This article first appeared in The Edge Malaysia Weekly on November 24, 2025 - November 30, 2025

ALL five of Malaysia’s digital banks that were awarded licences by Bank Negara Malaysia in April 2022 have now launched, the latest being KAF Digital Bank and Ryt Bank which opened their apps to the general public on Aug 8 and 26 respectively.

The other three — GXBank (launched Nov 30, 2023), AEON Bank (May 26, 2024) and Boost Bank (June 6, 2024) — have been in operation for over a year and are at various stages of progress.

Given that they are still at an infancy stage, digital lenders are yet to be seen as a threat to incumbent banks. But that will likely change in a few years, GXBank CEO Kaushik Chowdhury believes.

“As of now, I don’t think we are in competition. We have actually already broken into the top 10 in some of the metrics but those are all vanity metrics,” Chowdhury, better known as KC in the industry, acknowledges in a recent interview.

Pressed for details, he says: “We are already a top 10 card issuer and, on Paynet process volumes, we are the number one digital bank and again in the top 10. So it already tells you that in our chosen products and in our current construct, we are a material bank in the making. What we are building, the true value of it, is only a decade from now. In another five years, you will see GXBank becoming a material player in our chosen markets.”

It is important that digital banks make use of data, technology and creativity to come up with a differentiated proposition for users, he stresses. “If you don’t have differentiation, you will not survive. Today, if you look merely at the size of our balance sheet, there is no competition, right? But if you look at where we can be, I think if I were on a [traditional] bank board, I should worry — maybe not about all the five players but the ones which are becoming materially large in certain segments.”

Bankers to whom The Edge spoke say they can’t ignore digital lenders but, thus far, the most significant impact on their business has been in the area of deposits. 

“We have observed some impact in deposit outflows in response to digital banks that offer very attractive rates. But these flows tend to be transient. Once the promotional rates end, we often see deposits returning. So there is an ebb and flow,” Syed Ahmad Taufik Albar, group CEO of community financial services at Malayan Banking Bhd (KL:MAYBANK), the country’s largest bank, told The Edge in an interview published in August.

At present, Malaysia’s digital banks’ loans and deposits account for a tiny fraction of those in the banking system.

“In our view, [digital banks] are still at an infancy stage, with much room and opportunity for growth — they currently account for less than 0.1% of banking system loans/deposits. At the same time, the conventional banks are not resting on their laurels either and have stepped up their IT (information technology) and digital investments,” says Maybank Investment Bank (IB) Research in a Sept 29 progress report on digital banks.

Indeed, incumbent banks have been upping their digital game in recent years, with strong results. Last month, Maybank announced that it had facilitated more than RM4 trillion in digital transactions in the past five years, following the launch of its MAE app in 2020. That amount is roughly equivalent to twice Malaysia’s gross domestic product.

Maybank also reported that it ranks first in both the number and value of transactions across PayNet services, including DuitNow transfers and QR payments, FPX and JomPAY. It said it serves 10.7 million MAE users and has a 48% market share of mobile banking transaction volume in Malaysia.

As expected, the country’s five digital banks are still making losses. Maybank IB Research says it generally takes about five to six years for such banks to break even. Bank Negara requires the banks to show “a path to profitability” in their fifth year.

“While initially successful in drawing deposits through attractive promotional returns on savings accounts, preserving the deposit base is a challenge, in our view, with outstanding deposits having declined by 5% to 17% between Dec 2024 and June 2025,” the research house observes.

GXBank’s total deposits declined by 5% between Dec 2024 and June 2025 while Boost Bank saw its deposit base drop by 17%.

The products on offer by the banks are presently limited. “The focus has primarily been on deposit gathering and all banks have debit cards in issue. Financing has been limited to personal and SME (small to medium enterprise) financing, though Boost Bank now offers motorbike loans. Boost Bank and GXBank offer SME loans in the form of term loans/revolving credits,” Maybank IB Research notes.

In its view, other products that may come out in the future would include multi-currency remittance services, digital banking tools for SMEs, SME credit facilities and funding platforms, wealth advisory and investments as well as insurance plans.

The research house also points out that most digital banks in the region are still loss-making.

“Looking at the financial performance of regional digital banks, Singapore’s five digital banks (including Trust Bank), which commenced operations in 2022/23, were still loss-making up to 2024, as were Hong Kong’s eight digital banks that have been in operation for just over five years.

“Of the 10 licensed digital banks in Indonesia, seven were profitable in 2024. Of the six official digital banks in the Philippines, Maya Bank and OFBank were profitable in 2024,” it says.

Shankar Kanabiran, a financial services advisory partner at EY Malaysia, notes that, currently, Malaysia’s digital banks are firmly in an investment mode, prioritising rapid market share acquisition through aggressive rewards and high-yield deposit products.

“To secure initial traction, players have deployed costly ‘hook’ strategies, such as savings rates climbing up to 3.88% per annum and unlimited cashback incentives. This initial focus on deposits is now evolving as the banks begin to introduce income-generating lending products to balance their books. We are already seeing the roll-out of credit solutions, such as GXBank’s “GX FlexiCredit” for retail consumers and Boost Bank’s working capital financing for the underserved SME sector, signalling a critical shift from pure user acquisition to monetisation,” he tells The Edge.

“Typically, the path to profitability takes three to five years; however, with growing customer adoption, superior customer experience and a lower cost to serve, we are seeing examples of digital banks accelerating that timeline. As new entrants focus on their target segments rather than trying to be all things to all people, they are trying to achieve financial sustainability faster,” he says.

For example, he notes that Vietnam’s Cake reached profitability in just 3.5 years by strictly targeting Gen Z and millennials while Australia’s Judo Bank achieved this milestone in 2.5 years by serving the SME sector. Similarly, the UK’s OakNorth demonstrated that a sharp focus on the underserved “missing middle” business segment could cut the timeline to under a year.

It will be interesting to see how Malaysia’s digital banks evolve over the next few years. 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.