One of Australia’s largest insurance companies has become the latest superannuation provider to adopt straight-through processing of superannuation contributions through SuperChoice’s Super Data Exchange (SDX).
Tower recently began using the clearinghouse for contributions processing, according to SuperChoice chief executive officer, Peter Philip.
SDX was made available to all super funds in September, and is already used by AAS, AMP, ING, IBM/Russell and QSuper.
It allows funds to streamline their super choice transactions, giving funds the ability to receive full member, employer and contribution information and to initiate corrections if necessary that avoid costly reconciliation and error rectification.
According to SuperChoice, some clearinghouse facilities provide information to the receiving fund, but this info9rmation fails to be validated at the point of entry and results in missing or incorrect information, particularly with Choice of Fund.
Exceptions require funds to revert to manual verification steps and can cost 500-1000 times the cost of a validated electronic transaction.
“There are a lot of funds that are doing pseudo-electronic processing, getting emails, but those aren’t validated transactions whereas SDX is ensuring the fund receives validated straight through transactions that are reconciled to the money,” Philip said.
“The key of SDX is it’s inextricably tying the money and data together and it means the recipient funds don’t need to validate or reconcile the money.”
According to Philip, lack of upfront validation is responsible for incorrect contribution data, duplicate accounts and is the major cause behind the nearly $17 billion of investor funds sitting in unallocated accounts.
“Rework is the biggest cost element in the industry, it’s not processing the STP transactions that costs money, it’s the exceptions,” he said.
“We have published figures that show that if the industry was to move to STP it could easily cut $1 billion of cost. The cost figures for administration are $3.5 billion per annum; we think you could easily cut a third out of that, probably more, but even $1 billion would be a big step towards Chris Bowen’s ideal 1 per cent fees.”