86 400 sells to NAB, ending its neobank dream

Big four bank NAB is taking control of neobank 86 400, just 18 months after the fintech launched.

The proposed deal ends the “challenger bank” dream of British banking pioneer Anthony Thomson, co-founder of the UK’s Metro Bank and publicly-listed digital bank Atom, and CEO Robert Bell, a former ANZ Japan boss.

It was only in July 2020 that Bell declared: “We are only just getting started”.

The bank had planned to raise $250 million over three years as it built the business. Now it’s selling for little more than that figure, following an undisclosed series B raise through Morgan Stanley late last year.

86 400 closed a $34.5 million Series A in mid-2020. It has raised a total of $90 million to that point.

The app-based digital banking startup, initially funded by Sydney-based payments services company Cuscal, following the launch of its pilot phase in mid-2018, only received its banking licence in mid- 2019 and had been running behind its launch schedule.

86 400 had more than 85,000 customers, $375 million of deposits, $270 million in approved residential mortgages and 2,500 accredited brokers by mid-January this year.

This time last year it got into the energy comparison business as it looked to new ways to attract customers.

In its FY2020 annual results, the neobank posted a loss of $20.3 million, more than double FY19’s $10.9 million loss.

The neobank and its 120 staff will be crunched into NAB’s existing digital bank brand, UBank.

The deal still needs to be approved by shareholders and regulators. NAB was part of 86 400’s Series B raise and has around at 18.3% stake in the venture  The acquisition deal is expected to be worth around $220 million.

NAB Chief Operating Officer, Les Matheson said the acquisition will accelerate UBank’s growth by combining its established customer base, brand and colleagues with 86 400’s experience and technology platform.

“Bringing together UBank and 86 400 is consistent with NAB’s long-term strategy and growth plans and will enable us to develop a leading digital bank that can attract and retain customers at scale and pace,” he said.

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

UBank has been around got 12 years and serves more than 600,000 customers.

86 400’s independent directors have unanimously recommended the sale.