Starling, the UK-based challenger bank, withdrew its application for a European banking license four years after its initial application to the Irish Central Bank. The bank is now eyeing growth through its banking software subsidiary, Engine, and by expanding its lending initiatives.

Why should we care?
Starling has become one of the largest online-only banks in the United Kingdom, with over 3 million clients, including 500,000 businesses. The bank’s $3 billion valuation in April—double its 2021 valuation—stemmed in large part from its promise to expand rapidly into other territories.  On the one hand, Starling’s rejected application may draw the ire of the bank’s backers, including Goldman Sachs and the Qatar Investment Authority—ratcheting up tensions between EU regulators and investors. Relations are already relatively fraught after the European Union General Court upheld that Brussels has the authority to regulate the merger between biotech companies Illumina and Grail. But Starling’s pivot is revealing, too, and can offer a roadmap to other fintechs dealing with regulatory hurdles: Through white-label solutions, the bank seems to have found loopholes that let it expand its banking services without having to jump through licensing hoops. Starling can scale more quickly through partnerships with old-school banks, and shape the backend of these financial institutions in its image.