eMPF –The Race to Optimise Operating Models

Hong Kong’s eMPF project presents trustees with an opportunity to rethink operating models, says Monik Harindran.

As Hong Kong’s Mandatory Provident Fund Schemes Authority (MPFA) pushes forward with its major project to standardise and streamline the administration models of MPF schemes via a new centralised eMPF platform, the 13 trustees providing MPF schemes are focused on getting to grips with the emerging design of the new digital platform and the scale of the associated data migration exercise.

Looking beyond those challenges, the eMPF project also presents a unique opportunity for those trustees to rethink their business and operating models to secure future competitive advantage.

One of Hong Kong’s toughest transformation initiatives since the introduction of the Octopus card back in 1997, the eMPF project requires trustees – who collectively service 4.5 million scheme members and over 330,000 employers – to sequentially onboard to the new MPF platform from the first half of 2024 through until the platform’s full and final implementation in September 2025.

With the implementation date fast approaching, it is becoming urgent to understand how the new platform and its data architecture can support new operating models. However, this task is complicated by continuing uncertainties about the role that will be played by the various parties once the platform is up and running.

A key characteristic of the eMPF project is that while the new platform will take on many of the functions currently performed by the member administration staff at each trustee, others – such as consumer payment management – will remain entirely with trustees, while further functions such as scheme accounting may only partly rely on the platform.

All the stakeholders involved in the transition to the new platform, including the regulator and trustees, are currently delineating their roles, accountabilities and shared responsibilities across various processes as dependencies and procedural level details are ironed out.

For example, some shared responsibilities with implications for the design of new operating models are the processes surrounding anti-money laundering (AML), know your customer (KYC) and customer due diligence (CDD). While the eMPF will process customer applications, including data and document verification and communication of outcomes to the customer, it will do so as per scheme-specific AML configurations and AMLO regulations. Any medium- and high-risk clients that are identified will be routed to the trustee’s remaining administration service teams for further investigation and escalation.

The transition to eMPF is a major opportunity to revitalise, reorganise, and reoptimise trustee operating models around an efficient new platform. This opportunity extends beyond enrolment and member administration into other services that trustees will remain accountable for, such as fund administration, transfer agency, i.e. maintaining the financial records of the investor, and managing employers and fund managers.

Although eMPF has offered some guidelines on how these services may function in the future, trustees retain ownership of the design and implementation of their future business model, while ensuring services to end customers are uninterrupted.

In the two years following eMPF platform implementation, the scheme administration fees payable by scheme members are expected to reduce by 30% on average, driving up the need for efficient operating models. Trustees will need to streamline their fees and pricing structures while ensuring the best outcomes for their customers and remaining profitable. In addition to a review – and potential refresh – of pricing strategies and allocations, we recommend that trustees should develop a plan for how to guide the wider workforce on their eMPF journey.

There is no ‘one size fits all’ solution. Trustees should align their target operating models with the eMPF platform initiative by performing a gap assessment of the eMPF platform requirements and opportunities versus their current state. The key criteria of such an assessment should include workforce strategy, location and partner strategy, customer journeys, product development, process excellence, technology implementation, risk and regulatory compliance, and procurement/ contractual obligations.

The advent of eMPF requires a rationalization of platform and operating guidelines across the industry. Trustees can take this opportunity to consider rationalising their internal technology stack in tandem, which could lead to technology cost savings. Trustees should explore how data science and analytics, and automation solutions, can further optimise their eMPF transformational journey.

The eMPF timeline is well underway and the 2025 deadline will be here soon enough. To gain true competitive advantage, trustees need to work out how to optimise their business models around the new eMPF platform well in advance of their scheme’s onboarding.

Monik Harindran is a Principal Consultant at Capco. 

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