Question

The following is adapted for academic purposes from the original speech: “Staying on Top of Our Game” by Singapore Minister Mr Ong Ye Kung during the launch of the Financial Services Industry Transformation Map on 30th Oct 2017.

“The regulator facilitates the development of infrastructure upon which new services and ideas can thrive. A good example is the payments infrastructure. Three years ago, MAS worked with the banking industry to launch FAST, to conduct direct real-time transfers between bank accounts. This year, the banks launched PayNow, which links bank accounts to NRIC or mobile numbers, making transfers more convenient. More importantly, PayNow will activate the full potential of FAST. It currently works only for P2P, but will be progressively expanded for P2B and B2B next year. To further facilitate this, we will introduce by the end of the year a common QR code that can accept all payments using QR readers…..”

Question 3:
Appraise and discuss how a well-regulated payment system will enable the Singapore financial market to perform its functions effectively.

Answer 1

Role of Well Regulated Payment System in effective working of the financial market.

With the advent of information technology, financial payment methods have been digitalised, which provide the easy of transaction to the parties involved in it. Along with the advantages of digital payment there are some implicit disadvantages. To control such disadvantages the legal and regulatory framework acts as a fundamental pillar and smoothen the functioning of Digital Payment. Not having a solid, balanced and predictable legal framework (that provides certainty to digital and electronic transactions) can exacerbate or create unfavourable conditions for the development of some payment services or hamper actions that promote financial inclusion.In this regard, adoption of numerous legal dispositions for Digital Payments, such as those related to access and user protection, has been encouraged by every central bank in the world and financial supervisory bodies. The organic law of a central bank is the legal basis for its different responsibilities as regards the regulation, promotion, oversight and operation of Digital Participants for financial services.These regulators plays an active role in the different dimensions of financial inclusion, such as consumer protection, financial education and the smooth functioning of payment systems and services.

The work done by the regulators of such financial transaction is commendable in Singapore. The steps taken by such regulators to take the era of digital payment to the next level is worth appreciation. Without a proper regulatory body these services can prove to be a very painstaking. These authorities put and eagle's eye over the functions and compliances by several parties directly or indirectly involved in the digital financial transaction. Digitalisation of any activity provides the opportunity for the anti socials to create a situation of unjust advantage and several other risky factors. We all are aware of the several types of malpractices like hacking, leaking of private informations, fund transfers etc. around the globe. To control all these risky factors  it becomes very important to have a well regularized and effective working body which keeps a check on these services.

A well-regulated payment system will enable the Singapore financial market to perform its functions effectively in the following ways:-

1. Payment System Infrastructure:- A well regulated payment system will provide an effective and efficient infrastructure that will act as an enabler for the promotion of digital payments and opens up the doors for investments flowing in around several corners of the world.

2. Increased Reliability/ Certainity:- If the financial transactions happens in the safe and secure environment it will increase the reliability /certainty for the payment. People will be encouraged to adopt for the digital method of payment instead of conventional mode.

3. Reduced Transaction Turnaround Time:- Since this mode of payment is faster than the conventional mode it will reduce the time taken into the completion of any transaction and both the parties to the transaction can be benefitted.

4. Universal Access:- A well regulated payment system by the government can provide easy and anywhere access to these services and it will help to get the transactions completed from any corner of the world in fast and reliable manner.

5. Reduced transaction Cost:- These services will reduce the transaction cost associated therewith the conventional mode of payment as a result of which digital transaction will experience a significant hike in number. this will in turn provide a better cash flow in the market.  

6. Increased Financial Inclusion:- As discussed above regulatory bodies play an important role in the promotion of financial inclusion in the economy and it will help the market to secure more and more funds. Every person brought under the ambit of financial inclusion policy of the regulators will certainly be more aware about these payment services and which will help him in investing his savings. As a result it will attract more investment in the market.

7. Reduced risk implicit to cash :- Digital platform provided by the regulators will reduce the risk inherent to cash transactions such as fake currency risk, risk of theft etc. as a result transactions will be fruitful to the economy of the country.

Summary:- A well-regulated payment system will enable the Singapore financial market to perform its functions effectively and efficiently as a result pf which the investment opportunities will grow at faster rate than ever.