Starling Bank, the UK based digital lender founded and led by former senior AIB executive, Anne Boden, has pulled its plans to operate here under an Irish banking licence.
The news was communicated to the bank's employees today by Ms Boden, a spokesperson for the bank confirmed.
Ms Boden told them that the company had opted to pursue other projects that would deliver a superior return.
Starling has been eyeing the Irish market since 2017 and had been going through the process of obtaining a banking licence from the Central Bank of Ireland.
It is understood that the challenger bank had progressed all the way through the process and was at the final stage when it decided to withdraw the application.
"Sometimes changing course is the right option," Ms Boden told employees, Sky News reported.
"My job as CEO is to constantly test our thinking against evolving circumstances and to make sure that we are delivering value and maximising potential for growth."
"Ultimately, we felt that an Irish subsidiary would not deliver the added value we are seeking."
The news will come as a blow to consumers here, as the Irish banking market prepares to lose two of the five main retail banks, Ulster Bank and KBC Bank Ireland.
Starling already had a small team of around six people working on the ground here, preparing the way for the expansion.
It is unclear what will happen to their roles as a result of the decision.
Starling had planned to use Ireland as a location from which it would further expand across Europe.
"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," Ms Boden said in the message to staff.

The bank was founded in 2014 by Anne Boden and granted a banking licence by the Bank of England in July 2016.
It launched its first mobile personal current account in May 2017 and the UK's first digital business bank account in March 2018.
Today it has over three million accounts including 460,00 small business accounts.
It operates offices in London, Cardiff, Southampton and Dublin and has almost 2,000 employees.
The bank has reported monthly profitability every month since October 2020.
The bank is part owned by Anne Boden, employees and an employee benefit trust, as well as investors Harry McPike, Jupiter Asset Management, Fidelity Investments, Railpen, Qatar Investment Authority, Millennium Management and Goldman Sachs.
In April it completed a £130.5m internal fundraising round that valued the bank at more than £2.5 billion.
It said at the time that the money would be used as a war chest for acquisitions.
A year earlier it completed a £322 million Series D funding round.