The superannuation sector is not “taking the rapid march of technology seriously” and could be stuck with “greater risk, fewer members, higher costs, reduced competitiveness and lost opportunities”, says DST Systems.
According to DST Systems superannuation industry lead Luke Nardella, super funds could be sorted into three different categories: emus, peacocks or deer caught in headlights.
“Some funds are emus. They’re responding to the changing world by sticking their heads in the sand,” Mr Nardella said.
“Some funds are peacocks. They think digital transformation involves bolting on something shiny courtesy of a FinTech partnership or two.”
FinTech partnerships would “certainly play an important role,” but they were by no means the solution, he indicated.
Finally, some super funds were acting like deer caught in headlights: “They’re stunned into paralysis. There’s so much going on, they don’t know where to start.”
Not only were members preferring digital channels of communication (e.g. via website, app, email or online chat), but new technologies were “driving wholesale change in regulatory, competitive and member expectations”.
“Technologies like robotic process automation (RPA), APIs, AI, machine learning, and pattern recognition,” Mr Nardella pointed out.
“Like the Internet of Things, the cloud, and edge computing. Like open banking, blockchain, and the new payments platform. And, of course, like big data and cognitive analytics.”
Where the industry only provided two operating models, insourcing or outsourcing, platforms were now more flexible and a number of Software-as-a-Service (SaaS) options were available.
For super funds that were stuck on where to begin with technological innovation, Mr Nardella advised “start[ing] at the core”.
“On its own, bolting on point solutions is fiddling at the edges. The only way to make meaningful, lasting change is to change your core business,” he said.
On the other hand, another approach would be to start with the member.
“Seeing all this change purely as a way to reduce costs is a short-term solution to a long-term problem (or, more correctly, opportunity),” Mr Nardella argued.
“Instead, focus on building member value, but doing it efficiently. Similarly, don’t base your future capabilities on a particular platform. Start with the needs first and work backwards.”
Super funds should consider its vision, the needs of its members and gaps, and find solutions to address those areas, he advised.