The super industry – one of the biggest generators of paper cheques in Australia – is about to get on board the e-commerce train. If all goes to plan, reforms are likely to require businesses to ditch their cheque books in favour of a new electronic superannuation payment system, named SuperStream.

The reforms are part of the government’s Stronger Super reforms and have been a long time coming.

While millions of Australians have embracednewtechnologieslike automatic teller machines (ATMs) and electronic transfers in their daily lives, the super industry, charged with the task of having to accept workers’ super contribution each quarter, has lagged far behind.

It is estimated that more than half of Australian cheques relate to superannuation transactions.

In 2007 the Reserve Bank of Australia found that the average cost of processing a cheque was more than $7, compared to about $1.20 for a credit card and 67 cents for electronic funds transfer at point of sale (EFTPOS). Clearly, there is enormous room for efficiency improvements.

 

Barriers to entry

One of the barriers to the take-up of electronic payment has been the number of super funds that each business must deal with.

Businesses with three employees, for example, might be paying super to three different funds.

While most of us are frequent users of EFT and EFTPOS, there has been no standard payment system for getting data and money to super funds other than cheques.

Even if one super fund offers an electronic payment option, cheques may still required by the other two. And, while most employers now use an electronic payroll system, it is also true that some businesses that aren’t connected to the internet have resisted moving to e-commerce. According to the Cooper Review of Superannuation, 38 per cent of businesses use only cheques, while 22 per cent use a combination of cheques and electronic payments for super payments. Sole use of cheques is generally higher among businesses with fewer staff and lower turnover.

The problem from a super fund’s point of view is that it is reluctant to outlay money for new technologies aimed at improving the employer experience if no one else has complementary systems.

The Australian Institute of Superannuation Trustees (AIST) supports universal and mandatory standards. Stronger Super has brought together super funds, employers and government to create a better system.

 

How it works

SuperStream requires employers to providethesameinformationinthe same format for all super. Super funds have until July 2013 to adopt the new standards, medium-to-large business have until July 2014 and small ones until July 2015.

It costs almost $4 billion every year for super funds to process over 100 million transactions and the cost to employers is similarly huge. It is estimated that SuperStream will save in excess of $1 billion per year.

SuperStream will deliver two benefits: improved savings for members (provided funds pass them on) and reduced red tape for employers.

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