Neobank 86 400 to be acquired by NAB in $220 million deal

Aussie neobank 86 400 is set to be acquired by NAB, combining with the big bank’s own digital offering UBank.

NAB already owns 18.3% of 86 400, having taken part in its Series B funding round. Now, it plans to acquire the remaining shares for approximately $220 million, valuing the business at just shy of $270 million.

The deal is still subject to approval from regulators and shareholders. But, if and when completed, it will mean the second exit of an Aussie neobank from the market.

Fully backed by payments provider Cuscal, 86 400 has always been in something of a grey area of independence.

It did, however, secure its own authorised deposit-taking institution (ADI) licence back in July 2019, proving it a contender in the Aussie neobank race.

It is currently unclear whether the 86 400 brand will remain after the acquisition is finalised.

But, it is thought co-founder and chief Robert Bell will continue to lead 86 400, while UBank chief Philippa Watson will continue to lead UBank.

In a statement, Bell said the acquisition will serve to fast-track the bank’s growth, “propelling our business, customer numbers and balance sheet to a position which would’ve otherwise taken five years”.

When asked whether 86 400 would have been able to survive without a deal like this one, Bell said the team has built a “sustainable and balanced business with a growing lending book [and] clear path to proftability”, and reiterated that the acquisition is intended to fast-track growth.

He also confirmed that 86 400’s 120-strong team will be joining NAB.

For NAB’s part, the acquisition is part of a strategy to prioritise UBank and focus on digital experience.

As of mid-January, 86 400 had some 85,000 customers, and was managing $375 million in deposits, and $270 million in residential mortgages.

The news has been met with mixed reviews on Twitter. Alan Tsen, deputy chair of FinTech Australia, former general manager of fintech accelerator Stone and Chalk and fintech-focused angel investor, called the deal a “huge outcome” for Bell and the team.

NAB acquires 86400 for ~$220m. Congrats to the @86400smartbank team on the huge outcome ? https://t.co/tpmWdQINv3

— Alan Tsen (@alantsen) January 28, 2021

Others noted that we could be about to see some structural changes in the neobank sector in Australia.

Others still pointed to Bell’s previous claims that 86 400 was out to take on the big four, suggesting this is nothing more than a sell-out.

Aha! Just posted the same. Yes, the AUS neobank market going through some structural changes… and we’re not done yet…

— James Lloyd (@jamesplloyd) January 28, 2021

there’s no problem selling out, but if your core belief was that you wanted to be a big challenger, it looks a bit weak when you throw that away as soon as someone shows you cash.

— ?? Cert ?? (@Certainium) January 28, 2021

The news comes just six weeks after big-name neobank Xinja announced it would be exiting banking, handing back its ADI licence and returning all deposits to its customers.

The bank named COVID-19 and “an increasingly difficult capital-raising environment” as a major factor in the failure of its banking offering.

At the time, Fintech Australia chief Rebecca Schot-Guppy said Xinja’s exit was not necessarily a reflection of the state of the sector.

In fact, she pointed to the continued success of the likes of 86 400, Bendigo Bank-backed Up and European player Revolut, saying they were all continuing to bring new products to market.

In July last year, 86 400 announced it had actually grown during the pandemic thus far, launching new integrations with Zip Pay and Zip Money, as well as other updates and features.

However, this was never a particularly crowded space, and when it comes to fully independent, local offerings, we’re now left with only small business-focused Judo and Volt, which is still operating in beta mode and is not open to public sign-ups yet.

In a statement on Friday, Schot-Guppy called 86 400’s acquisition “fantastic news” for the fintech ecosystem, suggesting it reflects a maturing of the industry more broadly.

“While there is ongoing debate around competition in financial services, which we support, acquisitions and exits build investor confidence in our ecosystem,” she said.

Whether this move for 86 400 should be celebrated or lamented, it raises questions as to what we can expect to see in this sector in 2021, and whether two independent players are really enough to build a strong Aussie ecosystem.

If not, are we in for more exits or more acquisitions? Or, will we see more international players popping up?

Do you have thoughts or opinions on the Aussie neobank scene? Let us know.

This story was updated at 12.50pm on January 29, 2020, to include comments from Robert Bell.