Wise Group (LSE: WISE) shares fell sharply in London trading after the US Federal Reserve rejected the company's application for a national bank charter.
The decision marks a significant regulatory hurdle for the fintech, which had sought the license to deepen its footprint in the American market and offer a broader suite of financial products directly to US consumers and businesses.
The rejection undermines Wise's strategy to operate as a fully licensed bank in the US, a move that would have allowed it to hold deposits and offer credit products without relying on partnerships with existing US banks.
Instead, the company will likely need to continue its current model of partnering with chartered institutions to provide banking services, a structure that offers less control over the customer experience and potentially lower margins on deposit-taking activities.
Market reaction was swift, with investors pricing in the increased regulatory risk and the potential delay in Wise's US growth trajectory.
The sell-off reflects broader concerns about the tightening regulatory environment for fintechs in the US, where regulators have become increasingly cautious about granting charters to non-traditional banking entities.