E-Wallets, Float, and the SGD 5 Million Threshold: Staying Standard in Singapore's Payment Landscape
- Eastern Mezzanine
- Apr 9
- 4 min read
Updated: May 7
From topping up MRT cards and paying for ride-sharing fares to splitting dinner bills and ordering food deliveries, e-wallets have gained significant traction in Singapore in recent years.
With this success comes the inevitability of e-wallets handling enormous transaction volumes and daily user funds (aka float), often pushing them towards the Major Payment Institution (MPI) license under the Payment Services Act (PSA). This license comes with higher capital requirements and stricter regulatory obligations.
But do e-wallet providers always have to register an MPI license and work with its tighter regulations?
Not always. As this article demonstrates, e-wallet providers can strategically structure their operations to operate within the relatively less stringent limits of the Standard Payment Institution (SPI) license, particularly focusing on managing the critical SGD 5 million daily average float threshold.
Understanding the differences between the SPI and MPI licenses
As mentioned, the PSA issues two main license types based on the scale of their operations: the Standard Payment Institution (SPI) and Major Payment Institution (MPI) licenses.
To qualify for the SPI license, your business will need to operate at a smaller scale, in line with the following thresholds:
Total value of payment transactions for one payment service in a month: ≤ $3 million
Total value of payment transactions for two or more payment services in a month: ≤ $6 million
Average daily e-money float: ≤ $5 million
Minimum initial and ongoing financial requirements (for Singapore-incorporated businesses): Base capital of at least $100,000
Net head office funds (for foreign businesses): At least $100,000
For a detailed analysis of the different PSA license types, read our article here: Who’s Licensed, and How: A Breakdown of Payment Services Licences in Singapore
As e-wallets tend to work with larger volumes of transactions and user funds, they often exceed these thresholds, which means they are required to apply for an MPI license instead.
The float conundrum: What’s the big deal?
Of all the criteria identified by the PSA, the SGD 5 million daily average float threshold is especially critical as e-wallets typically provide account issuance services. As a business, this means you hold your customers’ funds, with the "float" representing the total value of e-money stored across all the user wallets you manage.
So, why is float so heavily regulated?
This all boils down to MAS’s emphasis on consumer protection. Should an e-wallet provider become insolvent, the float, representing customers’ funds, is placed under considerable risk. Furthermore, large volumes of float held outside the traditional banking system could pose risks to financial stability if not managed well.
The SPI advantage: Why aim below the MPI threshold?
Quite simply, operating as an SPI offers several strategic benefits that may prove to be a boon to your e-wallet operations. Generally, MAS exercises relatively less intensive regulations on SPIs, in line with its intent to encourage innovation. This begins with lower minimum capital requirements, significantly reducing the financial barrier to entry and operation.
The combination of lighter regulations and simpler operational structures potentially leads to a faster time-to-market, enabling you to launch your e-wallet with greater ease. Starting as an SPI also enables you to slowly validate your business model, build a user base, and gain operational experience before scaling up.
Keep your e-wallet within SPI limits with these tips
Given the benefits of running your e-wallet as an SPI, it is not unwise to tailor your strategic and operational framework to fit the bill. Here are some tips on what you can do:
1. Set value limits on wallet balances
This involves capping the maximum amount your customers can hold in their wallets, directly controlling your potential aggregate float. For instance, you can set a cap of SGD 1,000 in line with PSA requirements for personal payment accounts.
You can also consider varying the limits via a tiered system based on Know Your Customer (KYC) levels.
2. Encourage users to utilise their stored values
Incentivise your customers to spend the money stored in their wallets. This can be done through promotions, loyalty points, or discounts. At the same time, avoid implementing features that encourage long-term storage, such as interest-bearing accounts that may even trigger different regulations.
Introduce fast and seamless peer-to-peer transfers into your e-wallet to further encourage your customers to move their money. Bill payments and top-ups can also be integrated into the wallet, giving your customers more reasons to spend their balance on everyday expenses.
You can also build daily usage functionality into your e-wallet. As an example, you can incentivise your customers to use their e-wallets to pay for their daily commutes on public transport, encouraging frequent top-ups that are balanced by rapid spend-downs. The existing EZ-Link Wallet functions well on this framework, having evolved from a physical card to become an e-wallet app.
3. Optimise settlement and payout cycles
If your e-wallet facilitates merchant payments, ensure that all funds are settled quickly and efficiently to move them out of your float. Enable efficient withdrawals, allowing your customers to transfer funds to their linked bank accounts with little to no friction.
4. Incorporate robust real-time monitoring and alerting measures
Over on the operational side of your business, you can apply a daily float tracking system to continuously monitor the aggregate daily float across all user accounts. From here, you can extrapolate the data to forecast potential float spikes (eg: before holidays and promotional periods) and take the necessary steps to manage your float accordingly.
You should also pay attention to your transaction volumes and ensure they do not exceed the designated thresholds. Aside from monitoring your transaction flows, target specific customer segments or transaction types that naturally keep volumes within SPI thresholds.
Obtain an SPI license for your e-wallet with Eastern Mezzanine
Operating an e-wallet does not mean you automatically have to obtain an MPI license. By working within the thresholds stipulated by the PSA, particularly the monthly transaction flows and the daily average float, you can strategically design your product and operations to operate within SPI limits.
Keeping within the SPI thresholds can be tedious and frustrating. This is where Eastern Mezzanine comes in to help take this load off your mind. Our team of legal counsels comes equipped with deep expertise in payment services, poised to guide you through the SPI licensing process and ensure you stay compliant with all its requisites.
