KiwiSaver providers are finding new ways to meet more stringent regulations and tackle rising competition, says Bravura Solutions Head of Sales & Account Management NZ, Tim Bakkenes.
The $90 billion KiwiSaver market is being transformed.
A shakeup of the default scheme membership has directly affected more than 300,000 members, while the regulator is demanding lower fees and increased engagement. It is creating a challenging landscape for providers, who need to offer more while charging less.
In response, a rising number of KiwiSaver providers are overhauling their traditional processes, creating a stronger foundation to provide better services.
The challenge ahead
The demands on KiwiSaver providers have never been higher, and those who fail to adapt are quickly seeing consequences.
A suite of regulatory changes has lifted standards across the industry, yet almost half (46 per cent) of members remain unsatisfied with their providers, according to a 2022 survey by Consumer NZ.
They are increasingly exercising their choice in the wake of the FMA’s new default scheme membership, with the number of default members falling from 356,000 to 298,000 last year – the biggest reduction on record according to actuarial consultancy Melville Jessup Weaver.
Smaller KiwiSaver providers are tapping into this demand, carving out their own niche by focusing on areas such as socially responsible investing, fees, member engagement and advice, or investment performance.
New default provider regulations require greater engagement with members at key points in their retirement journey to help them make better decisions. This is no longer just generic information, but real advice conversations (or digital advice experiences) at relevant moments. This is placing new pressure on all providers to offer similar services.
At the same time, the regulator remains focused on fees, with the average dropping by 0.16 percentage points to 0.84 per cent last year. That pressure is likely to continue, particularly as investment returns remain volatile in an uncertain and rising interest rate environment.
These trends are placing KiwiSaver providers in an uncomfortable situation: they need to deliver more expansive services to members at a lower cost. The growing scale of funds is only part of the solution – a new approach to technology is needed.
How Business Process as a Service (BPaaS) can drive efficiency
Business Process as a Service (BPaaS) is a key part of the solution. It refers to the outsourcing of specific processes to a third-party service provider who can use their technology and expertise to improve the efficiency of these processes.
In a BPaaS model, KiwiSaver providers pay for specific business outcomes that are achieved through automated processes, rather than simply paying to access software or outsourcing to manual labour. BPaaS vendors contract to service level agreement outcomes for the delivery of these automated processes, such as member onboarding, contribution processing, and switches – all designed to be completed without manual intervention.
Human interaction is only required by exception when a task is flagged as needing an additional check or for a deeper ‘moment that matters’ engagement. The vendor also maintains legislative currency of the solution so that clients benefit from the expertise and improvements developed over time through the scale and reach of the vendor.
The new KiwiSaver: how providers are doing more with less
The evolution of administration by Bravura Solutions Limited.
The benefits of a BPaaS approach also include:
- Increased efficiency: Technology can automate repetitive tasks and process large amounts of data quickly and accurately, reducing errors and increasing productivity. Processes are automated and follow pre-defined workflows, meaning transactions are pre-validated, reducing touch points and processing time.
- Cost savings: Outsourcing manual tasks to technology can reduce labour costs, as well as the need for expensive equipment and infrastructure.
- Scalability: Technology can handle increasing workloads and changing business needs more easily than manual processes, which can be difficult to scale.
- Improved data quality: Automated systems can ensure consistency and accuracy of data, reducing errors and improving data quality.
- Increased speed and flexibility: Automated systems can process information faster and respond to changing business needs more quickly than manual processes, which can be inflexible.
- Better compliance: Automated systems can help maintain compliance with regulations, laws and industry standards in a more efficient way than manual process.
- Stronger security: Automated systems can provide better security for sensitive information, as they can be programmed to comply with data privacy and security regulations.
Focus on the moments that matter
Technology-enabled administration provides a stronger service foundation for funds by enabling exception-based processing – improving speed of service and freeing resources to focus on the deeper ‘moments that matter’ for members.
A great example includes enhancing the digital tools available to members, allowing them to interact with their provider online, initiate service or process requests, and receive real-time updates via an activity tracker. This provides full transparency and visibility for everyone involved in the process – including internal staff across all relevant departments – and a far better member experience.
It’s not just younger generations that are now demanding this type of digital engagement. According to the New Zealand Seniors’ Digital Trends Report 2022,more than 4 in 5 (82 per cent) of over 50s agreed that banking, finances and paying bills were important functions to perform on their devices. As this demographic nears retirement, it’s important to offer them more accessible and engaging ways to interact with their retirement savings, such as through digital channels.
Digital engagement will inevitably lead to more digital advice. It can help KiwiSaver members better understand the basic elements of the scheme, lift overall financial literacy, and ultimately make better financial decisions. Digital advice will help steer members at crucial times such as when they first join, withdraw money for a first home, or are approaching retirement.
The culmination of this ongoing digitisation trend means digital advice and interactive digital tools are likely to become more standard components of KiwiSaver services – and providers that move now will have an advantage to cement relationships.
It is only possible with a digital foundation powered by smarter and more efficient ways of working, ultimately helping more New Zealanders create the retirement lifestyle they want.
To learn more about Bravura’s BPaaS offering Sonata Alta, visit bravurasolutions.com/newzealand/ or email contactus@bravurasolutions.com.