The government must allow more time for the New Payments Platform to mature before mandating the use of the system for payday super, the Gateway Network Governance Body has cautioned.

The Gateway Network Governance Body (GNGB) has outlined potential problems with making superannuation contribution payments over the New Payments Platform (NPP), which the government plans to mandate as the payment mechanism for payday super.

The industry-owned not-for-profit group, which manages the Superannuation Transaction Network, has released a discussion paper outlining some of the potential complications that could arise with the NPP system for paying super contributions.

As part of its proposal to mandate the payment of super contributions at the same time as wages, the government has previously stated that SuperStream data and payment standards will be revised to allow payments to be made via the NPP.

The government has said that introducing near real-time payments, along with improved error messaging, will enable employers and intermediaries to quickly resolve any errors that arise.

However, the GNGB said while faster payments under the NPP will improve the ability for employers to meet the new superannuation guarantee deadlines in a Payday Super environment, it is "not the magic bullet some would make it out to be".

In its discussion paper, the GNGB noted that the payments landscape is continuing to evolve rapidly, with many expecting that the NPP, a fast payments infrastructure enabling real-time payments, will replace the Bulk Electronic Clearing System (BECS).

However, the superannuation system is still heavily reliant on BECS and a recent risk assessment from the RBA's Decommissioning of the Bulk Electronic Clearing System: RBA Risk Assessment, identified a myriad of issues that need to be addressed before any decisions can be made about the future of payments in Australia.

"The assessment concluded that far too little consultation and planning has been done around what the future payments landscape should look like, and there is an enormous amount of work to be done before any such decisions can be made," GNGB said.

"One of many critical risks that the RBA identified is that the NPP has never been tested with the volume of transactions that currently go through BECS – around 90 per cent of account-to-account transactions still run through the BECS platform, and most countries around the world operate both a fast payment system like NPP, and a batch payment system like BECS."

The GNGB paper warned that a move away from BECS and traditional batch processing would see more frequent, smaller payments and greatly increased transaction numbers.

"The capability of NPP to handle these volumes is yet unproven," it said.

The non-universal approach to NPP adoption is also likely to cause issues with the shift to NPP for contribution payments, GNGB cautioned.

"In an environment such as superannuation administration, where we depend on standards to ensure interoperability and efficiency across numerous organisations, the use of non-standard approaches complicates adoption," GNGB said.

"Currently, not all financial institutions and accounts are enabled for NPP, and while this is expected to change over time, consistent and reliable processing of payments across the NPP needs to be demonstrated beyond question prior to the wide-scale adoption of the technology."

Another area impacted by the changing payments landscape is the banks’ treatment of the payment reference number (PRN) on the NPP, the paper said.

"This reference is critical for a super fund to be able to reconcile contributions payments, but there is currently no technical validation on the NPP to ensure it arrives in the expected field and not modified in any way."

"Current examples include where banks add a suffix and/or prefix to the PRN (or both), which complicates reconciliation. Standardised, validated payments data is essential to minimise exceptions, work arounds, or the need for running two parallel processes within the industry."

The cost structure for payments for the NPP is also very different compared to BECS, which is likely to create challenges for adoption.

"While the per-transaction fee is progressively reducing towards current BECS levels, fees for using the NPP are volume-based, and set by the bank or financial institution. The NPP website states that wholesale costs are continuing to decrease as volume on the platform increases which will be equivalent to the wholesale fees for BECS transactions," the paper said.

"However, costs for the use of PayID registration and Payto (the direct debit equivalent), as well as NPP provider margin, are also expected on top of those transaction fees.

"This creates challenges for adoption, as the payer’s costs are outside of its control, making it difficult to rely on consistent cost structures to factor into product offerings."

GNGB said, given the number of contribution transactions expected annually in a Payday Super environment – around $500 million - even a fraction of a cent extra per transaction embeds massive new costs into the system.

Michelle Bower, chief executive of GNGB, said the breadth of work required to ensure the suitability of the NPP for superannuation meant that there was no way such a project could be completed by the Payday Super proposed introduction date of July 1, 2026.

“The super ecosystem is vast, with millions of participants, and we need to assess any changes to payment systems from each of those perspectives in a balanced, independent manner,” she said.

“At GNGB, we have been working with a cross-section of super ecosystem participants since this measure was announced, and we’ve identified payments as a core issue that must be properly considered before any changes are made, or we risk the integrity of the entire Australian retirement savings system.

Bower said policymakers should urgently consider allowing the NPP more time to mature and develop sustainable solutions to the issues the RBA highlighted before requiring its inclusion.