Payments Rules and Regulations in APAC: 6 Things to Be Aware Of.

Understanding Payment Services and Payment Regulations in APAC

In 2023, the Asia-Pacific (APAC) region continued to assert itself as a global payments hub, driven by rapid digital adoption and innovations spurred by the COVID-19 pandemic. With consumers shifting towards e-commerce and businesses embracing new digital channels, payment service providers (PSPs) face unprecedented growth opportunities. However, alongside these opportunities lie significant regulatory challenges that must be navigated for sustainable success.

Unlike regions with unified frameworks, such as the European Union’s passporting system for financial services, APAC’s regulatory environment is a complex mosaic. Each jurisdiction follows distinct rules, creating a web of licensing and compliance requirements for PSPs operating across borders. The lack of harmonised regulations, combined with varied stages of economic and technological development across markets, increases the compliance burden for PSPs and fintechs.

In this article, we highlight six critical considerations for PSPs to not only navigate APAC’s intricate regulatory landscape but also seize the opportunities presented in one of the most dynamic payments markets globally.

1. No one size fits all
   While the regulatory frameworks for payment services in APAC are generally founded on some common principles, the payment rules and regulations may differ materially from one country to the next. Some regulate through specific payment services regulations, others do so through funds transfer or money remittance business laws, others again do it through existing banking and finance laws and regulations, or a combination of these. Inside knowledge of local market nuances are important.  It’s prudent to seek advice and guidance from advisors with local knowledge, experience and expertise.  This helps to protect your business against the downside risks of being non-compliant or over-regulated, especially in the context of online payment regulations and payment processing regulations.
   
   
2. Complexity and uncertainty of payment regulations in regulatory regimes
   When operating in or entering a new market in APAC, don’t expect for all the applicable payment regulations and rules to be clearly drafted and neatly captured in a single main piece of legislation and supplementary legislation (e.g. regulations) … or to be in English for that matter. In some countries, in addition to the main statute, there are a myriad of subordinate payment rules and regulations, circulars, decrees, notifications, guidelines, etc. that can be difficult to find and fully understand. Poor translations, limited to no guidance notes on implementation, or the confusion arising from the unclear relationship between different payment rules and regulations, all compound the uncertainty and complexity.  Again, inside knowledge here becomes key to accessing the regulatory framework for each jurisdiction.  Understanding how the relevant central banks and authorities interpret and approach payment services and regulations is vital.
   
   
3. Audit your business and products/services against applicable payment regulations
   Undertake a thorough review/audit of your business model, products, services and operations against the applicable payment regulations in relevant markets to understand if your business or products/services are subject to any licensing, registration, permit or authorisation requirements. Just because your business has not been regulated in the past does not mean that that situation would remain unchanged. Due to the emergence of new technologies, regulators are taking a more aggressive and proactive approach, so there’s a need to keep up to date with the latest developments in the payment regulations landscape. Missing a change can be a very costly mistake.  Services such as Payments Compliance, assist PSPs to stay up-to-date with some regulatory changes and developments, as well as guidance from your payment expert advisors.
   
   
4. AML/CTF compliance considerations
   In the payments space, it’s more than likely that your business and products/services may be subject to applicable Anti-Money Laundering/Counter-Terrorism Financing (AML/CTF) laws and related laws and regulations (e.g. requirements around customer due diligence (KYC), transactions monitoring, PEP screening, etc). In recent years we have seen large fines and penalties (often in the $100’s of millions of dollars) being meted out to banks and other financial services institutions for compliance failures related to payment regulations. Having in place a robust compliance and risk management programme is a must, especially in light of evolving payment regulations. As your business grows, having in place effective compliance and risk management controls becomes even more critical. Indeed, the bedrock of any well-run payments company is a well-constructed and thoughtfully created compliance programme, with an effective and appropriately resourced compliance function tasked with overseeing it, ensuring adherence to payment regulations.
   
   
5. Exemptions and exceptions
   Even if your business or products/services are subject to payment regulations and licensing requirements, check to determine if you can benefit from any exemptions or exclusions that may be available under applicable laws or regulations or through market practice as determined by the local regulators. You may have to make some adjustments to your business model or operations or processes but being able to take advantage of any exemptions can save your business a lot of time, effort, resources and money. The compliance and administrative burdens of having to maintain a licensed entity can be rather onerous and should not be underestimated. In addition, there’s also the legal, financial and reputational risks if you don’t manage to comply with your licence conditions and/or the regulatory requirements that apply to your licensed.
   
   
6. Effective government relations engagement strategy
   In markets where the regulatory environment can be challenging for foreign companies to operate in (e.g. most countries in the SEA region), it’s important for PSPs wanting to operate in these markets to develop and have in place an effective public affairs and government relations engagement plan and strategy. Such a strategy can help the company to navigate payment regulations and develop productive relationships with the local authorities and position the company for success down the track if it decides to apply for certain licences or permits in the country. In this part of the world, don’t underestimate the power of relationships and of the need to engage in constructive dialogue with the regulators regarding payment regulations.

Cooperate with KorumLegal in the APAC Market

Navigating the payments regulatory landscape in the APAC region can be a complex endeavor, given the diverse and rapidly evolving regulatory frameworks across different countries, whether you're a fintech startup or an established financial institution KorumLegal expert services are designed to guide you through these complexities, offering insights and strategies tailored to your specific needs in APAC. By partnering with us, you can ensure that your business not only meets all regulatory requirements but also remains at the cutting edge of innovation in the dynamic APAC market. Let us help you turn regulatory challenges into opportunities for growth and expansion, paving the way for your business to thrive in this vibrant region.