Avenue Bank CEO Peita Piper
In need of a niche, newly-licensed Avenue Bank has settled on an exceptionally narrow focus for its industry debut.
Bank guarantees, and specifically landlord guarantees, are Avenue’s niche.
With only days remaining to progress from a Restricted ADI licence to a full banking authority, Avenue Bank yesterday morning received the final approval from APRA.
The bank “will initially focus on alleviating a significant pain point for businesses: the arduous process of securing bank guarantees for landlords,” Avenue’s launch media release declared.
“Current bank guarantee procedures are onerous, predominantly paper-centric, and can take up to two months while Avenue’s digitally enabled guarantee has a turnaround time of as little as one day,” the bank said.
Avenue said its research showed 29 percent of businesses have had to defer an office move and a further 46 percent have had their moves disrupted because of the process of obtaining a bank guarantee.
Avenue CEO Peita Piper said “the bank guarantee market remains stagnant, burdened by outdated, paper-based processes. Small businesses are stifled by unnecessary delays, uncertainty, and financial strains.”
Avenue estimates the bank guarantee segment at “roughly $9 billion” and it will need to convince a meaningful proportion of this business to change banks if it is to pay its way.
For now, Avenue Bank offers an interest rate of 3.5 per cent to customers on their security deposits, which are held as term deposits. This might be a competitive rate in the bank guarantee segment, but this rate is well out of the market for 2-year and 3-year term deposits.
For a limited time, the bank will also waive application fees.
Its primary revenue line will be a guarantee fee of 3.00 per cent (charged monthly in arrears).
“This is only the beginning for Avenue,” Piper said.
“We are committed to delivering further innovation to the bank guarantee market.”
But seemingly not, for now, any other segment of the banking market.
Founded by Colin Porter and Dale Hurley, only Porter serves on Avenue’s four-member board. Porter helped found publisher Loyalty Media, CreditorWatch (in 2014) and most recently PayOK, a fintech that assists clients reduce payment fraud by verifying bank account information.
Stephen Rix is the bank’s chair. Rix previously served as chair of Bennelong Funds Management Group and Travelex Asia Pacific.
Chief executive Piper’s banking experience was a decade long stint working to help conceive and then build NAB’s ubank brand. Her final role at ubank was as head of product and analytics, ending in 2016.