Starling Bank, a leading digital-only bank in the UK, has abandoned its pursuit of a banking license in Ireland and altered its European expansion plans. The revelation was first reported by SkyNews that disclosed Starling might alternatively purchase a European bank instead of acquiring a de novo license.
The information was shared in a memo that was distributed to Starling employees that reportedly stated:
“We’ll now be focusing on taking our software to banks around the globe through our Software as a Service subsidiary, Engine, and by expanding our lending across a range of asset classes, including through targeted M&A activity.”
Starling raised £130.5 million this past spring at a pre-money valuation of £2.5 billion. At the time, Starling shared that it had generated monthly profitability every month since October 2020. The Fintech also disclosed that the funding would “build a war chest for acquisitions.”
This past June, Starling reported that it had topped 3 million accounts, including over 450,000 small business customers.
It appears that Starling is planning a two-pronged approach for continental expansion. First, leveraging its tech stack – something other digital banks have accomplished with some success. Second, it may simply pick up a traditional bank in a European country and passport its license across the EU. This makes a lot of sense. What should be obvoius is that Starling will not remain content with only serving the United Kingdom.
The digital banking market has become very competitive from both neobanks, digital banks, and incumbents that have been forced to up their game and provide a better experience for their customers – lest they abandon them for a superior service. Meanwhile, markets remain choppy with raging inflation and rising interest rates that are sure to temper growth in the coming months. Starling’s move to keep its powder dry, for now, may have been a savvy move.