Starling says it has become the first digital challenger bank to be profitable, as its rivals continue to record large losses.

The online bank, founded by Anne Boden in 2014 after she spent 30 years working for “boring big banks”, has made a loss every month since its launch but says, on an operating basis, it will post a £0.8m profit for October.

Former computer scientist Ms Boden said that even though her pitch to launch a bank five years ago was initially met with “healthy scepticism”, she is pleased that Starling has “become the first of the new breed of digital banks to become profitable”.

She added: “Our operating costs have increased by 30pc in the past year, while customer accounts almost doubled and our fixed costs have broadly remained flat over the last 12 months.”

Although it is not yet an annual profit, the move heralds a key moment for the the industry’s newcomers, who are under fresh pressure from the Bank of England to deliver sustainable business models. While attempting to challenge high street banks, Britain’s financial technology stars Monzo, Starling and Revolut are yet to make a penny. 

All three fintech banks saw increased net losses in 2019 compared with 2018

The Bank of England started to lose patience over the summer, when its supervisory arm said that many new banks had “underestimated the development required” to become successful and now needed to focus on making a profit.

The message from Threadneedle Street came after losses at Revolut more than tripled to £106.5m in 2019, while Monzo’s rose from £47.1m to £113.8m and Starling’s losses doubled to £52m. 

The online banking sector is fiercely competitive, with the bitter rivalry between Monzo and Starling widely known. Monzo’s founder and former chief executive Tom Blomfield led a walkout of key Starling executives in 2015, just before launching Monzo.

For 18 months, the two companies were based on either side of a small street off Finsbury Square in London, causing Starling to frost all of its windows. 

Taking a dig at her rivals, some of which offer access to airport lounges or premium metal cards, Ms Boden said: “We’ve never ‘bought’ customers with cash incentives, or promotions. We don’t have jazzy metal cards and we don’t offer ‘perks’ such as access to premium airport lounges.”