Compliance technology automation, cyber security and new payment tech innovations will be at the core of Australia’s superannuation industry as it moves forward to a more efficient and secure era.
Approaching 2020, InPayTech’s CEO Dean Martin, looks at the prerequisites facing Australia’s growing national retirement savings sector to keep pace with change, tap into new technological solutions, and ensure data security becomes a fundamental priority.
Compliance technology and automation
Compliance is typically the last function to be automated in financial services organisations due to outdated legacy systems. By contrast, in pursuit of scale, all areas of payment processing are automated. Traditionally it was difficult, in the short and medium term, to justify and deploy the resources required to automate compliance in legacy transaction systems which were designed to support limited transactional data. Subsequently either increased regulation needs to be applied and adhered to, or fintech providers need to offer elegant solutions that can live with current legacy systems to augment existing infrastructure and processes.
These solutions inherently need to be easy to deploy, at a relatively low cost, and provide appropriate data access to all required entities in a transaction, including government agencies.
The inconsistency of having highly automated payments complemented by manual compliance systems and processes is currently a systemic failure faced by many financial institutions. This paradox is of course exacerbated with significant increases in the number and speed at which transactions need to be processed both domestically and internationally. For example, in Australia alone The Bulk Electronic Clearing System (BECS) processes more than $14.8 trillion a year.
That said, financial institutions currently looking at addressing the need to streamline and automate compliance in line with their payment processing, should look into solutions that can quickly be integrated with their existing system and security and compliance frameworks.
SuperStream, which has been successfully deployed throughout Australia, is an example of the type of solution needed by banks, payroll providers, superannuation funds and employers. SuperStream facilitates electronic Super Guarantee (SG) disbursement for all Australian employers and their employees by linking extensive SuperStream data with SuperStream payments.
Furthermore, as government digitises all business to government reporting and with Australian superannuation assets at $2.8 trillion, expected to grow to $5.4 trillion in 2029, the importance of end-to-end cyber security to protect against identity fraud and subsequently monetary theft is paramount. Antiquated export and upload systems and processes which compel employers to export personal and private information and financial data outside of accessed controlled, password-protected and audit-logged business management systems will increasingly need to be replaced during 2020.
Addressing growing cyber security risk and identity fraud
To address the growing risks from cybercrime, compliance and ID fraud will require greater resources allocation and attention to technology, cyber security, compliance and related risks. Subsequently the roles of chief risk officer and chief technology officer will acquire greater prominence and increased budgets.
In October 2019, ASIC revealed an international syndicate attempted to steal as much as $10 million from superannuation and share trading accounts. This is just the tip of the iceberg, as identity crime continues to be one of the most prevalent crimes in Australia according to the Australian Institute of Criminology (AIC), seeing the annual economic impact of identity crime exceeding $2 billion. We’re now in a time where protecting identity and financial information is an inherent part of protecting the working Australians’ financial wellbeing.
As custodians of identity and financial information, boards, trustees and all senior executive have an obligation to ensure employees and customers data is appropriately protected end-to-end.
To address the increasing risks and to meet the expectation of working Australians, business leaders will start to take a holistic view of personal, private and financial information by implementing solutions which do not require the exporting and exposing of identity and financial information outside of business management systems, like payroll and ERP systems, which have appropriate access control built in.
For example, via ClickSuper and the ClickSuper API integrated payroll network, employees’ or members’ personal and private information doesn’t need to be exported and can be transferred securely from the core payroll/ERP system directly via ClickSuper’s Gateway to the Superannuation Funds and the ATO, which means their personal and private information is secure end-to-end unlike the dated, insecure and prevalent export and upload into a fund portal process many businesses still use.
Increasingly employers will expect to securely transfer identity and financial information without needing to export and risk of exposing their employees, suppliers and customers data.
Of course, we predict the government will continue to harden the Privacy Act, with the Notifiable Data Breaches (NDB) scheme bringing into focus the growing importance of personal, private and financially sensitive data. Australia’s version of the General Data Protection Regulation (GDGP) is expected to continue the theme of increasing legislation and penalties for Australians’ personal and private data.
Open banking, New Payments Platform and payment techs
Phase 1 and Phase 2 of open banking are scheduled to be rolled out during 2020. This will provide fintechs with the ability to securely access and use account balance and transactional data for individuals’ bank accounts, where the individuals have elected to share this information. This marks an important milestone in the payment ecosystem to help reduce risk, rework and double handling for customers who want to use their data in a digitally connected world, in turn facilitating convenience and access to new services as they become available.
In 2020 we will see the data standards for processing structured payments become mandatory for the New Payments Platform (NPP). These standards are designed to help facilitate the required efficiencies in payment processing, such as for payroll and tax transactions. It should be noted there is very little benefit in moving structured payments in near real time if the associated payment data is not able to be processed efficiently, end-to-end from an originating business management system to a receiving business management system at government entities or other businesses. Indeed, moving money faster without the receiving entity being able to reconcile or process payments faster in their systems won’t lead to any additional value. Once again, mandating the data standard will be a significant milestone in realising the greater value from the promise of NPP’s ability to move money faster with the required payment information to drive process efficiency in receivers’ systems.
From a fintech perspective, the changes seen during 2019 and with more change coming in 2020, business and government success will be defined by their ability to securely and efficiently process increasing volumes of payments for employees, customers and suppliers.
Here at InPayTech we are looking forward to the promise of an increasingly integrated ecosystem and more market participants embracing technology and security for the benefit of all Australians.
Dean Martin, chief executive, InPayTech