Malaysia’s Digital Banking Revolution: Where Do Things Stand in 2025?
Malaysia’s financial sector is undergoing a significant transformation as digital banks take root, promising to reshape how millions access, save, and borrow money. Since Bank Negara Malaysia (BNM) granted licenses to five digital banks in 2022, the sector has seen rapid developments, with three banks—GXBank, Boost Bank, and AEON Bank—now fully operational. Two others, Ryt Bank and KAF Digital Bank, are in advanced pilot phases, preparing for broader public launches. This article explores the latest deposit growth figures, the challenges digital banks face, their impact on financial inclusion, and what the future holds for Malaysia’s digital banking landscape.
Deposit Growth: Digital Banks Make Their Mark
Since their launch, Malaysia’s digital banks have experienced a surge in customer deposits, reflecting both strong consumer interest and the effectiveness of their digital-first strategies. As of late 2024 and early 2025, the three operational digital banks have collectively attracted over RM2.3 billion in deposits from approximately 1.3 million customers. GXBank leads the pack, reporting RM2.16 billion in deposits and RM2.4 billion in total assets as of September 2024. AEON Bank and Boost Bank, which launched in mid-2024, have also shown impressive early growth, with AEON Bank holding RM339 million in deposits and RM711 million in assets by November 2024, and Boost Bank reporting RM573 million in deposits and RM819 million in assets as of March 2025.
This rapid deposit accumulation has been driven by aggressive promotional campaigns, high-yield savings accounts, and seamless digital onboarding experiences. GXBank, for example, initially offered market-leading savings rates of up to 3%, while Boost Bank adopted a more disciplined approach, maintaining a lower cost of funds at 1.7%—a strategy that could support better margins in the long run.
Despite these encouraging numbers, the combined asset base of all three operational digital banks remains modest, accounting for less than 1% of Malaysia’s total banking sector assets, which stood at RM3.7 trillion as of April 2025. Even if each digital bank reaches the regulatory asset cap of RM3 billion within their first three to five years, their collective RM15 billion would still represent just 0.4% of the industry’s total assets. This underscores both the potential for future growth and the current limited impact on the broader financial system.
Who Are Malaysia’s Digital Banks and What Sets Them Apart?
Malaysia’s digital banking sector is defined by five licensed players, each with unique value propositions and target markets:
- GXBank: Backed by Grab Holdings Inc. and Kuok Group, GXBank is Malaysia’s first licensed digital bank. It offers fully digital personal and business banking solutions, leveraging data from the Grab ecosystem to provide hyper-personalized financial products.
- AEON Bank: The country’s first fully Shariah-compliant digital bank, AEON Bank focuses on ethical, inclusive financial services, offering digital savings, payment cards, and budgeting tools tailored to Malaysia’s diverse population.
- Boost Bank: A collaboration between Axiata Group and RHB Banking Group, Boost Bank integrates digital banking with Malaysia’s fintech ecosystem. Its mobile-first approach, innovative features like Savings Jars, and partnerships with major retailers have made it a favorite among digital-savvy consumers.
- KAF Digital Bank: Set to become Malaysia’s second Islamic digital bank, KAF Digital Bank is currently in the pilot phase. It aims to offer Shariah-compliant savings, investment solutions, and embedded financial services for e-commerce and fintech platforms.
- Ryt Bank: The latest entrant, Ryt Bank, is focused on AI-powered personalized banking, with features like an AI financial assistant and advanced security measures. It targets underserved communities with user-friendly, multilingual support.
All digital banks operate entirely online, eliminating the need for physical branches. This allows them to streamline services, reduce costs, and reach customers in remote or underserved areas more effectively than traditional banks.
Financial Inclusion: Reaching the Underserved
One of the primary goals of Malaysia’s digital banking initiative is to enhance financial inclusion. According to BNM, nearly 60% of digital bank customers come from underserved segments, such as low-income households and rural communities. Traditional banks have long struggled to serve these groups due to strict credit assessments, lengthy approval processes, and limited branch networks.
Digital banks are changing the game by offering:
- Fully digital onboarding: Customers can open accounts and apply for loans via mobile apps or websites, removing the need for physical visits.
- Tailored credit offerings: By leveraging data analytics, digital banks can assess creditworthiness even for those with limited or no credit history, enabling access to financing for gig workers, micro-entrepreneurs, and sole proprietors.
- Low-cost services: Reduced operational costs allow digital banks to offer lower fees and better interest rates, making banking more affordable for all.
Beyond savings and payments, digital banks began rolling out financing products in late 2024. GXBank offers fast-approval loans to both retail and business users, though business financing is currently limited to merchants within the Grab ecosystem. AEON Bank has launched personal financing products, including Shariah-compliant options for gig workers and commission-based earners. Boost Bank, meanwhile, is targeting small and medium enterprises (SMEs) with business loans and has partnered with CGC Digital to allocate RM130 million for SME financing.
Challenges: Profitability, Lending, and Customer Retention
Despite their rapid growth in deposits and customer numbers, Malaysia’s digital banks face significant challenges on the road to profitability and long-term sustainability.
High Startup Costs and Losses
All three operational digital banks remain loss-making, as expected in their early years. GXBank posted a pre-tax loss of RM189 million for the nine months ending December 2024, AEON Bank recorded RM91 million in losses, and Boost Bank reported RM43 million in losses over similar periods. These losses are largely due to high startup costs, aggressive marketing, and a reliance on low-risk investments that generate limited income in the initial phase.
Lending Growth: Slower and Costlier Than Expected
Scaling up lending activity has proven more challenging than anticipated. Digital banks primarily target underserved and unbanked Malaysians, many of whom lack digital literacy or have limited credit histories. This presents both operational and credit risks, making it difficult to grow loan portfolios quickly and safely.
Keith Wee Teck Keong, an analyst at UOB Kay Hian, explains:
“Many in this segment may lack the digital literacy to engage fully with app-based platforms, while their credit profiles may raise asset quality concerns.”
As a result, digital banks are expected to temper their deposit-gathering efforts to avoid a scenario where expensive deposits are invested in low-yielding money market instruments, which would squeeze profit margins. This strategic shift could also ease deposit competition for conventional banks.
Customer Retention and Acquisition Costs
Retaining digitally savvy and price-sensitive users is another major challenge. While high-interest rates and promotional offers can attract customers quickly, sustaining engagement and loyalty requires continuous innovation, personalized services, and robust customer support. All three banks received capital injections from shareholders in 2024 to support ongoing expansion and product development.
Traditional Banks Respond: Digital Transformation and Competitive Edge
Malaysia’s established banks are not standing still. They continue to advance their own digital agendas, investing heavily in technology, product innovation, and customer experience. With broader product capabilities, extensive distribution networks, and strong capital positions, traditional banks remain formidable competitors.
UOB Kay Hian Research notes that, amid external uncertainties, banks with attractive valuations, high provision buffers, and strong capital management are well-positioned for defensiveness. Their top picks include Hong Leong Bank Bhd, Public Bank Bhd, and AMMB Holdings Bhd, all of which offer stability and resilience in a volatile environment.
Regulatory Framework: Ensuring Stability and Innovation
Bank Negara Malaysia has played a proactive role in shaping the digital banking landscape. Its licensing framework, introduced in 2020, sets strict requirements for digital banks, including:
- A foundational phase of three to five years with a total asset cap of RM3 billion per bank
- Minimum capital requirements (RM100 million initially, rising to RM300 million after the foundational phase)
- Continuous compliance with liquidity, capital adequacy, consumer protection, and cybersecurity standards
This approach allows digital banks to establish operational stability and sustainable growth before transitioning to full-scale operations. BNM’s 2024 Annual Report also highlights efforts to expand financial access points, enhance digital literacy, and support the secure adoption of electronic Know-Your-Customer (e-KYC) solutions, including the rollout of MyDigital ID for national digital identity verification.
Spotlight on Individual Digital Banks: Strategies and Innovations
GXBank: Leading the Charge
GXBank’s rapid growth is attributed to its integration with the Grab ecosystem, aggressive promotional campaigns, and a focus on both personal and business banking. The bank’s GX FlexiCredit product offers a five-minute application process and credit limits up to RM150,000, targeting both consumers and micro, small, and medium enterprises (MSMEs). GXBank’s partnership with the Malaysia Digital Economy Corporation aims to develop tailored financial products for MSMEs, addressing challenges in credit assessments and application procedures.
AEON Bank: Pioneering Islamic Digital Banking
AEON Bank stands out as Malaysia’s first fully Shariah-compliant digital bank. It has received accolades for its ethical financial offerings and innovative engagement strategies, such as the Neko Missions gamified loyalty program and the GrowthStart iTEKAD initiative, which supports female micro-entrepreneurs from B40 communities with coaching and digital skills training. AEON Bank’s focus on financial inclusion and responsible lending positions it as a leader in Islamic digital finance.
Boost Bank: Embedded Finance and Regional Ambitions
Boost Bank has quickly established itself as a transformative player, leveraging its fintech roots and partnerships with major retailers and telcos. Its user-friendly features, such as RM1 account openings and Savings Jars, have resonated with a broad user base. Boost Bank’s lending portfolio has exceeded RM5 billion in loans disbursed across Malaysia and Indonesia, supporting thousands of MSMEs. The bank is also expanding regionally, with initiatives in Indonesia and Cambodia aimed at bridging financial access gaps.
Fozia Amanulla, CEO of Boost Bank, emphasizes the bank’s mission:
“The launch of Boost Bank represents a significant leap in our journey to redefine financial inclusion. This is about more than deposits or accounts; it’s about creating a platform that truly empowers individuals and businesses to thrive.”
The Road Ahead: Opportunities and Risks
As Malaysia’s digital banks continue to grow, several trends and challenges will shape their future:
- Expansion of product offerings: Digital banks are expected to introduce more financing options, such as microloans, invoice financing, and in-app financial education, to better serve MSMEs and individuals.
- Technological innovation: The use of artificial intelligence, real-time analytics, and embedded finance will drive smarter, more personalized banking experiences.
- Regulatory evolution: BNM’s introduction of the Licensing and Regulatory Framework for Digital Insurers and Takaful Operators (DITOs) in 2024 paves the way for further innovation and competition in the financial sector.
- Financial literacy and inclusion: Ongoing efforts to improve digital literacy and expand access points will be crucial in ensuring that digital banking benefits all Malaysians, especially those in rural and underserved areas.
- Profitability and sustainability: Achieving profitability remains a key challenge, with most digital banks projecting a break-even timeline of more than three years. Balancing growth, risk management, and customer retention will be critical for long-term success.
In Summary
- Malaysia’s digital banks—GXBank, AEON Bank, and Boost Bank—have rapidly grown their deposit bases, collectively attracting over RM2.3 billion from 1.3 million customers by early 2025.
- GXBank leads in both assets and deposits, while AEON Bank and Boost Bank have carved out niches in Islamic finance and embedded digital banking, respectively.
- Nearly 60% of digital bank customers come from underserved segments, highlighting progress in financial inclusion.
- All operational digital banks remain loss-making, facing challenges in scaling lending and retaining customers, with profitability expected to take more than three years on average.
- Traditional banks continue to invest in digital transformation, maintaining a competitive edge through broader product offerings and strong capital positions.
- BNM’s regulatory framework ensures stability, innovation, and consumer protection, with ongoing efforts to expand financial access and digital literacy.
- The future of digital banking in Malaysia will be shaped by technological innovation, expanded product offerings, and a continued focus on financial inclusion and sustainability.
