British fintech Starling withdraws application for European bank license

Starling CEO Ann Boden.

Harry Murphy | Sports file for Web Summit via Getty Images

LONDON – British digital bank Starling is terminating its application for a European banking license in a major blow to the company’s international ambitions.

On Monday, the company told employees it had withdrawn its application for a banking license from the Irish central bank four years after the process began. The Starling app has faced challenges in the past, with the digital lender temporarily suspending negotiations with regulators in 2020 due to the Covid-19 pandemic.

Instead, Starling will focus on selling its software-as-a-service product aimed at helping banks with their digital transformation strategies and expanding into new areas of lending, CEO Anne Boden told employees in a memo on Monday. The memo was first reported Sky News and subsequently confirmed to CNBC by a Starling spokesperson.

The news came as a blow to Starling’s European expansion plans. With the support of such Goldman Sachs and the Qatar Sovereign Wealth Fund, Starling has won investments from such high profile investors with the promise that it can succeed in countries outside of its home market.

Starling is one of the UK’s largest online banks with over 3 million customers, 500,000 of which are businesses. It competes with numerous popular fintech companies in the country, including Revolut and Monzo, as well as its own investor Goldman, which offers savings accounts through a digital banking brand called Marcus.

The private firm was last valued at £2.5bn ($3bn) in April, double its value in the 2021 funding round.

Fintech companies have had a tough time in both the public and private markets, with Swedish buy-now-pay-later firm Klarna recently seeing its valuation. fall 85% to $6.7 billion from $45.6 billion last year.

Starling said it still intends to expand in Europe, but only through software deals with other lenders and not through its own retail bank brand.

“Ultimately, we felt that the Irish subsidiary would not provide the added value we are looking for,” Boden said in a memo on Monday.

“Now we will focus on delivering our software to banks around the world through our software-as-a-service subsidiary Engine, as well as expanding our lending across a range of asset classes, including through targeted M&A activity,” she added. she is.

Starling acquired specialist mortgage lender Fleet Mortgages for £50m in July 2021.

The company was recently object of criticism from Lord Agnew, a former UK minister who questioned the rollout of state-backed lending schemes to help businesses in the coronavirus crisis.

Agnew, who stepped down as anti-fraud minister this year over the government’s handling of Covid loan fraud, called Starling “one of the worst” offenders when it came to scrutiny of businesses applying for the government program. repayment of loans in the amount of 47 billion pounds. The government has promised creditors 100% loan support in case the firm fails to repay.

Boden responded to Agnew’s claimscalling them “slanderous” and “wild allegations” and threatening the politician with legal action if he does not decline to comment.

Covid Lending Program Significantly Boosts Starling’s Earnings: In October 2020, the new bank reported its outstanding earnings following a significant increase in lending activity. Between 2019 and 2021, the bank’s loan portfolio increased from almost none to nearly £2.2bn. Starling is expected to release its latest full year reports this week.