NAB chief Andrew Thorburn: Banks face challenging changes in regulation and technology disruption
LOCAL banks have to adjust to the impacts of the royal commission this year at the same time as they face revolutionary disruption, writes Terry McCrann.
Terry McCrann
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THIS is a seminal year for the Australian banking system and for every individual bank.
It promises the most change — not just for the banks but even more for their customers, both business and consumer — since the revolutionary year of 1984 when we got sweeping financial deregulation and the arrival of the foreign banks.
That unleashed an orgy of speculative lending to the so-called “entrepreneurs” — sparking the “greed is good decade” and ending in the massive losses and the collapse of the government-owned state banks in the early 1990s.
This will be very different: the banks that will come out of this year of change, will have to come out of it, will be far more disciplined and customer focused.
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The two great drivers are much greater regulatory oversight and intrusion and the relentless pace of technological change.
Broadly, the banks have to adjust to the impacts of the royal commission at the same time as they face the revolutionary disruption of Amazon (and Apple and Google and Bitcoin etc) destroying their margins.
This is, at core, the explanation of and the dynamic of National Australia Bank’s “6000 out/2000 in” staff shift. It is both to respond to that reality and to best position the bank for customer expectations and even more delivery.
Talking to NAB CEO Andrew Thorburn, you get a strong sense of his focus on getting on with the job; to in one sense “look through” the RC and all the other regulatory interventions.
It’s not that he’s dismissing them — or indeed, the poor behaviour that prompted them. The very opposite in fact: NAB takes them very seriously (even if there’s an unstated irritation at much of the politics and exaggeration); and more than that, will actually aim to build out of them.
Indeed, the timing has worked out pretty well for Thorburn and NAB. He’s been CEO for a little over three years. He needed that time to deal with the legacy issues like NAB’s British bank mess and to reframe, restructure and reinvigorate its business banking leadership.
He doesn’t put it quite in these terms, but in moving now to face (and hopefully, win in) the post-RC/post-Amazon world, he (and the board) he is about turning NAB in to a version of Amazon.
The key is to make NAB more horizontal; to take out layers of middle management and to bring far more bank people into face-to-face contact with customers; and to make them more effective in that contact.
Like all the “new competitors”, technology is critical. The 2000 coming in will provide the technology shift and functionality to optimise that customer interface.
Time and again, Thorburn stresses he is obsessive about the customer, not the competitor. There will be more competitors — Google? Facebook? — so it’s pointless focusing on them.
He is confident about the future and NAB’s ability to succeed in it. But he had to be ruthless about cost; ruthless about risk discipline (in a very challenging world of cyber threats), respond positively to regulation, and have an absolute focus on transparency and building (and deserving) trust.
The great competitive advantage banks had, he stresses, is assessment of credit risk. It was critical not to lose or weaken that in the refocusing and restructuring dynamics.
This leads him into discussing the broader challenges for Australia.
He’s a strong advocate for a comprehensive long-term plan, built on tax reform, education, infrastructure and productivity.
They came together in the population debate. A future, higher population Australia had to be built on not just the five capital cities but, perhaps, 15 identified regional cities.
The role of business was to be a unified and cohesive supporter of reform — and exercise in enlightened self-interest. Individual CEOs needed to be continually part of the public debate. They and other business leaders had to connect with the community.
As an aside, he makes the point that it’s not just banks and bankers in all of the regulatory, competitive and structural spotlights. Every business and every business leader had to grapple with the same or similar dynamics.
More broadly, he muses about remembering the world of the mid-1990s when I am Australian became a sort of unofficial second national anthem. We were much more fractured. While some of that was unavoidable in the globalised, digital world, we really had to recapture that spirit and national cohesion.
These are all fine words, delivery is of course the only metric that matters — both in terms of NAB’s performance and customer delivery.
Thorburn clearly understands that they are two sides of the same coin: that the world which emerges from this year won’t allow any business — but more than any, banks — to get away with putting the customer second.
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