Malaysia decided to greenlight digital banks amid a wave of investor excitement and regulatory acquiescence in early 2020. Led by Hong Kong and Singapore, many East Asian economies sought to introduce more competition to their staid banking sectors. The backers of digital banks – venture capitalists, large tech firms, telecoms giants and even incumbent lenders – convinced themselves that there was a significant opportunity to tap underserved markets.
That was often – and still is – the case in countries like Indonesia, the Philippines and Vietnam. Malaysia, however, is a mature banking market. It has a comprehensive regulatory framework, high levels of financial inclusion, and is a global leader in Islamic finance. The sector is characterized by strong capitalization and high-quality assets. About 97% of Malaysians have a bank account.
The data point often used to argue in favor of digital banks in Malaysia comes from a Bain & Company research report. That report stated that 55% of Malaysians are underbanked, a vague term that can mean anything from lacking adequate credit access to not having enough features in a savings account.
Even if we take that data point at face value, persuading Malaysians to switch their primary bank accounts is a difficult task. That means most digital banks in the country are serving as secondary accounts. It is no surprise to see that lending growth is trailing deposit acquisition, and deposit market share itself is nothing to get excited about: less than 1% of the overall market. Malaysia’s online lenders are thus facing a “negative carry” situation, where high-interest deposit-gathering efforts are not being matched by quick revenue generation through loans.
One point frequently overlooked in the conversation about the market opportunity provided by underserved segments is that it can be a risky undertaking. If digital banks want to focus on those segments, scaling up lending can be tough due to high operational and credit risks associated with customers who cannot easily get loans from traditional banks.
Currently, Malaysia has three operational digital banks: GXBank (Grab), Boost Bank, and AEON Bank. Ryt Bank (the erstwhile SeaBank) and KAF Digital Bank are still in the pilot phase.
Among these five, we find AEON to be one of the most promising given its status as the first Islamic digital bank. AEON combines Shariah-compliant principles with an established retail ecosystem. By leveraging the massive AEON Group’s customer base, credit data, and loyalty programs, it creates a unique, high-trust entry point for financial inclusion.
Grab’s GXBank has probably attracted the most attention among Malaysia’s digital lenders. While these are early days for Grab’s Malaysian digital bank, thus far it is losing money: It reported a pre-tax loss of approximately RM189 million for the nine-month period ending December 2024. While GXBank is leading Malaysia’s online lenders in deposits and assets, it is grappling with high initial setup costs, technology investments, and pricey customer acquisition.
Overall, as of the end of 2025, Malaysia’s licensed digital banks had total deposits of approximately RM4.2 billion (US$1.04 billion), serving roughly 2.4 million customers. While these figures represent rapid growth in customer adoption, the combined assets and deposits of Malaysia’s online lenders remain pithy as a percentage of the overall banking sector: just 1%. Malaysia’s online lenders have a long way to go before they are competitive with incumbents.
We expect the online lenders’ profitability to be constrained in the short and medium term. Though they are attracting deposits with high interest rates, their growth is structurally limited (asset cap of RM3 billion per bank) by the Malaysian central bank during the “foundational phase,” their first three to five years of operation. Thereafter, depending on their business strategies, the profitability picture could gradually improve.