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.
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.