Written By Wan Ding Yao & Irene Ng, LawTech.Asia
This article is part of the Legal Technology Manual, an initiative by the Singapore Academy of Law (SAL), and was first published here on 21 May 2018. Head over here for a list of articles contributed by LawTech.Asia members.
With new technologies providing novel methods of payment and banking services to consumers and businesses, law firms may also consider adopting some of these services for various reasons. These reasons can include providing their clients with more convenient and faster payment methods, paperless traceable trail of funds or better efficiency in accounting for payments within the firm.
A. PAYMENTS RECEIVED BY CLIENTS
1. E-Payment Systems
In his National Day Rally speech 2017, Prime Minister Lee Hsien Loong spoke about how adopting e-payment systems are an integral part of the Smart Nation drive. E-payment systems are quickly replacing traditional cash facilities. For example, since September 2017, cash top ups have ceased operations at passenger service counters in 11 MRT stations. The Land Transport Authority and TransitLink have since announced a fully cashless vision for public transport by 2020.
In the same light, law firms should join in the e-payment adoption drive – or risk not reaping the efficiency benefits that e-payment systems provide. This article explores categories, examples, and popularity of e-payment systems.
E-payment systems can be separated into card-based and smartphone e-wallet applications. For card-based systems, they can be further segregated into contactless and non-contactless cards. For smartphone e-wallet applications, they can be further categorised into credit/debit cards, bank accounts and bank-independent depending on where the e-wallets are tied to.
(a) Non-contactless Cards
(i) NETS’ Electronic Funds Transfer at Point of Sale (EFTPOS)
EFTPOS, commonly known as NETS, is the oldest e-payment system in Singapore. Operated by Singapore’s three biggest local banks, EFTPOS enables customers to use automated-teller machine (ATM) cards to debit directly from their bank accounts. Accepted at over 99,000 points island wide, EFTPOS forms the most extensive e-payment network in Singapore. Besides ATM cards, newer EFTPOS point-of-sale (POS) terminals also processes credit card and contactless mobile wallet payments. This reduces a clutter of terminals at payment points.
(ii) NETS’ Cashcard
Launched in 1995, the Cashcard is mainly used for Electronic Road Pricing and car parking services payment. However, being accepted at EFTPOS terminals, Cashcards can also be used for retail payments. Without an automatic top-up feature, consumers have to accrue Cashcard value at ATMs or retailers with EFTPOS terminals when their stored value is depleted.
(b) Contactless Cards
(i) NETS’ Flashpay
Introduced in 2009, Flashpay runs on near-field communication (NFC) technology. It is compatible with various point-of-sale (POS) terminals and also work with NFC-enabled smartphones. Unlike its non-contactless counterpart, Flashpay has an automatic top-up feature, bringing its users increased convenience. Running on Singapore’s Contactless e-Purse Application (CEPAS) specification, it has strong encryption and is relatively secure.
(ii) EZ-Link Card
Established in 2001, EZ-Link is the oldest contactless e-payment system in Singapore. While it supports retail payment, it is more commonly used for public transport services. When first introduced, it ran on cryptographically-weak Mifare Classic technology. However, in 2009, it was upgraded to more secure CEPAS, the same technology that its NETS rival uses.
What distinguishes EZ-Link from other contactless cards is its ability to be integrated in subscriber identity module (SIM) cards in NFC-enabled mobile phones. This brings increased convenience to users as they do not need to carry a separate card to use EZ-Link services.
(c) Smartphone E-wallet Applications
(i) Tied to Credit/Debit Cards: Samsung Pay, Apple Pay, Google Pay
These applications allow users to store encrypted tokenized versions of their credit or debit cards to their smartphones. They can then be used to make online or physical payments through NFC technology. Tokenization technology increases security because actual card details are not stored on the phone. Instead, each time a card is “added”, a token unique to the phone is created. If the phone is lost, banks can delete the tokens on their end, preventing the now-invalid token from being used further.
Available at over 50,000 Visa payWave and Mastercard PayPass contactless payment terminals, and supported by major banks, these applications are widely accepted. Usage of Visa and Mastercard infrastructure is however, not free and a fee is imposed on merchants for each transaction.
As their names suggest, each e-wallet application is limited to their own manufacturer or operating system developer. For example, Samsung Pay and Apple Pay can only be used on Samsung-manufactured phones and iPhones respectively. However, Google Pay may be used on all phones operating on the Android system, regardless of manufacturer. For this reason, supported Samsung-based devices have the privilege of using both Samsung Pay and Google Pay.
(ii) Tied to Bank Accounts: DBS PayLah, UOB Mighty and OCBC Pay Anyone
In July 2017, the Monetary Authority of Singapore (MAS) launched PayNow, an instant fund transfer system. It allows customers of most major banks to transfer funds, across or within supported banks, by referencing the recipient’s mobile phone or NRIC number. Customers use PayNow through their bank’s e-wallet application. These applications include, amongst others, DBS PayLah, UOB Mighty and OCBC Pay Anyone.
The Smart Nation and Digital Government Office has announced its intention to make QR codes available for PayNow, as well as for this e-payment method to be available at hawker centres.
(iii) Bank-independent: Singtel Dash (“Dash”), Alipay, PayPal
Launched in 2014 and supported at over 20,000 locations, Dash claims to be Singapore’s first all-in-one payment solution. With Dash, consumers can pay for retail, transport services and send money to other Dash account holders. Deductions are performed by scanning a merchant’s QR code or tapping on contactless payment terminals for supported NFC-enabled smartphones. Dash also comes with a Visa Virtual Account, enabling users to pay at 50,000 locations that accept Visa payWave. Topping up Dash is done through eNets or by charging to the user’s Singtel bill.
Established in 2004 in China, Alipay established its presence locally in July 2017 through CC Financial Services, a local start-up. It is accepted in taxis and 600 merchants with over 20,000 points. CC Financial Services plans to grow the number of merchants to 6000. Similar to Dash, payment is made via scanning a merchant’s QR code. Currently, Alipay targets Chinese tourists to Singapore; its users need to have either a China banking account or a China bank-issued credit card.
PayPal is one of the oldest e-payment solutions around. Launched in 1998, PayPal functions as a payment processor for merchants and handles online money transfers. It also offers its own dispute resolution service. These services are accessible via a smartphone application available for Android and iOS devices.
2. Internet Banking
Payment via Internet banking is a viable option for law firms that have clients who are acquainted with Internet banking processes. There are numerous benefits for Internet banking, at least between for clients making payments using Singaporean banks that are participating in the FAST scheme – immediate fund transfers and waived interbank transaction fees (this however depends on each bank; it is prudent to double check with each bank prior to using FAST). Such Internet banking services can also be accessed via smartphones, which makes payment of legal fees more convenient than ever.
One issue with the use of Internet banking is that fund transfers do not show who or which bank account do the funds originate from. This means that lawyers or their accountants will have to trace the origin of these funds, which can be a time consuming activity. Lawyers who intend to allow payment of legal fees using Internet banking should ensure that clients are aware that they must inform the law firm once payment via Internet banking has been made and to forward a copy of proof of funds indicating so. Such practices will help to prevent law firms from being unable to balance their client accounts at the end of the financial year and also watch out for any red flags that may be signs of potential money laundering.
3. Credit Card or NETS Payments
Using credit cards to make payments is not novel but remains as one of the viable methods of payment. Firms should however note that there may be additional merchant fees payable for payment by credit card or NETS. The fees chargeable are approximately 3% for credit cards and approximately 1% for NETS payments. Thus, law firms that are intending to provide credit card services should consider whether they will absorb such transaction fees or require the client to bear them. For one’s consideration, 3% of $100,000 worth of legal fees comes up easily to $3,000. If the law firm requires the client to bear such transactions fees, it would be good practice to inform the client that they are required to do so.
4. Anti-Money Laundering
Regardless of whichever payment system the firm decides to use eventually, it is important for the firm to ensure that lawyers and staff employed by the firm are aware and vigilant of potential money laundering schemes associated with the respective payment systems. Firms who are unable or unsure of how to keep records of transactions received from clients on specific payment systems should take time to understand such payment systems before implementing them as part of their firm’s acceptable payment method. This may include having an initial “trial period” for a limited scope, whereby selected clients that have undergone satisfactory due diligence checks and are making payments of less than a certain amount are invited to make payments using new payments schemes that the law firm has decided to implement. Upon the successful “trial period”, law firms may consider scaling up such e-payment methods to other clients, larger transaction amounts or both.
B. PAYMENTS MADE BY LAW FIRMS
Due to the Legal Profession (Solicitors’ Accounts Rules) stating that outgoing payments above the sum of $5,000 must be made by cheque (or other instruction effecting the withdrawal) and signed by two solicitors. Thus, at the present moment, the use of the physical cheque remains the best method for such payments.
C. PAYMENTS TO EMPLOYEES
The prompt and proper payment of an employee’s income and CPF is important. There are several payroll software available in the market, such as JustLogIn, Gpayroll, PayDay!, TIMES Software, amongst many other solutions. Greater automation of payroll processing can provide greater efficiency and ease in paying employees for the law firm, as such payroll software will handle both simple and complex calculations including monthly salary, CPF (for Singaporeans, Permanent Residents of certain years), no pay leave, transportation or other reimbursements, amongst others. However, some of these payroll software do not come cheap – therefore, depending on the firm’s headcount, law firms may consider purchasing a payroll software that best meets its needs after considering the price of the payroll software in relation to the firm’s needs.
The benefits of using an automated payroll system are large. Firstly, payroll software can generate the relevant files for automatic payment of employee’s salaries and CPF – these files are usually generated in a .txt format and can be easily uploaded onto the online portal of the bank or CPF for automatic processing of income and CPF. Local banks that support such bulk payroll payment services include DBS, UOB and OCBC. Firms that decide to use a payroll software should however ensure that their payroll software are constantly and promptly updated to take into account any amendments in employment or CPF laws or income tax legislation, so that the right amount of salaries and CPF are paid correctly and promptly each month.
As participation in the Auto-Inclusion Scheme for Employment Income is compulsory from Year of Assessment 2018, law firms that have an employee headcount of more than 9 or above should consider purchasing payroll software that allows for the quick and easy generation of tax declaration files that can be easily ported into IRAS’ Auto-Inclusion Scheme software.
D. CONCLUSION
With the national push to grow a Smart Nation, e-payment systems are here to stay. Slowly, but surely, they would replace traditional cash payment facilities. With high internet literacy and mobile phone penetration rates, adoption of e-payment applications is expected to grow at an increasing pace. A third of the e-payment services mentioned in this article were launched in 2017 alone. Law firms should keep abreast of such trends and be prepared for the digital future ahead by offering a reasonable suite of e-payment methods.
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