* NAB to pay A$220 million for 82% stake it doesn't already own
* Deal to accelerate digital strategy of Australia's No. 2 lender
* Regulator to scrutinise deal for potential competition concerns (Recasts, adds competition regulator comment, analyst, background)
By Paulina Duran
Jan 29 (Reuters) - National Australia Bank NAB.AX is snapping up small online-only bank 86 400 Holdings for A$220 million ($168.9 million) as it broadens its digital offering in a move analysts said also effectively swallows the competition.
The deal announced on Friday, which gives NAB access to 86 400's technology at a time the market is shifting towards online banking and payment platforms, will be reviewed by the competition regulator.
86 400, named after the number of seconds in a day, is one of four so-called neo-banks granted licences to provide loans and take deposits in Australia as regulators sought to improve competition in a sector dominated by NAB and its three Big Four peers.
NAB will bolt the purchase on to its digital unit, Ubank, a process that will include the transfer of 85,000 customers, A$375 million in deposits, and A$270 million in approved home loans.
"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 Chief Operating Officer Les Matheson said.
However, the Australian Competition and Consumer Commission said the deal raised some red flags.
"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," the ACCC said in a statement to Reuters, adding it would review the deal and make a decision by April 15.
NAB, which has close to a fifth of the Australian deposits market and currently owns an 18.3% stake in 86 400, expects to complete the acquisition by mid-2021, provided regulators approve the deal.
Consumers are seeking competitive, fast and efficient services via phone handsets or tablets, to complement low interest rates and attractive repayment schemes.
"FinTech promises to disaggregate and disrupt 'old economy' retail banking, but it can't if the major bank oligopoly consumes them," said Matthew Wilson, a senior banking analyst at Evans and Partners.
Ultra low interest rates since the onset of the coronavirus pandemic had also hampered the growth of neo-banks by accelerating the capital burn of their deposit-funded operations, analysts said.
Xinja Bank, one of the four Australian entrants, decided last month to give up its year-old banking license and return more than A$500 million in deposits due to funding troubles. = 1.3028 Australian dollars)