Currency (Amendment) Bill

Order for Second Reading read.

4.50 pm

The Minister for Education (Mr Ong Ye Kung) (for the Prime Minister): Deputy Speaker, on behalf of the Minister-in-charge of MAS, I beg to move, "That the Bill be now read a Second time".

The Bill makes amendments to the Currency Act in two areas. First, the legal tender limits for coins. Second, the offence of mutilation of currency notes, to enable MHA to license companies that sell IBNS, which is Intelligent Banknote Neutralisation Systems or offer cash transportation services using IBNS.

First, the legal tender limits for coins. The Currency Act places legal tender limits on each coin denomination that are used for payment. The current limits today are: $2 for 5-cent, 10-cent and 20-cent coins; $10 for 50-cent coins, and no limit for $1 coins. This means that under the Act, a customer can use coins within these limits and legally the seller has to accept the payment.

Legal tender limits minimise inconvenience to vendors and their waiting customers. However, a couple of high profile news stories surfaced in 2014 where large quantities of coins, including $1 coins, were used for payment. One case involved the payment of close to $20,000 in coins at a car dealer's showroom. Another involved over $1,000 worth of coins at a handphone shop at Sim Lim Square.

Thereafter, MAS received public feedback on the need to place a legal tender limit on $1 coins. MAS agreed that it is useful to do so.

We also took the opportunity to revise the basis for setting legal tender limits. The different value limits for different coins currently are confusing to many and not easy to remember. Further, instead of a value limit, we should limit the number of coins used, since the processing time and effort for coin payment depends more directly on the number of coins used, and less the total value of the coins. So, for example, it does not make sense to set a value limit of $2 for both 20-cent coins and 5-cent coins, which means that while a customer can use up to 40 5-cent coins, he can only use 10 20-cent coins, which also adds up to $2.

We conducted a public consultation exercise on the proposed revisions in 2017. There was broad support from respondents to introduce a limit for $1 coins and have a simple and uniform limit for all coin denominations that is easy to remember.

The Bill will therefore streamline the legal tender limits for coins to a uniform limit of 20 coins per denomination in a single payment. This means that a payer can use up to 20 pieces each of 5-cent, 10-cent, 20-cent, 50-cent and $1 coins per transaction. This is much simpler than the current legal tender limits.

Notwithstanding the legal tender limit, a customer and a vendor can mutually agree to transact using quantities of coins above the limit. But I am sure such instances will be infrequent, especially when more people switch to using electronic payment.

Deputy Speaker, I will now move to the second area of amendment to support MHA's plan to allow the use of IBNS.

IBNS is a security system installed in containers used in the transportation of currency notes. It will permanently damage or deface the currency notes housed within it when there is an attempted robbery. This deters robbery because the loot can be easily destroyed. IBNS is used in many countries in the European Union.

Some companies intend to introduce IBNS services in Singapore. MHA will facilitate this so that it is available to banks and other businesses. There are certain advantages, such as replacing armed Auxiliary Police Officers who are needed today to transport large amounts of cash, and reducing the risk of violent crimes. This can free up scarce armed Auxiliary Police Officers for more critical operations.

MHA intends to license companies that sell IBNS or offer cash transportation services using IBNS as security service providers under the Private Security Industry Act (PSIA). It intends to obtain industry feedback to develop the licensing conditions. MHA and MAS will also conduct a joint education exercise to inform the public on the identification and handling of IBNS-damaged notes.

The Bill will amend section 23 of the Currency Act to make clear that an IBNS-damaged note is not legal tender. Under specific conditions, the Bill will exempt a holder or applicant of a security service provider licence from the offence of mutilation of currency notes.

Two related amendments will also be made to the PSIA, so as to give effect to the Currency Act amendments. Deputy Speaker, Sir, I beg to move.

Question proposed.

4.58 pm

Mr Yee Chia Hsing (Chua Chu Kang): Deputy Speaker, Sir, one of the key provisions in this Bill is to streamline the existing legal tender limits for coins to a uniform limit of 20 coins per denomination in each payment. This will bring convenience to retailers and consumers as the uniform limit is easy to remember and easy to implement.

In particular, for 5-cent coins, the number is brought down from 40 coins to 20 coins.

Sir, I would like to ask if the Monetary Authority of Singapore or MAS has considered removing the 5-cent coin altogether.

Let us face it. Consumers do not like getting any change in 5-cent coins and because consumers do not like receiving any 5-cent coins as change, retailers are forced to deposit them into banks but banks too impose a very high transaction cost for the deposit of coins.

A quick check on DBS Bank’s website indicated that the coin deposit fee is 1.5 cents per coin, which is a whopping 30% of the face value of a 5-cent coin. This is very unfavourable to small business owners and is certainly not cost effective. We stopped minting 1-cent coins more than 15 years ago because it is no longer actively used by the public.

I would like to ask what are the policy considerations for keeping the 5-cent coin and whether it would make sense to reconsider this policy given inflation and also our push towards encouraging the use of cashless forms of payments.

I believe that businesses will face an increasingly high cost to handle cash and the removal of the 5-cent coin will benefit both consumers and retailers in the long run. The Government too would save money from minting the 5-cent coins which is not widely used and universally disliked.

On a slightly separate note, I would also like to ask what the estimated cost of minting each 5-cent coin is and whether it would make sense for the MAS to fund the coin deposit fee to encourage the re-circulation of 5-cent coins so that MAS does not have to mint new 5-cent coins.

Mr Deputy Speaker, Sir, notwithstanding my suggestions today, I support the Bill. Thank you.

Mr Deputy Speaker: I am not sure that the 5-cent coin is universally disliked.

5.01 pm

Ms Sylvia Lim (Aljunied): Deputy Speaker, Sir, there are two changes brought about by this Bill, first, relating to the legal tender of coins, and secondly, to prepare for the introduction of intelligent banknote neutralisation systems (IBNS).

On the first change regarding the legal tender of coins, section 13 of the Currency Act is being amended to introduce a uniform limit on the use of every coin. Under the amendment, a person making payment can only insist on using a maximum of 20 coins of the same denomination. What is probably most significant about the change is that it introduces a limit on the use of one-dollar coins, which did not exist before. Under the Bill, the limit of 20 coins will also apply to $1 coins.

In the Explanatory Brief to this Bill, MAS has stated that the rationale is to have a standardised limit on all coin denominations to make it simple to remember and easier to implement. It was further stated that government wishes to encourage persons to use less cash for greater convenience of payments.

Sir, while I accept the rationale for the change, I would like to understand if indeed the introduction of the limit on $1 coins is really necessary. Is there a widespread situation of persons over-using such coins for payment? According to media reports last year, MAS decided to review the existing legal tender limits after two cases were reported in 2014 which the Minister also mentioned earlier. One case involved a mobile shop in Sim Lim Square trying to refund a customer about $1,000 entirely in coins, while the other case involved a man who left $19,000 in coins at a car dealer’s showroom. While these cases may cross the line and be considered unreasonable conduct, are such cases very common?

I am also concerned as to whether certain groups of persons who tend to transact in coins will be adversely affected by the new limit. For instance, persons in certain occupations tend to earn their income from customers in coins, for example, hawkers of cooked food and buskers who sing for change. Once the Bill is passed, they can no longer insist on tendering $1 coins to pay for any item over $20. Would the change cause hardship to such persons? Some might say that these persons could always use the coin machines at banks to deposit their coins into their bank accounts, and withdraw currency notes thereafter to use. However, there are Singaporeans today who do not have a bank account or are not approved by banks to have one. How will they be impacted?

The second change brought by this Bill is to prepare for the IBNS. The Bill introduces provisions to legalise the use of IBNS as part of security systems to protect the movement of cash in transit (CIT). IBNS would operate to damage or deface currency notes when it is detected that a CIT robbery is imminent, thus rendering the notes indelibly marked or altered. The Bill contains provisions to state that such notes cannot be legally used. The Bill also carries amendments to the Private Security Industry Act to require those who intend to sell IBNS to obtain a licence to do so.

The IBNS is an application of primary crime prevention, by reducing the rewards of crime, or increasing the chances of detection. The theory is that an intended CIT robbery would lose its appeal if the perpetrator knew that the loot would be rendered worthless, or that their hands or bodies would be stained with a substance that could provide forensic evidence to link them to the crime scene. IBNS technology has been in use for more than three decades in Europe and found in ATMs, vending machines and also containers for CIT movements.

If the IBNS is successful in deterring CIT robberies, there will be potential spill-over cost-efficiencies. CIT which is enhanced with IBNS may no longer require armed guards and armoured vehicles. This may allow re-deployment of such guards and vehicles to other areas, which will alleviate the current manpower shortages in the auxiliary police. There are also potential savings for organisations who need CIT security, such as Town Councils, since they can save on the service fees of armed auxiliary police, which are relatively high.

That said, IBNS is just one part of the security eco-system for CIT. What is critical is that the IBNS is accompanied by equally secure pre- and post-handling, so as not to create vulnerabilities before the cash enters an IBNS environment and after it leaves.

Overall, Sir, I am in support of the Bill.

5.06 pm

Mr Chen Show Mao (Aljunied): (In Mandarin): [Please refer to Vernacular Speech.] Mr Deputy Speaker, the Currency Act currently provides for a limit of two dollars for 5-,10- and 20-cent coins, ten dollars for 50-cent coins and no limit for $1 coins, for legal tender. Today, we are amending the Act to provide for a limit of 20 coins to apply across all denominations. Of course, a payor and a payee can mutually agree to transact in any quantities of coins above the limit if they wish.

I believe these amendments are reasonable, and do not foresee any particular difficulties in their implementation. I would however like to emphasise the broader and related point that in our drive towards a “cashless” society, we should take care to leave room for the co-existence of alternative payment methods, including physical currency such as coins and banknotes, so that members of the public may have a choice in the payment methods they prefer.

At a National Day Rally not long ago, the Prime Minister heralded the advent of a cashless society in Singapore, and local e-payment businesses are experiencing robust growth. A recent research report by UBS highlighted that many Asian countries are implementing measures to go cashless. For example, the Indian government has done away with the 500-Rupee and 1,000-Rupee banknotes and the Korean Central Bank plans to stop minting coins after next year.

Technology development has increased the scope for inclusive financial services, but it can also widen the gap between the disadvantaged and mainstream society. Disadvantaged groups often lack digital literacy and we need to pay attention to this “digital divide”. For example, most of the elderly habitually use cash for transactions and are unfamiliar with the various e-payment technologies and devices available. To them, a cashless society often signifies greater difficulty rather than convenience. There is need to enhance education and training for the technologically disadvantaged, as the Minister mentioned, and the Government can provide more services that promote digital literacy.

According to a BBC report, Sweden is set to become the first cashless society in the world. However, in recent years the Swedes are increasingly concerned that doing away with cash altogether may well lead to problems for the elderly and others. For example, most banks have stopped providing over-the-counter teller services, and shops no longer accept cash transactions.

In addition, with an open web environment and the deployment of distributed systems, the increasing prevalence of e-payment may well have other risks. User-profile, consumption behaviour and personal habits and preferences are increasingly collected and mined, making it harder to protect privacy. Furthermore, for the country, the society and the financial system as a whole, the concentration of payment and settlement data in the hands of a few private companies and government agencies may well pose increased risks of disruption to the stability of the financial system or economic security.

Of course there are obvious benefits to doing away with coins, banknotes and to go cashless in our payments and settlement, and we should continue to promote the idea of progress towards a cashless society. However, I hope that this cashless society will be an inclusive one, which provides our people with choices.

I believe that different payment methods and settlement systems should be allowed to co-exist in the foreseeable future. Even as we redouble efforts at public education to promote various non-cash payment methods, we should also permit people the choice of their preferred payment methods, including in physical currency such as coins and banknotes.

Thank you.

5.11 pm

Mr Saktiandi Supaat (Bishan-Toa Payoh): Mr Deputy Speaker, in Malay, please.

(In Malay): [Please refer to Vernacular Speech.] Frequent technological advancements mean that it is important to review our policies to ensure that we are keeping up and making the most out of the available technologies.

With the growing importance of shoring up security and defences against terrorism, we are always in need of support from the Singapore Police Force for a variety of security operations. Therefore, the licensing of the Intelligent Banknote Neutralisation System (IBNS) for cash-in-transit (CIT) operations will help to free up auxiliary police officers so they can be deployed to do more important tasks. I support the prevalent use of such systems and hope to see it utilised all around Singapore. May I ask the Minister how many banks are on board, and how does the Ministry intend to reach out to those that have not expressed interest? Therefore, in terms of financial impact, how costly will the use of such systems be for the banks?

These amendments also call for the revision of the legal tender limits for coins to a uniform limit of 20 pieces across denominations, which makes it easier for all to remember and implement it. Hence, merchants and customers alike should not be made to accept large amounts of coins which they may not have an avenue to use, especially with more people using cashless payment methods. Additionally, it also discourages unnecessary delays for the rest of the customers in the queue, and abuse by way of mischief. One particular case that made media headlines was a shop in Sim Lim Square, which Ms Sylvia Lim mentioned earlier, that refunded its customer $1,010 in coins.

There was also a customer who paid $19,000 worth of coins to a car dealer to make a point. These acts of mischief drew the attention of local media because of the huge amount of cash involves, but I believe it is not uncommon on a smaller scale.

Some customers may not bear malicious thoughts, but instead they simply want to reduce the number of coins they carry, and think nothing of offloading them on to a merchant. To them, it is still money after all, and the merchant is more likely able to find a better use for the coins.

However, I understand that the limit of 20 coins applies to each denomination, across all denominations, in a single transaction. What this means is that the new legal tender limit for coins allows a payer to use up to 100 coins across the 5 denominations, or $37 in total value, in a single transaction. Hence, the change in legal tender limits is not likely to result in significant changes to the way coins are used in day-to-day transactions. I am pleased that this rule is maintained.

Mr Speaker, I would also like to raise a question whether the service charge imposed by banks when accepting coins can be regulated. There are still many vendors, and even charity organisations, that receive large amounts in coins. While I am not disputing that a service charge could be imposed, I think there should be a cap because, if a counting machine is used, it does not take that much time to count the coins. And, with increasing automation, I expect that the use of the coin deposit machines will become even more prevalent. Currently it costs $0.015 to deposit one coin, and this can add up to a significant amount for large amounts of coins. It simply discourages people from using it. Moreover, usually the people with large amounts of coins also tend to be those who will consider the fees that they have to bear as a significant expense.

It is important to recognise that coins are still a big part of payments for small businesses, like the newspaper vendors, children’s playground operators, and provision shops. It is already a challenge for them to convert to cashless payments, and I am concerned that these policies will indirectly lead to an overall reduction in coin usage and availability, which would affect their sales. I wish to take this opportunity to emphasise the need to engage these small businesses, and help them to stay relevant even as we are promoting the use of cashless methods.

Therefore, Mr Speaker, I support the Bill. Thank you.

5.16 pm

Mr Ong Ye Kung: Mr Deputy Speaker, I thank all the Members who have spoken on the Bill and their support. On behalf of the Deputy Prime Minister and Minister-in-charge of the Monetary Authority of Singapore (MAS), let me now address their questions.

First, on the legal tender limits for coins. Mr Saktiandi highlighted the need to educate the public on the new legal tender limit. Currently, information on the legal tender limits for coins is published on MAS’ website. MAS also explains these limits when it receives feedback from the public regarding their experience with coin payments. Now, with a formula that is a lot easier to remember, there is an opportunity for us to explore ways to further raise public awareness of the new legal tender limit.

Mr Saktiandi and Ms Sylvia Lim have highlighted the concern that people who get most of their income in coins may have no choice but to pay in coins and they may be affected by the new legal tender limits, especially if they use the $1 coins.

Ms Sylvia Lim went on to explain how the new limits will work in her speech but let me elaborate further. I thank Mr Saktiandi for helping me answer part of this question, but let me just repeat some of the facts. The new uniform legal tender limit of 20 coins applies to each of the five coin denominations. Thus, it allows a payer to use up to 100 coins, or $37 in total value, in a single payment transaction.

Further, compared to today’s legal tender limits, in terms of monetary value, there is actually no change for 50-cent coins and 10-cent coins and, in fact, an increase for 20-cent coins. There is a reduction in limit for 5-cent coins, from $2 to $1. But it is not likely to affect many existing transactions because it is very rare for customers to use so many 5-cent coins, which is a point that Mr Yee Chia Hsing raised.

The main reduction is really for $1 coins, as Ms Sylvia Lim had pointed out, from no limit to 20 coins, or $20. Ms Lim asked if there is a widespread situation of persons over-using coins for payment and whether this change is really necessary. While we agree that cases of people paying with large quantities of coins are actually very few, MAS received quite a number of feedback from the public on the need to place a limit for $1 coins following the high profile cases I mentioned earlier, and three of us mentioned it in our speeches. So, it looks like we are all aware of those cases. Because of that heightened awareness, a limit for $1 coins thus serves to protect more vulnerable consumers or salespersons against abuse.

I should say that it is actually very rare that people pay for goods and services with a large amount of coins. A great majority of lower income Singaporeans are actually employees who do not receive their income in coins. For small vendors like hawkers who may receive a large amount of coins and small notes, they either deposit their cash or use them as change for their customers. And in the very rare incidences where someone without a bank account somehow collects income in coins and needs to purchase something with many coins for whatever valid reasons, the vendor can adopt a flexible approach and I would urge them to do so. Let me reiterate that the legal tender limit does not prevent a payee and payer from mutually agreeing to transact using quantities of coins above the limit.

Mr Saktiandi further expressed concern that the legal tender limits would affect the sales of small businesses, such as newspaper vendors and provision shops, where coins are still mainly used for payments. I think this is also unlikely. As I explained, the main change is really for the $1 coins, and instances of customers using more than 20 coins for any denomination are actually very few. Customers who are used to cash are also very likely to use notes. I have even come across a report that says small vendors that switched to e-payments actually saw an increase in their business.

This Bill proposes a practical move, towards a much simpler set of limits, easier to remember, and makes it easier for merchants to operate. It will not disadvantage consumers except in some very extreme, even theoretical instances.

Second, on coin deposit fees. Mr Saktiandi and Mr Yee Chia Hsing asked whether the service charge imposed by banks when accepting coins can be regulated and capped. Banks typically charge a deposit or administrative fee for coin deposits because they incur costs in handling coins. It is not just the counting machines but, beyond that, there is also authentication, sorting, packing, transport. The setting of fees and charges for banking services are commercial decisions made by banks, but MAS will keep a close watch on the fees. MAS also expects banks to disclose the fees and charges for their services upfront so that businesses and consumers can make informed decisions. At the same time, MAS has set out alternatives to the banks for depositing of coins so that the public can also deposit their coins at several designated locations managed by Certis Cisco, which has been appointed to manage MAS’ coin operations. Deposit fees at these centres are at a nominal rate of $3.50 per 1,000 pieces. There are no fees for depositing 1-cent and 5-cent coins at these centres.

Third, on the removal of 5-cent coins, raised by Mr Yee Chia Hsing, MAS will hesitate to remove 5-cent coins because they are still worth something. And if you take a look at products sold at supermarkets, convenience stores and fast food outlets, you will see that many basic necessities like bread, eggs, beverages and so on have 5-cents in their pricing, such as $1.95 or $2.95. There is a chance that removal of 5-cent coins may lead to such items being rounded up to the nearest 10-cents! So, I think, better not.

Mr Chen Show Mao talked about e-payments and a cashless society and how it will inconvenience and even threaten consumers. Our approach and our objective are never to be a cashless society. We think we should promote e-payment because it is convenient to use and is more efficient. The way to do this is not to compel but to make e-payment very convenient to use. Over the last couple of years, MAS has implemented many initiatives. I mentioned in the last Bill debate from FAST, PayNow, SGQR, all these make e-payments a lot easier to use so that people are naturally attracted to use e-payment. And while we do that, always ensure there is the option of still using cash because, as Mr Chen pointed out, there will still be members of our society who are still very used to using cash. I should add that it is not just the seniors. In my interactions with seniors in the community and many of them attended digital literacy courses, many of them are actually champions of e-payment and really embrace the use of e-services, such as booking their medical appointments, paying by e-payment, so on and so forth. So, I would also encourage not just the seniors but also the young to embrace e-payment and realise the convenience of using it.

Lastly, on IBNS, Mr Saktiandi asked how many banks support the use of IBNS and how MHA intends to reach out to those banks which have not expressed interest. He also asked about the cost impact on banks from the use of such IBNS.

MHA and MAS have been engaging the Association of Banks in Singapore on the use of IBNS for cash transport services. As pointed out by Ms Sylvia Lim, there are some advantages for doing so. Discussions are still on-going. IBNS will not be made a compulsory requirement for cash transportation services, but an added option. While banks are generally open to new technologies, banks will also need to assess, together with their service provider, the combination of technology and manpower that best fits their needs. With that, Mr Deputy Speaker, I beg to move.

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Ong Ye Kung].

Bill considered in Committee; reported without amendment; read a Third time and passed.