Facing the future of payments

Asia’s growth in digital payments is unmatched, with a predicted annual growth rate of 16% from 2020 to 2025ⁱ. As society becomes more connected and technology changes the way people live and work, the digital transformation of this industry is set to accelerate.

Long gone were the days where banks held a comfortable leadership position in the payment ecosystem. We now see an increased volume of entry of formidable non-traditional players into the market with the aim to deliver a seamless integration of financial services into existing products.

To survive and thrive in the new era of payments, financial institutions must adapt their business models and make critical decisions. As rapid digitalisation put existing financial infrastructures to the test, regulators are considering measures to strike the right balance between innovation and risk mitigation.

Below, Mark Chew, Partner, Audit & Assurance at Mazars in Singapore explores how the payment landscape is changing in the region.

What are the future trends in financial payments?

What does the future hold for the payments industry? Payment is evolving in different ways and at different speeds across the world due to distinct market conditions.

In Singapore, there are several key trends that will dominate the payments landscape.

• E-wallet proliferation

In recent years, the meteoric rise of digital wallets in Asia is powered by the unparalleled growth of the e-commerce and ride-hailing sectors. In a region with an exceptionally high smartphone penetration rate, it comes as no surprise that consumers are using e-wallets for transactions everywhere, from hospitals to hawker stalls.

Super-app operating models such as Grab are accelerating and driving the usage of e-wallets in the region, including Singapore, at scale. Payment providers are looking to integrate value-added services ranging from personal finance, to travel and even medical services, into their mobile wallet offerings.

Convenience and user confidence will increasingly drive the adoption of digital wallets as a first point of contact for cashless payments, instead of cards. This will help to empower the underbanked population, through different ways such as eliminating risks related to money transfers which drives financial inclusion.

• Increased partnership

While the competition between traditional and non-traditional financial service providers will continue to intensify, the payment ecosystem of the future will be built on cooperation.

Singapore is seeing greater collaboration between incumbent institutions and FinTech companies, and this is set to continue into the future. A bank’s strong consumer base and robust infrastructure mixed with sophisticated, new capabilities brought by new entrants will ultimately enhance the end-user’s payments experience.

Organisations that use their networks to effectively leverage the data generated along the value chain to improve the customer experience will likely emerge as winners in the long run.

Collaborations are also being formed beyond borders. In September 2021, the Monetary Authority of Singapore (MAS) and Bank Negara Malaysia announced plans to commence a phased linkage of Singapore’s real time payment system PayNow and Malaysia’s DuitNow to enable instant fund transfers. This follows MAS’ announcement to link PayNow with India’s Unified Payments Interface earlier that month.

• Data-driven offerings

Payment insights generate a wealth of information, making data the most valuable assets of financial services. Advances in analytics enable innovative players to look into customers’ spending patterns to create more competitive and personalised offerings.

Consumers are always in the search of payment services that are faster, simpler, and more secure. With data-driven offerings, providers can meet customers’ ever-changing preferences and boost conversion rates.

For corporate clients, access to real-time data provided by payment services will significantly help them to grow their revenues, address business challenges, and make better informed decisions.

Whilst creating value and revenue from data, financial service companies need to be aware of the data protection and privacy implications that arise across different jurisdictions. Big data tools are useful in helping companies to meet compliance requirements.

The Payment Services Act: how can companies meet the compliance requirements in Singapore?

Compliance costs are very significant for entities in the financial services sector and that will continue to be the case in the future. Authorities across the globe are considering different measures to promote the growth of digital payments while safeguarding public interest.

The Payment Services Act (“PS Act”) was passed by Parliament on 14 January 2019 and came into force on 28 January 2020 as announced by the Monetary Authority of Singapore (MAS). The PS Act is a forward-looking framework for the regulation of payment systems and payment service providers in Singapore and was designed to create a robust e-payments ecosystem in the country while ensuring consumer protection and confidence.

The PS Act resulted in a more comprehensive regulatory scope for MAS to include seven basic types of payment services:

• Account issuance service
• Domestic money transfer service
• Cross-border money transfer service
• Merchant acquisition service
• E-money issuance service
• Digital payment token (DPT) services
• Money-changing service

This effort also facilitates competition by promoting interoperability across different e-payment solutions.

Under the Payment Services (Amendment) Bill 2021 passed on 4 January 2021, amendments concerning anti-money laundering and countering terrorist financing (AML/CTF), cross-border money transfer services and DPT services were introduced.

Under the PS Act, companies wishing to provide payment services in Singapore will need to obtain a Payment Service Provider Licence from MAS.

If you are seeking to enter the payments industry or scale your fintech business, we can help your organisation stay ahead of the curve and fulfil all your compliance requirements. Mazars in Singapore can assist you in a wide range of services, in particular:

• Internal Audit

We provide services in the assistance or externalisation of Internal Audit, which comprises of:

-          Gap assessment: We will conduct health checks into the risk profile of your current activities that can potentially disrupt your business. We will provide you with insights on potential financial, operational, compliance and IT gaps and determine areas which require improvement.

-          Internal control framework: We will assess the adequacy and robustness of your existing internal control framework, aiming to improve your overall internal control environment for compliance risk mitigation.

-          Outsourced Internal Audit Function: Whether you are considering outsourcing the entire internal audit function, a co‑sourcing arrangement, or require assistance to deliver ad-hoc assignments, a tailored approach will be provided by our experts.

• External Audit

The service we offer our clients is partner-led. We will conduct independent audits to assess your accounts, transactions, procedures, controls, and compliance, before sending a timely report to MAS in Form 4 on an annual basis.

• Regulatory Reporting

We can assist you in review to ensure that the basis of preparation and computation is consistent with the relevant MAS Notice. We will also develop regulatory reports and ensure timely completion of all the documents and consistency among them.

• AML/CFT Framework

Mazars can help you to develop or improve your AML/CFT framework. This includes AML risk assessment tool and transactions monitoring. In addition, we bring you data analytics solutions, deep industry expertise and significant experience in successfully assisting our clients to run and implement regulatory transformation projects.

Additionally, we can work with your legal team in the licence application process. Together, we can help in determining whether you meet the admission criteria for the respective licences (money-changing licence, standard payment institution licence or major payment institution licence) and provide insight on the applicable licensing requirements for your business model.

To discuss any of the above services, please contact us today.

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[i] “Asia-Pacific Online Payment Methods 2021 Post COVID-19,” Research and Markets. Asia-Pacific Online Payment Methods 2021 Post COVID-19 (researchandmarkets.com), 2021.