While Bank of Queensland has made no secret of its plans to integrate the back-end systems of its stable of customer-facing brands, new details have emerged this week about the overhaul of the ME Bank business.
ME notified mortgage brokers on Monday of a major change to the bank’s product mix, with the jettisoning of its award-winning credit card operation.
“From 2 October 2023, ME is not accepting new credit card applications,” the BOQ subsidiary told brokers in the notification.
“ME will no longer have a credit card product available for customers.”
The bank told brokers that existing holders of ME-issued credit cards would continue to be serviced by the bank but did not specify for how long.
BOQ exited the credit card-issuing market many years ago when it entered an outsourcing deal with Citi to be the funder and legal issuer of its house-branded cards.
It seems likely that ME’s card operation will be farmed out to National Australia Bank, which now owns the Citi cards business.
That could result in significant changes to the features and pricing of ME’s award winning low-rate card.
In the last decade ME has carved out a reputation as a leading innovator in the credit card market after the launch in May 2015 of Frank, which also carries no annual fee.
While the product’s features have attracted savvy consumers shopping for a low cost credit tool, it appears that the business was a heavy loss maker.
Since its launch, the Frank card received glowing reviews from leading consumer research sites such as Finder, Mozo and creditcard.com.au.
The decision to shut the business down appears to confirm suggestions that BOQ’s senior management could find no credible way of turning it into a consistent profit-spinner.
When BOQ took legal ownership of ME Bank in July 2021, the ME credit card book had total receivables of around A$130 million, making it the ninth largest credit card issuer in the country.
BOQ is in the middle of a program to simplify ME as a digital business and to integrate the subsidiary’s core banking platform with the parent’s system.
However, the effort has become a painstaking and costly process.
In a filing to the ASX on Friday, the bank revealed it was preparing to absorb further write-downs on the carrying value of the ME business as it tries to accelerate digital transformation of the acquired asset.
BOQ’s chief executive Patrick Allaway is set to unveil the group’s full year results on Wednesday 11 October.