Malaysia's Digital Banks Build Deposits as Lending and Profitability Test Their Growth

Fast Growth Meets the Challenge of Making Money

Malaysia's first three operating digital banks have attracted more than RM2.3 billion in deposits from about 1.3 million customers, yet all three remain unprofitable as they work to turn savings accounts into sustainable lending businesses. By June 30, 2025, GXBank, AEON Bank and Boost Bank were operating publicly, while Ryt Bank and KAF Digital Bank were in advanced pilot phases preparing for broader launches.

GXBank led the operating banks with RM2.16 billion in deposits and RM2.4 billion in assets as of September 2024. AEON Bank held RM339 million in deposits and RM711 million in assets by November 2024. Boost Bank reported RM573 million in deposits and RM819 million in assets as of March 2025. Those individual figures describe different reporting dates, while the collective figure of more than RM2.3 billion covers the sector's early growth in late 2024 and early 2025.

Bank Negara Malaysia (BNM), which granted five digital banking licences in 2022, intended the newcomers to widen access to financial services. According to the central bank, nearly 60% of digital bank customers come from underserved groups, including households with low incomes and rural communities.

Reaching those customers is only part of the task. The banks must also assess borrowers with limited credit records, help people who struggle with digital tools, retain savers after promotions end and cover substantial startup costs. Most expect to take more than three years to break even, the point at which income covers expenses.

Deposits Are Growing From a Small Base

Promotional campaigns, attractive savings rates and account opening through mobile apps have helped the banks gather deposits quickly. GXBank initially offered savings rates of up to 3%. Boost Bank followed a more disciplined funding strategy, maintaining a cost of funds of 1.7%, which could support better margins over time.

A bank's cost of funds is what it pays to obtain the money it uses, including interest paid to savers. To make money, it needs enough income from lending and investments to cover that cost, its operating expenses and losses on loans.

Despite their growth, the three operating digital banks together held less than 1% of Malaysian banking assets. The entire banking sector had RM3.7 trillion in assets as of April 2025. Assets include loans and investments, as well as other resources held by a bank.

BNM limits each digital bank to RM3 billion in assets during its initial regulatory phase. Even if all five reached that ceiling, their combined RM15 billion would amount to about 0.4% of the sector's RM3.7 trillion asset base. Their immediate role is therefore concentrated on particular customer groups and services, while established banks retain a much larger presence.

Five Banks With Different Starting Points

GXBank, backed by Grab Holdings Inc. and Kuok Group, became Malaysia's first licensed digital bank. It offers personal and business banking through digital channels and uses data from the Grab ecosystem to develop highly personalised financial products.

AEON Bank is the country's first fully Shariah-compliant digital bank. Its services follow Islamic financial principles and include digital savings, payment cards and budgeting tools. Boost Bank, a collaboration between Axiata Group and RHB Banking Group, draws on Malaysia's financial technology ecosystem, retailer partnerships and features such as Savings Jars.

KAF Digital Bank, in its pilot phase, aims to become Malaysia's second Islamic digital bank. Its plans include Shariah-compliant savings, investment solutions and financial services built into online commerce and financial technology platforms. Ryt Bank, the latest entrant, focuses on banking personalised through artificial intelligence, an AI financial assistant, advanced security and support in multiple languages for underserved communities.

The sector's development has moved through several stages:

• 2020: BNM introduced its digital banking licensing framework.
• 2022: Five digital banking licences were granted.
• Mid-2024: AEON Bank and Boost Bank launched.
• Late 2024: Digital banks began introducing financing products beyond savings and payments.
• June 30, 2025: Three banks were operating publicly, with KAF Digital Bank and Ryt Bank preparing for broader launches after advanced pilots.

All five use a model without physical branches. Running services online allows them to streamline operations, reduce costs and reach customers in remote or underserved areas through digital channels.

Who Is Gaining Access to Banking?

BNM's finding that nearly 60% of digital bank customers belong to underserved segments puts financial access at the centre of the sector's early progress. Rural residents and households with low incomes can face difficulties reaching branches, meeting conventional credit requirements or completing lengthy applications.

Digital account opening allows customers to apply through an app or website without visiting a branch. Lower operating costs can also allow banks to offer lower fees and better savings rates, making services more affordable.

For gig workers, microentrepreneurs and sole proprietors, another potential benefit lies in credit assessment. Digital banks can use data analysis to assess applicants who have little or no conventional credit history. A credit history is a record of previous borrowing and repayment that helps a lender decide whether someone can manage a new loan.

Access still depends on people being able to use the technology. An account that is easy for a confident smartphone user to open may require more support for someone unfamiliar with app navigation, digital identity checks or online financial services.

Financing Products Begin to Take Shape

GXBank introduced loans with rapid approval for retail and business customers as the sector began moving beyond deposits in late 2024. Its business financing was limited to merchants within the Grab ecosystem.

AEON Bank launched personal financing products, including Shariah-compliant options for gig workers and people earning commissions. These customers may have income that varies from month to month, making the design and assessment of financing particularly relevant to their circumstances.

Boost Bank targeted small and medium enterprises (SMEs) with business loans. Its partnership with CGC Digital allocated RM130 million for SME financing, providing a specific funding commitment alongside its wider ambitions to serve businesses.

For the banks, lending creates a possible income stream from the deposits they have collected. For customers, it extends the relationship beyond storing and moving money to obtaining funds for personal needs or business activity. The challenge is to grow that lending while keeping repayments manageable and credit losses under control.

Startup Losses Put Pressure on Growth

GXBank recorded a loss before tax of RM189 million for the nine months ending December 2024. AEON Bank recorded RM91 million in losses and Boost Bank RM43 million over similar periods. All three operating digital banks remained unprofitable during their early development.

High startup spending, aggressive marketing and reliance on investments with low risk and limited returns contributed to those losses. A new bank must build its technology, operations and customer base before income from its products can cover those costs.

All three banks received capital injections from shareholders in 2024 to support expansion and product development. That funding gave them resources to continue building their businesses while they worked toward profitability.

Most digital banks projected a break-even period of more than three years. Their ability to reach that point depends on the balance between attracting customers, earning income, controlling expenses and managing the risks of lending.

Why Lending Is Harder Than Gathering Savings

Digital banks have found that scaling up loans can be slower and costlier than expected. Their target customers include underserved and unbanked Malaysians, some of whom have limited credit records or lack the digital skills needed to use banking apps confidently.

Keith Wee Teck Keong, an analyst at UOB Kay Hian, described the customer and credit challenges facing lenders:

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.

Asset quality describes how likely a bank's loans and other assets are to retain their value. For a lender, the central concern is whether borrowers can repay on time. Serving people with limited borrowing records requires careful assessment even when applications can be processed quickly.

Digital banks are consequently expected to moderate their efforts to collect deposits. Paying attractive rates to savers becomes costly when the money is placed mainly in money market instruments that generate lower returns. Those instruments are used to hold and invest funds rather than lend directly to households or businesses.

A slower drive for deposits could also ease competition for savings at conventional banks. For the digital banks themselves, matching deposit growth more closely to lending opportunities would help protect the gap between what they earn and what they pay for funding.

Keeping Customers After Promotions End

Customers who are comfortable with digital banking can also be sensitive to price. Attractive savings rates and promotional rewards may bring them into an app quickly, while another bank's offer may draw their attention later.

Retaining those customers requires continuing product development, personalised services and reliable customer support. The banks must give users reasons to keep saving, paying and borrowing with them after an introductory offer finishes.

Customer acquisition costs add to this pressure. Marketing spending can help establish a bank's presence, but sustained engagement is needed to turn that spending into a lasting customer relationship. The shareholder funding provided in 2024 supported this continuing work on expansion and products.

Established Banks Keep Their Advantages

Malaysia's traditional banks continue to invest in technology, product development and the customer experience. Their broader range of products, extensive distribution networks and strong capital positions make them substantial competitors for the new digital banks.

An established lender can serve a customer through several products and channels, while the digital banks are still building out their services. Digital convenience is therefore part of a wider contest over pricing, access, reliability and the range of financial needs a bank can meet.

UOB Kay Hian Research identified banks with attractive valuations, high provision buffers and strong capital management as better placed to offer defensive qualities amid external uncertainty. Provision buffers are funds set aside to absorb possible credit losses.

Its preferred names included Hong Leong Bank Bhd, Public Bank Bhd and AMMB Holdings Bhd, reflecting their stability and resilience in a volatile environment. Their position adds to the competitive pressure facing newcomers seeking both deposits and borrowers.

BNM Sets Limits for the First Years

BNM's framework, introduced in 2020, places digital banks in a foundational phase lasting three to five years. During that period, each bank faces a total asset ceiling of RM3 billion and an initial minimum capital requirement of RM100 million.

The minimum capital requirement rises to RM300 million after the foundational phase. Capital is money available to help a bank absorb losses, while liquidity concerns its ability to meet payments and withdrawals when they fall due.

Digital banks must continuously meet requirements covering liquidity, capital adequacy, consumer protection and cybersecurity. The initial limits give them time to establish stable operations and sustainable growth before moving to full operations beyond the foundational restrictions.

BNM's 2024 Annual Report also highlighted efforts to expand financial access points, improve digital literacy and support secure electronic Know Your Customer checks, known as e-KYC. These checks allow identity verification through digital channels. The report included the rollout of MyDigital ID for national digital identity verification.

GXBank Builds on Its Grab Connection

GXBank's early growth drew on its integration with the Grab ecosystem, promotional campaigns and focus on both personal and business banking. That connection gives it an established setting in which to develop products for consumers and merchants.

Its GX FlexiCredit product offers an application process taking five minutes and credit limits of up to RM150,000, targeting consumers and micro, small and medium enterprises (MSMEs). Its business financing remains limited to merchants within the Grab ecosystem.

GXBank also partnered with the Malaysia Digital Economy Corporation to develop financial products tailored to MSMEs. The work targets difficulties in credit assessment and application procedures, two practical barriers for smaller businesses seeking finance.

AEON Bank Combines Islamic Finance and Training

AEON Bank has positioned itself around ethical, inclusive financial services and responsible lending. Alongside savings, payment cards and budgeting tools, its Islamic banking model serves customers seeking products that follow Shariah principles.

The bank has received accolades for its ethical financial products and customer engagement approaches. These include Neko Missions, a loyalty programme that uses game elements to encourage participation.

Its GrowthStart iTEKAD initiative supports female microentrepreneurs from B40 communities through coaching and digital skills training. B40 refers to the bottom 40% of households by income. The programme connects financial inclusion with practical help for women running very small businesses.

Boost Pursues Finance Built Into Daily Activity

Boost Bank draws on its financial technology roots and partnerships with major retailers and telecommunications companies. Account opening from RM1 and Savings Jars have helped it appeal to a broad customer base.

Savings Jars allow customers to organise money within their banking experience. The wider strategy centres on embedded finance, which means making financial services available within other platforms or everyday commercial activity rather than requiring a separate banking journey.

Boost Bank's lending portfolio has exceeded RM5 billion in loans disbursed across Malaysia and Indonesia, supporting thousands of MSMEs. Its regional ambitions also include initiatives in Indonesia and Cambodia aimed at reducing gaps in access to financial services.

Fozia Amanulla, chief executive officer of Boost Bank, described its purpose at launch:

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.

More Products, Technology and Access Work

Digital banks are expected to introduce further financing options, including microloans and invoice financing, alongside financial education within their apps. Invoice financing helps businesses obtain funds against money customers owe them, rather than waiting for those bills to be paid.

Artificial intelligence, analysis of data as it arrives and embedded finance are expected to support more personalised banking. Ryt Bank's planned AI assistant and support in multiple languages reflect the sector's effort to make digital services easier to use for different customer groups.

BNM also introduced the Licensing and Regulatory Framework for Digital Insurers and Takaful Operators (DITOs) in 2024. Takaful is an Islamic form of insurance. The framework creates space for further competition and innovation in financial services alongside digital banking.

Financial literacy programmes and wider access points remain part of the effort to reach rural and underserved Malaysians. For the banks, the next stage combines product expansion with the less visible work of assessing credit, maintaining security, supporting customers and controlling costs. Balancing growth, risk and retention will determine how their early deposit gains develop into sustainable businesses.

Key Points

• As of June 30, 2025, GXBank, AEON Bank and Boost Bank were operating publicly; Ryt Bank and KAF Digital Bank were in advanced pilots.
• The operating banks attracted more than RM2.3 billion in deposits from about 1.3 million customers during their early growth.
• BNM said nearly 60% of digital bank customers came from underserved segments.
• All three operating banks remained unprofitable, with most digital banks expecting more than three years to break even.
• BNM caps each bank's assets at RM3 billion during a foundational phase lasting three to five years.
• Lending growth, customer retention, digital skills and competition from established banks are central challenges as services expand.