Sky News understands that CYBG (Frankfurt: 42YA.F - news) , which owns the Clydesdale and Yorkshire Bank brands, told staff late last week that it was in talks to exit a contract with 10x Future Technologies to create an online bank using the Virgin Money brand.
The move is not entirely unexpected, since David Duffy, CYBG's chief executive, had hinted since securing a £1.6bn deal to buy the bank founded by Sir Richard Branson that it was likely to use its own technology platform.
Confirmation that it is ditching the 10x deal may, however, deal a blow to Mr Jenkins, who has been in talks with investors for several months about a substantial new funding round for his venture.
Virgin Money is understood to have committed tens of millions of pounds to creating a digital platform with 10x's support, and CYBG's decision to terminate the deal is likely to trigger a sizeable payment to 10x.
Since being sacked by Barclays in 2015, Mr Jenkins has been a vocal advocate for technology-led change in the retail banking industry, predicting that most bank branches will disappear in the medium term as consumers accelerate their shift towards using digital channels.
In a statement on Monday, a CYBG spokesman said: "10x Future Technologies has been a valuable partner to Virgin Money through its digital journey.
"However, since we first announced our proposed acquisition of Virgin Money we have been clear that we plan to use CYBG's existing iB technology platform - designed for the world of Open Banking - to support our 6m customers.
"We have informed 10x of our intention to exit the agreement with Virgin Money. We wish the 10x team the very best for the future."
A 10x spokesman also confirmed the move, insisting that the business was "in good shape, with a strong pipeline and many opportunities ahead of us".
He added: "We remain focused on the continuing development of our technology platform, having recently carried out the first live real money and merchant transactions across our platform at the end of October."
10x said it had already signed additional clients, which it declined to name.