Malaysia’s digital banking landscape is shifting, as the nation’s new players in the sector are reassessing their approaches to deposit gathering amidst challenges in lending growth, which has turned out to be more costly and sluggish than initially projected, according to a recent report from UOB Kay Hian (UOBKH).
As of now, three of the five licensed digital banks in the country—GXBank, Boost Bank, and AEON Bank—are operational, while Ryt Bank and KAF Digital Bank are still in the pilot phase. The slow scaling of lending activities has been a significant hurdle for these digital lenders. Their target market consists largely of underserved and unbanked Malaysians, who present unique operational and credit risks.
UOBKH analyst Keith Wee Teck Keong highlighted the complications: “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,” he stated in a report dated June 24, 2025.
In light of these lending challenges, digital banks are likely to pull back on their deposit-gathering efforts. Wee pointed out that taking an overly aggressive stance in collecting deposits without a corresponding growth in lending could lead to negative carry. This scenario would see expensive deposits funneled into low-yielding money market instruments, squeezing profit margins.
For conventional banks, this situation may present a silver lining, as the reduction in deposit competition could ease pressure within the broader banking ecosystem. Currently, none of the digital banks have reached profitability, and Wee notes that those that have begun operations estimate it could take over three years on average to reach breakeven.
Among the newcomers, GXBank Bhd stands out, boasting both the highest assets and customer deposits. As of September 2024, the bank reported total assets of MYR2.4 billion and deposits totaling MYR2.2 billion. EAON Bank trails with MYR711 million in assets and MYR339 million in deposits reported in November 2024, while Boost Bank has MYR819 million in assets and MYR573 million in deposits as of March 2025.
Although these figures are promising, Wee cautions that the combined asset base of these three operational digital banks remains modest, representing less than 1% of Malaysia’s total banking sector assets, which were pegged at RM3.7 trillion as of late April 2025.
Even under the regulatory cap of MYR3 billion per digital bank for their first 3-5 years, the cumulative MYR15 billion ceiling reflects just 0.4% of the industry’s total assets, leaving plenty of room for growth and opportunity for these nascent financial institutions.
What challenges are Malaysian digital banks facing?
Digital banks in Malaysia are encountering significant hurdles in scaling their lending activities due to targeting underserved segments that often lack digital literacy and have questionable credit profiles.
How have digital banks responded to lending growth challenges?
In response to the costlier and slower growth in lending, digital banks are expected to temper their deposit-gathering strategies to avoid negative carry and maintain healthier profit margins.
Which digital bank currently leads the market in assets and deposits?
GXBank Bhd leads among operational digital banks in Malaysia, with total assets of MYR2.4 billion and deposits of MYR2.2 billion as of September 2024, showcasing a considerable market presence.
