Singapore launched its Payment Services Act in January 2020 but it’s only now that the contours of what this means are becoming real.
On September 1, the Monetary Authority of Singapore issued three licenses to local fintech FOMO Pay. One of these includes the ability for FOMO Pay to provide “digital payment token” services.
Louis Liu, the company’s founder and CEO, says this frees the company to invest more heavily into building out the rails of what he says will be the emerging trend of payments based on 5- and 6G networks, the Internet of Things, and blockchain.
“New technology allows payments to be cheaper, faster, and better,” Liu said, meaning it will compete against the status quo of credit cards and correspondent banking.
The license also marks Singapore’s formal bid to establish global leadership in the future of payments.
Enabling QRs and mobile wallets
Liu, an engineer by training, set up FOMO Pay in 2015 to cater to the nascent but fast-growing world of digital payments – QR codes, mobile wallets – that were appearing alongside credit cards.
With dozens or more such wallets appearing in a given market, merchants didn’t know which to pick, and couldn’t integrate them. Liu saw the chance to become a tech-based acquirer, just as First Data or Wirecard operated in the traditional world of cards.
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The fintech grew large enough in Singapore to be included in a government-led initiative to standardize QR codes, along with banks and traditional acquirers. These technical standards eventually found themselves into the Payment Services Act, enacted by Singapore’s government in 2019.
“SMEs and merchants now accept mobile or QR code-based payments because the cost is much lower than credit cards,” Liu said. COVID-19 turned a trend into a universal need, as merchants hastened to remove the need to handle physical cash.
License to invest
The passage of PSA means that the hundred-plus banks, fintechs, telcos and others that operate digital payments have applied for a license to continue their work. All of those firms still operate as “exempt entities” under the PSA law. However, if MAS rejects a license, that means the organization must quit the business – and lose the capital and time it invested.
A license, therefore, frees a company to invest much more heavily, because it doesn’t risk being forced to close its operation.
PSA is also designed to be modular. It is actually a bundle of seven licenses. FOMO Pay already had one license, to facilitate cross-border money transfers.
This month it acquired three more: for merchant acceptances, local money transfer operations, and the digital payment token (DPT) services.
It is the first company to receive the DPT license.
“We got it before even DBS,” Liu said.
There is no quota on PSA licenses (unlike, say, the five licenses that MAS offered for virtual banks). More, perhaps many more, will eventually be issued.
Evolution in payments
For now, though, when it comes to crypto and central-bank digital currencies (CBDCs), FOMO Pay has a head start. Ditto with its local money-transfer license, which FOMO Pay will use to enable buy-now, pay-later solutions for merchants.
Liu says his goal is to be at the forefront of the next generation in payments.
“Every business model is a balance of three types of flows,” Liu said. “Data flows, money flows, and the flow of goods. The evolution of communications technology made the flow of data much more efficient, and now the other two must catch up.”
To illustrate this, Liu sites the evolution of mobile telephony. With basic 2G networks, cashless payments were limited to telecom carriers’ billing. The advent of 3G came with the rise of internet-based e-commerce. The likes of Amazon and Alibaba drove online payment, but only with credit cards, and only via internet-connected desktops.
For the past few years we have been in the 4G era of smartphones and mobile internet, which has enabled new businesses such as livestreaming, as well as biometrics for onboarding and security. WeChat Pay and ApplePay led the charge to mobile payments.
Today the world is at the start of the 5G wave, and some countries are already planning for 6G networks. This means incredible speed and bandwidth. From a payments perspective, it will put money into the Internet of Things.
“Instead of just devices being connected to a human, they will be connected to each other,” Liu said. “That will enable the flow of money to accelerate and catch up with the flow of data.”
Thus the dream of your refrigerator knowing when to contact your local supermarket for deliveries when you run low on beer or milk. Or you visiting your grocer virtually in the metaverse.
But to provide assurance and security to this idea will require blockchain-based smart contracts, to provide the immutable record of someone’s preference, and to transfer tokens of value to pay for transactions – which could be cryptocurrency, corporate-issued tokens as vouchers, or digital Singaporean dollars, i.e. MAS-issued currency.
While some tech companies will need to design intuitive smart contracts that allow people to manage their preferences, FOMO Pay is investing in the tools to enable payments.
This is where the PSA license is important. “It lets us invest in R&D for the world of 5G and 6G,” Liu said. “This will help make Singapore set the financial infrastructure to lead the world.”
Liu says the company is “very” profitable but declined to comment on its finances or investment budget.