How a neobank merger caused headaches for ubank

At first, Grant was mildly puzzled when he wasn’t able to log into his bank account late last year.

After several years as a customer of National Australia Bank’s digital offshoot ubank, it was the first time he’d encountered a problem.

But what at first seemed like a minor glitch has turned into a months-long debacle. He was unable to access his money for weeks, had his account accidentally closed by the bank, and spent hours on the phone trying to get help.

The chief executive of ubank Philippa Watson, which merged with neobank 86 400 in 2021.

“It’s been incredibly frustrating,” he says. “I’ve never experienced something like this in my entire banking life.”

The doctor, who did not want his surname published for privacy reasons, isn’t alone. Since November, customers have been complaining to ubank and the financial services regulator as they face a variety of issues stemming from an ongoing merger with neobank 86 400. A process to migrate hundreds of thousands of accounts onto the technology platforms of 86 400 was paused over Christmas as ubank hired 170 new customer service staff.

In 2021, NAB announced its $221 million purchase of 86 400, acquiring the neobank’s technology platform and mobile banking systems in an effort to stay ahead of the curve and attract younger clients to its digital offshoot ubank.

At the time, ubank said the deal would “enhance customer experience and meet their changing needs” to create a leading digital bank, and foster the “next generation of simple, fast and mobile banking solutions”.

However, more than two years since the merger, some customers would argue this is yet to occur and former staff have suggested that some of the ongoing problems reflect what they consider a turbulent merger process.

‘Mass exodus’

Ubank, which has more than 600,000 customers, was one of Australia’s first digital banks when it hit the market in 2008.

A decade later, 86 400, a neobank backed by payments provider Cuscal, was launched in 2019. It was one of the first start-ups to be granted a banking licence by the Australian Prudential Regulation Authority, and alongside a number of other neobanks, promised to disrupt the traditional banking oligopoly and be a point of difference for Australians.

But then came the coronavirus pandemic, bringing with it economic uncertainty and a rocky outlook for tech start-ups and other digital disruptors. Cuscal agreed to sell 86 400 to NAB.

The acquisition gained approval from the shareholders, regulators and the Federal Court, and in May 2021, the merger was officially completed, with former CBA executive Philippa Watson at the helm.

Five former and current staff, who spoke to The Age and The Sydney Morning Herald on the condition of anonymity to protect their jobs, said it has been far from smooth sailing. Some employees, particularly those who had come from 86 400, were sceptical of the deal to begin with, and quickly felt their concerns had come to fruition once the two companies merged.

“Instantly, it was obvious that while this was pitched as a merger where they wanted to keep 86 400 people and systems, it was ‘we bought the people and the systems’ and they would do things differently,” said one former employee of 86 400.

“We could see it was a takeover and it wasn’t a nice environment to work in… I couldn’t get out quick enough and most people felt the same.

“The decisions they’ve made are not the decisions we would have made.”

Another employee said she had loved the company when she started, but things changed when it was bought by NAB.

“This was an NAB takeover. They needed the tech … it wasn’t about the people, or the process of disrupting the market,” she said. “They took advantage of a situation where all neobanks were very vulnerable, and they just took us out.”

Employees said a main source of the tension was a culture clash between the 86 400 start-up mentality to disrupt the banking landscape and the big bank mindset.

“86 400 staff felt cheated,” said one. “The big goal of 86 400 was to be better than the big four and then they got sold out to one of the big four. That was a cultural shock to the people who invested their time in the organisation. It got very toxic.”

Since the merger, all except one of 86 400’s original leadership team have left the merged ubank in what one employee described as a “mass exodus”.

In response to the claims from former staff, a ubank spokeswoman said they had expanded their banking, technology and service teams and had recently received strong employee engagement scores.

“In the past year, ubank has experienced significant growth and our team has more than doubled in size,” she said. “We’re extremely happy with the team we’ve built as we continue on a strong trajectory of growth.”

A former ubank staff member, who has since left, also said he felt confusing decisions had been made about the way customer accounts were migrated to the 86 400 technology platforms.

The man said months of work was done before the transfer of accounts to 86 400’s platforms, with the aim to make the process as smooth as possible for customers. A number of plans were drafted, including encouraging customers in advance to ensure their passwords and postal address were correct so new debit cards could be sent to the right place.

The new debit cards were needed to log into the new app, and customers who didn’t receive them couldn’t access their account on their mobile, including those who were overseas.

“A lot of work was done to find out what customers wanted to know when and if their accounts were migrated,” said the former employee. Instead, he says, much of this work wasn’t used.

“The root cause is that they started moving customers based on how convenient it was for ubank.”

‘The calls blew out’

The process of migrating accounts, which is being called an upgrade, began towards the end of last year, with customers moved over in batches. It didn’t take long for customers to have issues.

In November, ubank’s social media pages were flooded with complaints from irate customers who were unable to access their accounts or were having trouble getting their money.

In mid-January, ubank tightened the privacy settings on its Facebook page, no longer allowing comments from customers and hiding the complaints that were previously public. However, customers continue to complain on Twitter, particularly about the hours-long wait times to reach someone from customer service.

“They didn’t have the people for it,” said an employee. “The calls blew out.”

The migration process was paused over Christmas, as ubank worked to onboard 170 new people in customer service roles to help customers move onto the new banking platform and “support the bank’s growth”, a spokeswoman said. It will recommence soon.

The bank’s deposit and mortgage balances are growing faster than general market growth rates, she said, and ubank had been retaining existing customers while welcoming “thousands” of new ones every week.

‘Incredible amount of stress’

After Grant was unable to get into his account, he reviewed the email that said he would be sent a new debit card. He hadn’t received anything. It was impossible to get onto anyone through ubank’s helpline.

“It was a stalemate. You couldn’t log in or use the card,” he said.

He lodged a complaint with the Australian Financial Complaints Authority, which prompted ubank to contact Grant. During this time, the bank accidentally closed his account, which they later said was due to a “manual processing error” in a letter which also contained an apology for the disruption.

Grant had to open a new account, and when he got access he moved all his money to another bank. “I didn’t trust them anymore,” he says.

Ubank offered him $250 in compensation as a goodwill payment, but on the proviso he didn’t speak about the complaint to any third party. Grant has told the bank he doesn’t want money – he wants a public apology to all the customers who have been affected.

“What I asked for is a public apology to customers for this right royal stuff-up. They are being savaged everywhere they look but the bank hasn’t sent one email to customers apologising, the chief executive has been completely silent,” he said.

“I accept people make mistakes, that’s fine … but it’s how you respond to that mistake which shows the fortitude of the company and I feel like they have been asleep at the wheel here.

“You are dealing with people’s money, lives and livelihoods. It causes an incredible amount of stress… I would have liked to see some ownership or responsibility from the CEO to say we failed customers here.”

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