PayDay Super-charged on the NPP

A multi-phased pilot proving the efficacy and capability of Australia’s real-time payments platform, the NPP, has come at an ideal time amid questions about plans to shut down the legacy BECS payment system.

There’s more work to be done, to be sure. But a PayDay Super study, using rails from the New Payments Platform (NPP), shows payments to superannuation funds in near-real time are achievable in principle.

These findings have significant implications for the financial services sector — as well as every business that pays their staff super — and should help galvanise industry to ensure a smooth switch, especially when benefits such as more end-user engagement are expected.

Background

The NPP is the modern payments infrastructure for Australia’s financial system. Launched in 2018, the NPP offers faster settlements, superior reconciliation, and visibility, transaction information and fraud controls, meaning the Australian payments system is faster, data-rich and more secure.  

In 2023, the Australian government announced its intent to mandate PayDay Super, which would align superannuation payments with regular salary payments, making it easier for workers to track their super and find lost entitlements. Estimates from the Australian Taxation Office indicate there was $A3.4 billion in annual unpaid superannuation in 2019–20.

This presents an opportunity to leverage the NPP to the benefit of superfund administrators and members.

Pilot landing smoothly

The pilot program was conducted between ANZ and SuperChoice — Australia’s largest superannuation clearing house and a longstanding ANZ partner.

The first two phases tested using NPP rails to send payments to SMSFs and APRA regulated super funds.

The big question was whether the NPP could be used to meet the requirements of PayDay Super. The results were very encouraging.

Using the NPP, more than 200 payments were passed between ANZ and SuperChoice. Of the contributions, the majority were super fund member contributions totalling around $A228,000. The process was seamless and completed in near-real time.

“Ever since PayDay Super was announced, the industry has been looking to the NPP as a compelling option to help meet these incoming obligations,” Lisa Vasic, ANZ’s Managing Director of Transaction Banking says. “In principle, the milestones in the pilot have demonstrated payments to super funds in near-real time are achievable."

Richard Breden, CEO of SuperChoice, says the pilot to date has been a resounding success.

“With NPP as the primary payment rails for superannuation contributions one step closer, we are looking forward to the next phase."

PayDay Super in an NPP world

Starting with the benefits, the NPP is designed to improve the speed, sophistication and security of payments across the economy.

Meanwhile, the so-called ‘superannuation guarantee gap,’ the gulf between what a worker is entitled to and what they end up receiving, disproportionately impacts lower socio-economic groups, women and casual workers.

PayDay Super will align super payments with a person’s regular salary payments, making it easier for employees to track their retirement payments and find unpaid super. Getting the money sooner will also mean it’s working longer for the wage-earner.

Mary Delahunty, Chief Executive of peak super body the Association of Superannuation Funds of Australia, says industry expects PayDay Super “will encourage people to engage more regularly with their retirement savings”.

Vasic said it was widely known the super industry would greatly benefit from more opportunities to engage with their members, who would prefer to think about their retirement later, to add value today.

“Money in the member’s account faster, more often, with a better user experience is a great recipe for doing just that,” she says.

Under draft legislation due to be introduced in 2025, an employer will have a seven-day ‘due date’ for super contributions to arrive in an employee’s super fund. An employer will be liable for the new Superannuation Guarantee charge if the due date isn’t met. But the reforms are also expected to simplify payroll for employers.

Road to payments modernisation

This pilot demonstrated the value of 24/7 availability, flexible payment timing and use of rich data for improved reconciliation and exception processing.

Change isn’t always easy, of course. But as ANZ’s Head of PCM Product Australia, Carolyn Young, told Insights, the NPP is constantly transforming to ensure the opportunities it offers – including super contribution payments – are future proof.

“The NPP roadmap is evolving to enable broader adoption of faster payments to provide the certainty required by PayDay Super,” she says.

“As with any modernisation, there are a number of considerations in moving from a legacy system to an innovative solution, meaning some end users will seek assistance in making that transition.”

According to Young, this can include technological maturity, customer experience, cost and efficiency as well as the risks to businesses, particularly payment fraud.

“These considerations are not unique to moving to real time payments but are essential when thinking about modernisation.”

ANZ, SuperChoice and their industry partners are working to solve these issues. With the right financial institution partner, using NPP for PayDay Super is a critical step on the journey towards payments modernisation.

The next two phases of the pilot involve testing the migration of existing direct debits to PayTo, and using PayTo to initiate super contributions from employers.

“The move to NPP is an exciting step forward in superannuation payments however the complexities involved should not be underestimated. Each phase of this successful pilot is critical in demonstrating NPP’s value to all stakeholders in the superannuation ecosystem”, Breden says.

Vasic agrees, adding the NPP offers a compelling solution to meet the expectations and desired outcomes from PayDay Super.

“No doubt there’s more work to do to make PayDay Super on NPP rails a reality,” she says. “ANZ is looking forward to sharing the results of these next two pilots with the market and partnering with our customers to realise the benefits of the real-time, data-rich platform.”

Alexander Liddington-Cox is a Contributor at ANZ Institutional Insights