Why NAB is investing hundreds of millions for no obvious ROI
Chairman of Big Four lender NAB explained the bank's strategy, which he is certain "ANZ does too".
NAB chairman Dr Ken Henry said the bank is investing millions of dollars into digital despite no obvious return on investment. Speaking at an event with ANZ chairman David Gonski last night hosted by the Australia-Israel Chamber of Commerce, Henry said it was a common strategy and was sure ANZ was doing the same.
"NAB invests hundreds of millions of dollars a year in digital; ANZ does the same thing. I’m sure David would say exactly same thing, which is we cannot see that that adds anything to our bottom line cash earnings."
The focus on innovation is part of NAB's commitment to delivering "the best customer experience", said Henry.
The comments came about during a discussion on digital disruption and the changes that may occur to jobs in the banking sector. Gonski said he was not worried about job losses, but rather people forecasting it.
"I'm worried about people saying the end of labour is coming," he said. "The answer is jobs will be replaced, but new jobs will develop."
While the two banks are in direct competition with each other, especially with the pressure to offer services on par with the new technologies being offered by smaller fintech companies, Henry said the nature of the "Big Four" oligopoly is misconstrued.
"The textbooks say that oligopolists don’t usually compete on price. That’s actually quite a dumb way to compete. We actually compete on service offerings to customers.
"If we don't do it we're out of business."