NAB confirms it will buy neobank 86 400 for $220m

NAB has confirmed it will buy a smaller digital bank in order to grow its digital banking technologies.

National Australia Bank will acquire neobank 86 400 as part of its strategy to grow and modernise its digital-only subsidiary UBank.

The major banking group confirmed on Friday it would seek full ownership of 86 400 for $220m, noting the takeover was primarily to grow UBank’s customer base and overhaul its digital banking technology.

UBank chief executive Philippa Watson said the digital incumbent with a customer base of 600,000 needed to modernise and transform for customers who primarily bank through mobile apps.

“UBank is a great business, (but) it needs modernisation in the technology perspective,” she said.

“This partnership is intended to bring UBank’s mature business, our customer base and brand recognition together with 86 400’s technology, its operating platform and innovation capability.”

UBank CEO Philippa Watson and NAB chief operating officer Les Matheson. Picture: Supplied via NCA NewsWire

NAB’s acquisition of a smaller player is the latest consolidation in the neo-banking sector after the collapse of Xinja last year.

Neobanks before the pandemic were tipped to be a sector disrupter by offering better deposit rates and cheaper lending to digital-savvy consumers wanting simpler banking services.

86 400 entered the industry in 2019 and offered home loans, deposit accounts and everyday banking.

As of January 15, 86 400 had more than 85,000 customers, $375m in deposits and $270m in approved residential mortgages.

NAB chief operating officer Les Matheson said the UBank transformation was in part to offer a banking product that targets younger customers.

“We are trying to accelerate UBank’s growth by helping it become a leading digital bank,” Mr Matheson said.

“We want it to attract and retain a lot of different customers, particularly young ones.”

NAB is the parent company of UBank. Picture: NCA NewsWire / Daniel Pockett

“The combined business will deliver accelerated innovation and an enhanced customer experience to create a stronger and more competitive banking alternative for Australian customers.”

NAB acquired a 18.3 per cent stake in 86 400 late last year through a Series B capital raising, and the completion of the takeover will be subject to approval by the banking regulators.

The Australian Competition and Consumer Commission said it would be reviewing NAB’s intended acquisition within 10 weeks and expected to have a decision date by April 15.

“Acquisitions by the big four banks of small but vigorous and effective competitors in the market has the potential to substantially lessen competition, and therefore the ACCC will carefully scrutinise such transactions,” an ACCC spokesman said.

“This does not mean, however, that all acquisitions of fintechs by the big four banks will necessarily raise competition concerns.”

86 400 chairman Anthony Thomson and chief executive Robert Bell. Picture: Supplied

The 120 staff working at 86 400 will become part of the NAB workforce.

“This will significantly fast-track our growth, propelling our business, customer numbers and balance sheet to a position which would’ve otherwise taken five years,” 86 400 chief executive Robert Bell said.

UBank’s digital interface was built prior to the adoption of mobile banking by consumers and was mostly designed to suit desktop users.

Ms Watson said the partnership would assist in overhauling UBank’s user experience that would have taken years to complete if the product development was done internally.

“Combining with 86 400 will bring together UBank’s established business and 86 400’s experience and technology platform to meet the changing needs of our customers,” Ms Watson said.

“We are looking forward to having the 86 400 team join us to deliver the next generation of simple, fast and mobile banking solutions.”