Members Equity (ME) Bank could become a major competitor to Australia's big four banks, according to Schroders Investment Management deputy head of Australian equities Andrew Fleming.
Fleming said ME Bank, which is owned by 33 industry superannuation funds including AustralianSuper, had the opportunity to provide competition in the banking sector in the area of transaction accounts.
"They are looking to improve their position in transaction accounts as much as mortgages. There is a huge amount of profit to be made out of the transaction account market in Australia," he said.
"If they get some traction in terms of competition, then maybe they are going to be the one setting prices."
ME Bank chief executive Jamie McPhee said the focus for the bank was meeting the needs of its target audience.
McPhee said ME Bank did not want to become a fifth banking pillar, rather it wanted to offer a different value proposition to its customers.
This meant it would focus on ensuring superannuation fund members had access to cost-effective banking, including transaction banking, he said.
"Our key focus is our target audience, the members of industry superannuation funds. We want to ensure that these members have access to simple and transparent banking without hidden fees," he said.
ME Bank will continue to offer products such as term deposits, credit cards and personal and home loans. The bank also has plans to launch an everyday transaction account.
"This new transaction account will take advantage of the latest technology that will make it easier for people to make simple transactions using a debit card," McPhee said.
ME Bank also has plans to diversify its funding. The bank previously relied heavily on the securitisation market.
"Our aim is to have 50 per cent funding from retail deposits and 50 per cent from the securitisation market," McPhee said.
Another strategy developed by the bank is a new automated teller machine (ATM) strategy. Currently the bank has an ATM agreement with Wesptac to use its machines.
"We will be taking a new ATM strategy to the board that will enhance the network," McPhee said.
Fleming said the bank should be able to overcome challenges from the past.
In 2008, ME Bank was subject to a strategic review from its four largest industry fund owners.
The review followed a temporary credit downgrade by Standard & Poor's, which placed ME Bank on credit watch.
The downgrade was a result of the bank's reliance on the securitisation market for funding, which collapsed in the wake of the global financial crisis.
The bank also had a number of staff changes before McPhee joined in February last year.
McPhee had previously worked for Adelaide Bank as managing director.
"I admit they [ME Bank] have done some things poorly, but they have done some things well," Fleming said.
He said McPhee's retail banking experience was positive for ME Bank.
"We are watching Jamie [McPhee] closely to see how he will improve the business. They do have the potential to be a real competitor in the banking sector if they execute their strategies effectively," he said.
