A new digital era for MPF

Local | 25 Sep 2019 4:00 pm

The MPFA hosted its first ever tech themed symposium to discuss the roadmap and challenges of the eMPF Platform.

Established in December 2000, the Mandatory Provident Fund (MPF) System runs in the form of privately managed mandatory schemes with an aim to provide basic retirement protection for the Hong Kong working population.

Most employees and their employers are required to contribute monthly to the MPF scheme which is based on a fundamentally manual model, operating with forms, wet signatures, cheques and paper reports as its backbone. Nevertheless, with a steady increase in the number of accounts and scheme members, the ‘paper based’ operation model is becoming increasingly strained.

In light of this, the Government has entrusted the Mandatory Provident Fund Schemes Authority (MPFA) to spearhead the design, development and operation of the eMPF Platform.  The Platform is a one-stop, user-centric, digital solution that seeks to standardize, streamline and automate the administrative processes of the MPF schemes; to elevate the MPF user experience through various digital functions; and to reduce operating cost, creating more room for fee reduction. 

The MPFA held a Symposium, titled “The eMPF Platform: A new digital era for the MPF”, on 6 September to gauge the views from different stakeholders on the development of the eMPF project.

James Lau, Secretary for Financial Services and the Treasury and the Guest of Honour of the Symposium, says, “For MPF, fintech will surely catapult the entire industry into a new age of open architecture and enhanced operational efficiency. The eMPF Platform will help to level the playing field for all industry players and encourage market competition by rationalizing administration processes and reducing overhead costs. It will also bring about a new MPF user experience as it delivers simpler, user-centric and readily accessible services.”

In the opening address at the Symposium, MPFA Deputy Chairman and Managing Director Alice Law says, “The eMPF Platform represents the single largest reform ever carried out by the MPFA. Our vision is to deliver a comprehensive MPF scheme administration service to over 4 million members and some 300,000 employers through a one-stop, user-centric, common digital platform that is built with future-proof solutions, marking the beginning of a new era for the MPF eco-system that will bring substantial benefits to all stakeholders.”

Law cited some of the anticipated benefits of the eMPF Platform:

•    Time saving - many MPF members are holding multiple accounts under different schemes as a result of changing jobs. Take the example of “Employee Choice Arrangement”, where members want to transfer their MPF from one trustee to another, the average processing time would take around two to three weeks in the current system, but with the eMPF Platform, this will be reduced by a whopping 90%.

•    Single log-on - the effort required for members to manage their accounts across different trustees and schemes will also be drastically reduced with an MPF ID which serves as a single log-on identification.  Together with the support of various AI tools, the eMPF Platform would facilitate members to review all accounts across 14 trustees through one single dashboard seamlessly.

•    Avoidance of manual errors - according to the MPFA, in 2018, about 20,000 payment notices per month were issued to employers who were either late in making contributions or not paying at all. A part of which is believed to relate to the heavy reliance on paperwork and manual processes. The digital platform will benefit employers, especially small and medium size enterprises, by helping them finish all the administrative work digitally, such that manual errors could be avoided.

•    Convenience – there will be added convenience to the employers by using payment channels that connect all banks in Hong Kong and allow instant fund transfer on a 24/7 basis such as the FPS Faster Payment System to make MPF contributions.

Overseas experts converge 

Overseas experts were invited to share their views and introduce the digital transformation journey of their pension systems at the MPF Symposium. Jason Lucchese, Assistant Commissioner of the Australian Taxation Office (ATO), introduced SuperStream - a package of measures designed to bring the back office of superannuation into the 21st century to the audience.

“When consultation first began in 2011, we had the intent for SuperStream to achieve a few things: to increase use of technology in contributions, rollovers and account administration; to unify data standards for superannuation transactions, including electronic payments; to use the tax file number as a key identifier of member accounts; and to facilitate account consolidation,” says Lucchese.

The case of SuperStream shows that all systems require time and exploration to mature and excel, and stakeholder engagement is one of the keys to success. “Today, automation of transactions is widespread, quality of key data holdings is improved, and data transfer between employers and funds is also simplified. Members benefit $2.4 billion per annum through SuperStream, while employers’ saving and funds savings both amount to $400 million per annum,” continues Lucchese.

Another guest speaker Nick Sex, Chief Operating Officer of the National Employment Savings Trust (NEST) Corporation introduced the UK digital pension administration platform.

“At NEST, our approach is one product, one fee level/structure, multiple options open to all.  NEST is built for scale, is free for employers, and provides online self-service for all parties. We provide one pot per member, and excel with straight through processing,” says Sex.

Since its inception in 2011, NEST has amassed over 8.3 million members, over 750,000 employers enrolled, and over 7.4 billion pounds worth of assets under management.

“We have set out to help millions enjoy a better retirement and to deliver a self serve online product that supports the needs of all our customers, and we have achieved that. Moving forward, we hope to further enhance member engagement and adequacy as well as maximising member outcomes, delivering even more reliable and efficient service to all members,” continues Sex.

Is fintech the future of the pension industry?

In today’s digital world, fintech is on the rise which can be clearly shown by its expanding footprint all around Hong Kong. As Hong Kong’s financial custodian, the Hong Kong Monetary Authority (HKMA) has been actively exploring the technology, cultivating a fintech ecosystem and developing an e-payment regime and infrastructure.

Howard Lee, Deputy Chief Executive of the HKMA, says many fintech technologies are applicable to the MPF lifecycle. For instance, the use of big data analytics and artificial intelligence in scheme design; robo advisor to assist customer onboarding; open API (Application Program Interface) for account administration and using chatbot in customer services, etc.

He adds that Faster Payment System (FPS) is user-friendly and safe and secure, providing full connectivity between banks and e-wallets. These efforts when combined, will soon eradicate the slow, costly and cumbersome pain points of conventional payment in Hong Kong and bring new possibilities to the MPF as well as propel Hong Kong’s financial industry to new heights in the near future.

Another speaker Victor Lam, Government Chief Information Officer, shares the Smart City blueprint for Hong Kong with the audience.  He says citizen will be provided an eID which can ensure secure access to online services offered by the Government departments, and this could hopefully be applied to the eMPF Platform.

Is digital innovation the answer to a transformed MPF landscape?

Ending the Symposium on a high note, experts from Hong Kong’s pension and IT fields gathered for a riveting panel discussion in how digital innovation and the transformation of MPF goes hand-in-hand.

“Having listened to experts in the industry from overseas, I think we can take away that one crucial challenge that the new eMPF Platform has to overcome is to be able to change behaviour,” says Cynthia Hui, Executive Director (Members) of the MPFA. “eMPF is a large and unprecedented project with great complexity that will shift the entire MPF ecosystem, and collaboration and support from the industry is paramount.”

Ka-shi Lau, Vice-Chairman of Hong Kong Trustees’ Association, stresses that going digital is the way to success amidst the change in times. “The key aspects that the new eMPF project needs to excel on in order to succeed are adequacy, efficiency, and engagement,” says Lau. “98% of the employers in Hong Kong are SMEs which rely heavily on a paper-based operation model, so how to get them engaged is key, but with that being said, technology is also a crucial factor as a significant amount of users of the new platform will be millennials.”

KP Luk, Chairman of the Pension Schemes Association, believes that standardization is the fuel that will drive efficiency, and is thrilled to see the eMPF Platform being introduced. “Having previously worked individually to tackle different clients’ needs, we experienced many issues relating to a lack of consistency in user experience. The eMPF Platform is fundamental in the sense that it provides a benchmark for the industry to follow,” says Luk.

Finally, Hon Charles Mok, Legislative Councillor representing Information Technology Functional Constituency, advises that when launching any large digital project, flexibility and security is pivotal. “The digital world is constantly changing, and being able to keep up with the technological advancements is a challenge. In addition to this, cyber security is also a major concern in the financial world, as a single mistake could have serious implications,” says Mok.

Soon within this year, the MPFA will be issuing a Request for Proposal. The MPFA will continue to gauge the views of various stakeholders on the operations, functionality design, service models and transition arrangements, and participate in building a platform that could balance the needs of different stakeholders and serve the needs of the users at large.

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