Are Australia’s superannuation payment clearing houses becoming redundant?
By Robin Beauchamp, CEO, Integrated Payment Technologies (InPayTech)
Clearing houses have been essential fixtures within Australia’s $2.3 trillion superannuation ecosystem. They make payments on behalf of employers to employees’ superannuation fund accounts. They can save employers considerable time and money. But new payments technology may make clearing houses redundant.
Typically, an employer makes a single payment to a clearing house which then distributes superannuation contributions to employee’s member funds on the employer’s behalf. The administrative pain and complexity of making superannuation payments can be significantly reduced by using a clearing house.
Smaller businesses – those with fewer than 20 employees, or with an annual turnover of $10 million or less – can access the Federal Government’s Small Business Superannuation Clearing House, a free service. Most super funds also provide access to a clearing house service, as well as private super clearing houses, though they may charge fees.
Change is coming
The arrival of the New Payments Platform (NPP) together with automated payment technologies, means change is on the horizon for traditional clearing houses and the companies who utilise their services. The future role for clearing houses as a pivotal component of superannuation fund payments is dramatically diminished.
InPayTech’s own proprietary technology is a good example of the kind of technological advancement that is creating greater efficiencies and reducing cost. Such technologies are disrupting the payments chain within superannuation.
Our product or solution is called PayVu. It is software as a service with the capacity to fully automate payroll, superannuation and all business payments including taxation. Importantly, PayVu removes the payment delay incurred when using a clearing house. When paying superannuation via a clearing house, an average of 4.2 days elapse between the money leaving the employer’s account and arriving at the superfund’s account. PayVu payments are transferred the same day.
PayVu removes the clearing house ‘middle man’ by promoting the straight-through-processing of superannuation payments. It adds immediate ease, efficiency and security to the direct payment of employee super entitlements and gives control over any returned payments back to employer.
PayVu will operate like an overlay of the NPP, which will be launched in November 2017. The NPP will enable businesses and government agencies to make faster payments, with near real-time funds availability to the recipient, on a 24/7 basis, 365 days a year, so public holidays and weekends won’t slow down superannuation payments.
The benefits of using PayVu to automate payroll and super payments from an employer’s own bank account (and not a clearing house) include:
- Giving employers a direct relationship with each employee’s superannuation fund (and vice versa)
- Compliance with the Government’s SuperStream reporting regime
- A potential dollar benefit to fund member (by having their retirement savings monies invested in their super account 4.2 days earlier)
- A benefit to super funds that are enabled to deal directly with the employer, not the clearing house, which is more efficient
- Removing any need for employers to manually match data to payments in their accounting software
- The direct return of superannuation money into the employer’s bank account whenever the superfund is unable to process the contribution. Currently, returned funds suffer delays through the clearing house being paid, then being reconciled, before returning to the employer.
The introduction of this system to Australian small employers has far-reaching efficiency benefits. We continue to explore other applications for PayVu technology beyond the superannuation sphere, and are excited to be focusing for the moment on making the payment of retirement savings far more speedy and efficient for SMEs.