Malaysia’s Digital Banks Slowing Deposit Growth Amidst Lending Challenges
Digital banks in Malaysia are expected to reduce their focus on attracting deposits because expanding their lending activities is proving to be more expensive and slower than initially anticipated, according to a report by UOB Kay Hian (UOBKH).
Currently, three of Malaysia’s five licensed digital banks—GXBank, Boost Bank, and AEON Bank—are operational, while Ryt Bank and KAF Digital Bank are still in their pilot phases.
A significant hurdle for these digital lenders is scaling up their loan offerings. UOBKH analyst Keith Wee Teck Keong noted that their target demographic—underserved and unbanked Malaysians—presents both operational difficulties and credit risks. Many in this segment may not be digitally savvy enough to fully use app-based platforms, and their credit histories could raise concerns about loan quality.
Wee also highlighted that an overly aggressive approach to collecting deposits without corresponding loan growth could lead to financial losses. This is because expensive deposits would be invested in low-yielding money market instruments, squeezing profit margins. This shift is seen as a positive development for traditional banks, as it could lessen competition for deposits across the broader banking sector.
None of the digital banks have achieved profitability yet, with most operational ones estimating it will take over three years on average to break even.
Among the new entrants, GXBank Bhd is leading in both assets and customer deposits. As of September 2024, it held MYR2.4 billion in total assets and MYR2.2 billion in deposits. AEON Bank reported MYR711 million in assets and MYR339 million in deposits as of November 2024, while Boost Bank had MYR819 million in assets and MYR573 million in deposits as of March 2025.
Despite these figures, Wee pointed out that the combined asset base of all three operational digital banks remains small, accounting for less than 1% of the total Malaysian banking sector’s MYR3.7 trillion in assets as of the end of April 2025. Even at the regulatory cap of MYR3 billion per digital bank over their first 3-5 years, the total MYR15 billion ceiling for all five digital banks represents only 0.4% of the industry’s current total assets.
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