NPP to boost superannuation efficiency and savings

By | NPP

NPP to boost superannuation efficiency and savings

By Robin Beauchamp, CEO, Integrated Payment Technologies (InPayTech).

Australia’s superannuation members will benefit from the New Payments Platform (NPP) as employer contributions are paid more quickly into savers’ accounts and they earn a return sooner. The role of clearing houses could quickly become redundant if employers start making real-time payments directly to workers superannuation accounts.

The NPP is Australia’s new payments system, delivering data rich payments within seconds. Businesses and consumers can transfer funds to recipients real-time on a 24/7 basis, 365 days a year, if that money is being transferred to a person or business who has a registered a ‘PayID’ with the NPP. That PayID will be used instead of a bank BSB and account number and can simply be a mobile telephone number, email, ABN or business name.

The Commonwealth Bank of Australia has released a white paper with KPMG, The NPP and Superannuation, which says the NPP will benefit superannuation members significantly. Based on, for example, a 3% investment return, the switch to real-time payments from the average two-day lag could see total value generated of $19.2 million annually (for 100 per cent of Australian workers’ contributions, based on FY17 contributions of $116.9 billion), the white paper estimates.

Superannuation payments arrive more quickly

Despite SuperStream, superannuation payments are still getting lost in the system because data and monies still move separately under SuperStream, which was developed at a time when payment technology was less sophisticated, according to the white paper. Clearing houses have been managing these problems for superannuation funds and employers, however, this creates cost, complexity and delays in the system.

The NPP offers the potential to smooth out this web of payments, with its infrastructure and overlay services built on top. The NPP enables significantly more information to be sent with payments, allowing senders to attach up to 1,400 fields of data, including Tax File Numbers and ABN, says the white paper. Using that unique PayID for employees, employers will be able to direct funds in real-time to employees’ superannuation accounts and overcome the administrative burden of using a clearing house and keeping up with employees’ changing details.

The employer only needs to know the PayID and the employee becomes responsible for ensuring this is linked to the correct superannuation account at all times. This will make the job of a clearing house redundant – and it will avoid significant delays in the current system which are costing workers, and employers, money.

Need for overlay services

The NPP alone won’t deliver all payment services to superannuation funds. Overlay services will still be needed to add sophistication to real-time payments. Overlays are like apps which enhance or expand the service delivered by the NPP’s basic infrastructure.

InPayTech’s PayVu is an overlay style service that will sit on top of the NPP. PayVu can be used by employers to fully automate superannuation and payroll payments to employees and taxation payments to the ATO. Importantly, PayVu bridges the gap between accounting and payroll systems, and the ATO. PayVu is being integrated with Xero, MYOB and QuickBooks, allowing for the more intelligent processing of payments.

PayVu enables employers to avoid clearing houses and make direct payments to a member’s superannuation fund. This reduces the time it takes payments to go to employees’ funds from an average four days to same day. PayVu will go a significant way to reducing some employers’ lack of compliance with their superannuation obligations.

PayVu complies with SuperStream and that will be on many employers’ minds as mid-year approaches. For employers with 20 or more employees, Single Touch Payroll (STP) reporting of SG payment information will be mandatory from 1 July 2018.

Need for collaboration

The white paper calls on the superannuation funds to take a collaborative approach to developing overlay payment services.

“It is really incumbent on the funds, in collaboration with their bank and the right expert advice, to really understand the pain points and work together to co-design a solution,” says Michael Eidel, Executive General Manager, Cash-flow & Transaction Services, Commonwealth Bank of Australia.

However, collaboration between superannuation funds isn’t realistic. Superannuation funds are like the big banks; that is, they do not co-operate or collaborate; they compete against each other. So, I do not expect this proposal will ever get up. It took legislation and the might of the Australian Taxation Office to push funds to adopt SuperStream. They are hardly likely to raise their hands to work together to develop payment solutions.

This makes the importance of third-party overlay services like PayVu more important.

Benefits of direct payments

The benefits of superannuation payments being made directly 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)
• A potential dollar benefit to the fund member
• A benefit to superannuation funds that are able to deal directly with the employer, not the clearing house, which is more efficient
• The direct return of superannuation money into the employer’s bank account whenever the superannuation fund 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.

Another big benefit of STP is that it will help to avoid employers not paying employees super. STP reports Superannuation Guarantee (SG) contributions directly to the ATO when salary payments are made, enabling the ATO to more closely track non-payment. That will take the onus off employees to report non-payment of superannuation. So, the benefits of STP are many fold.

About InPayTech

InPayTech is an ASX-listed technology company that has developed a software as a service system, called PayVu, to help employers meet their new STP requirements. PayVu fully automates payroll, superannuation and taxation payments to the same day and reports these payments to the ATO using STP. Importantly, PayVu reduces the transaction time of superannuation payments from the average of 4.2 days (if a clearing house is used) to payment the same day.

Understanding STP and its benefits

By | NPP

Understanding STP and its benefits

By Robin Beauchamp, CEO, Integrated Payment Technologies (InPayTech)

The Federal Government is arming the Australian Taxation Office (ATO) with additional funding to monitor employers who are not paying correct superannuation guarantee (SG) entitlements to their employees.

Employers’ failure to meet their SG obligations has long been a problem since the introduction of the system of compulsory superannuation in 1992.

A Senate Economics References Committee recently said it is deeply concerned by analysis by Industry Super Australia that suggests employers failed to pay $5.6 billion in SG contributions in 2013-14. No doubt that number has climbed since then given wages and employment growth.

To firmly crack down on this problem, the Government is providing the ATO with additional funding to monitor employers’ non-compliance. The package includes requiring employers to adopt Single Touch Payroll (STP) reporting to to ensure SG payments meet the minimum payment frequency (quarterly) and introducing greater penalties for employers where they don’t pay the right amount of superannuation to their employees.

What is STP?

Single Touch Payroll (STP) involves automating an entire transaction from start to finish by using software to eliminate paper-based work. As payment reporting is fully automated, STP reduces the possibility of reporting errors while introducing greater transparency due to the ATO being able to monitor all aspects of wages and superannuation payments.

In terms of superannuation, the Federal Government will require employers to begin adopting STP for SG payments from 1 July 2018.

The key components of STP include:

  • Employers report on an employee’s salary and wage amounts (including ordinary time earnings) and PAYG withholding amounts to the ATO; and
  • Superannuation Funds report on superannuation contribution information to the ATO at the time payments are received.
  • Employers with 20 or more employees will need to transition to STP from 1 July 2018 with smaller employers being required to adopt STP from 1 July 2019. This will align employers’ payroll function with the regular reporting of taxation and superannuation obligations to the ATO.

The benefits of STP

When employers report their employee’s ordinary time earnings using STP, this will enable the ATO to calculate a reasonable estimate of their employees’ SG entitlements. Where employers aren’t paying the correct amounts, the ATO will be able to step in to require employers to pay their SG obligations. This will reduce the ATO’s reliance on employees to report non-compliance by employers. This is a good thing; often workers may be reluctant to ‘dob in’ their boss or may not even be aware they aren’t receiving the correct amount of superannuation.

The collection of superannuation contribution data through STP will also enable the ATO to display this information in individuals’ MyGov accounts, Australians will therefore have easier access to information about their superannuation via this government platform which houses much of their taxation, medical and other records.

Additional action on super

Other measures the Turnbull Government is taking to enforce SG payments include requiring superannuation funds to report to the ATO more frequently SG contributions received from employers (at least monthly). This will enable the ATO to identify non-compliance earlier and take prompter action against non-compliant employers.

The Federal Government is also improving the effectiveness of the ATO’s recovery powers, including strengthening director penalty notices and using security bonds for high-risk employers, to ensure that unpaid superannuation is better collected by the ATO and paid directly to employees’ superannuation accounts.

The Government is also giving the ATO the ability to seek court-ordered penalties for employers who are repeatedly caught failing to pay their SG liabilities.

The bottom line

STP processing will also go a long way to reducing employers’ non-payment of their SG obligation and reducing this ‘wage theft’, as it has been called.

About InPayTech

InPayTech is an ASX-listed technology company that has developed a software as a service system, called PayVu, to help employers meet their new STP requirements. PayVu fully automates payroll, superannuation and taxation payments to the same day and reports these payments to the ATO using STP. Importantly, PayVu reduces the transaction time of superannuation payments from the average of 4.2 days (if a clearing house is used) to payment the same day.

So, employers will be able to take control and automate the payroll process. No more writing cheques or manually inputting wages and superannuation data.

PayVu will sit as an overlay on top of the New Payments Platform (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 recipients. Payments will be data rich and fully transparent.

Are Australia’s superannuation payment clearing houses becoming redundant?

By | NPP

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.

How technology can stop the next payroll fraud

By | NPP

How technology can stop the next payroll fraud

By Robin Beauchamp, CEO, Integrated Payment Technologies (InPayTech).

The Plutus payroll scandal has been labelled Australia’s largest white-collar crime, with increasing calls for additional legislative crackdowns on those entrusted to process the pay, benefits and taxation of working people.

The alleged $165 million Plutus payroll scandal could have been avoided if employers automated payments directly to the Australian Taxation Office (ATO) and authorised taxation payments themselves, rather than relying on a ‘bulk billing’ third-party payroll company to make such payments. Only by authorising payroll payments themselves can employers eliminate the risk of such fraud entirely.

Learnings from the case highlight that payroll is a critical business function which can’t be ‘bulk billed’ without the risk of fraud. Employers need to get it right from the start.

That’s because your payroll is extremely important; it’s the reason why your employees get out of bed every day to be with you – because they get paid. Organisations should therefore keep their payroll authorisations in-house to make sure their employees get paid all their entitlements. Only by authorising themselves can the risk of fraud be entirely eliminated as it takes away the opportunity from third parties to pocket monies intended for others.

Indeed, no amount of additional laws can prevent those third parties with the knowledge, resources and criminal intent to illegally exploit existing systemic loopholes. ‘Bulk billing’ will always carry this risk.

In the Plutus Payroll fraud, the payroll company itself defrauded millions of dollars from employers, money intended for the Australian Taxation Office. While the ATO is still chasing those payments, employers remain out of pocket and liable for those payments that went missing. Trusting Plutus was a bad move. But trusting any third party can expose you to this risk.

That’s why embracing the authorisation process yourself is the safest option. There is a temptation to think the payroll process is too hard and needs to be entirely outsourced by businesses that do not have time to do it. However, this type of thinking can lead to problems. Finding the right technology can make the payroll process much easier – and much more secure if businesses authorise the payments themselves directly to recipients.
InPayTech has developed a unique payments technology, PayVu, which delivers a greater certainty for employers, their agents and the ATO as it fully automates payroll and tax payments. This solution is immediately available to every employer in the nation right now.

PayVu is like an overlay service that will sit over the top of the New Payments Platform (NPP), due to be introduced later this year. 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, so public holidays and weekends won’t slow down payments. Each payment message will be capable of carrying much richer remittance information than existing systems.

Importantly, PayVu bridges the gap between accounting and payroll systems and the ATO. The product gives time back to business owners and their bookkeepers by reducing the payment process from hours to minutes and it adds certainty to the outcome by ensuring payments are received by the intended recipients virtually on the same day they are made.

PayVu therefore eliminates the need for employers to outsource the authorisation of payments and it therefore removes the opportunity for illegal behaviour. The massive scale of the Plutus case highlights why it is so important to act now to in-source the authorisation function.

About InPayTech

Integrated Payment Technologies Limited (InPayTech) is an Australian financial technology business that has designed an innovative overlay capability with broad domestic and global applications across banking, wealth management, pensions and financial services.

During its Initial Public Offer process and subsequent listing to the ASX on December 16, 2016, InPayTech highlighted its intention to create new business initiatives to commercialise patents approved and pending around the world. PayVu is the first such initiative from InPayTech Limited.

Understanding the NPP and its benefits

By | NPP

Understanding the NPP and its benefits

The New Payments Platform (NPP) is a national payments infrastructure being developed for the Australian economy. It will give consumers, businesses and government departments a platform to make payments virtually in real time.

In times past, getting access to cash depended on going into a bank during branch hours and withdrawing money.  Today, people can access money via ATMs, EFTPOS, online payments, contactless cards and mobile payments. The NPP will speed up these payments even more, taking them close to real time.

The NPP is being developed collaboratively by 13 financial institutions, including all the big banks and several other banks. Once it goes live later this year, it’s expected that 80 per cent of all Australian bank accounts will be able to receive payments by the NPP. This will increase as more financial institutions connect to the NPP.

Not only will payments be faster, but they will be completed with ‘remittance information’ or details about the payment. Payments will be addressed to a payee’s unique identifier, so there is less chance of money ending up in the wrong account.

How the payments system will work?

The NPP works through three parts:

1. The Basic Infrastructure.
This is a network which will connect all participants.  The network includes a switch, which moves messages between participants and an ‘Addressing Service,’ which enables transaction accounts to be identified by a payment address such as an email address, phone number or ABN number.

2. The Fast Settlement Service
The Fast Settlement Service (FSS) is provided by the Reserve Bank of Australia which enables every single payment made on the NPP to be settled in real-time.

3. Overlay Services
An overlay is a computer network which is built on top of the basic infrastructure.  The NPP infrastructure will eventually support multiple overlay services, which will deliver additional payment services.

The benefits of the NPP:

Customers of financial institutions connected to the NPP will be able to make or receive payments in a matter of seconds.  Real-time settlement means businesses can also make and receive payments more quickly. This will speed up cash flows for everybody.

There will also be less scope for payments to the wrong account. The Addressing Service will enable payments to be directed to any recipient using their phone number, email address, ABN or organisational identifier, even if you don’t know that person’s bank account number.

For bookkeepers, this will reduce the time taken to reconcile accounts. Accounting systems, for example, will be able to match payments against invoices using a person’s payment address.

The platform also enables more information to be conveyed with payments, including the attachment of documents like invoices and receipts.

Questions that you were too afraid to ask:

Q. What’s the point of the NPP?

A. There are three key benefits of the NPP:

  • Speed: the ability to make payments in real time, with close to immediate funds availability to payees outside normal banking hours.
  • Data enriched: the ability to send more information with payments.
  • Simple Addressing: A system to more easily address payments to recipients using their phone number, email address, ABN or organisational identifier.

Q. Who will run the NPP?

A. NPP Australia Limited (NPPA) was formed in December 2014 to build and operate the NPP. The company is owned by the 13 financial institutions participating in the NPP: the ANZ, CBA, NAB, Westpac, Cuscal, ING Direct, HSBC, Macquarie, Bendigo and Adelaide Bank, Citigroup, Indue, Australian Settlements Limited and the Reserve Bank of Australia.

Q. When will the NPP be operational?

A. The NPP is currently being tested by NPP Australia and could become available from November 2017.

Q. Will I pay money to use the NPP?

A. That will depend on your bank. Pricing for use of the NPP will be at the discretion of participating banks and other participants.

Q. Can I move bank accounts more easily?

A. Users of the NPP’s Addressing Service, which allows customers to send payments to a nominated account via a unique identifier, such as a mobile phone number or email address, will be able to switch payments between accounts more easily. So, while the NPP has not been designed to support account switching, it does empower consumers to redirect payments to other accounts through the use of their unique identifier.

Q. What is an overlay?

A. Overlay systems will leverage the NPP’s basic infrastructure and provide tailored payment services. Overlays are like apps which enhance or expand the service delivered by the NPP’s basic infrastructure. NPP Australia, the company formed to operate the platform, predicts the development of several overlay services once the NPP is operational.

Q. What kind of products and services could overlays deliver?

A. As payments made by the NPP will be data rich, the opportunities to speed up payments in funds management, securities trading and in the insurance and superannuation industry are numerous.

The first overlay to be launched on the NPP will be delivered by BPAY via participating institutions. It will be a convenient and accessible service for consumers to send payments from their bank account at any time to payees using addresses such as a mobile phone number or email address, with fast and data-rich availability of cleared funds.

Q. Why is the Reserve Bank of Australia involved with the NPP?

A. Having the RBA connected directly to the NPP will allow real-time settlement between the participating financial institutions.