A digital bank has no branches. You open the account, get a card, send money and apply for loans entirely in an app. Asia is a natural home for the model. In East Asia and the Pacific, 83% of adults held an account and 86% owned a smartphone in 2024, according to the World Bank’s Global Findex 2025.
This guide explains how these banks work, how they earn money and what to check before you open an account.
What is a Digital Bank?
- Licensed bank: it is regulated like a bank and can take deposits and lend, which many e-wallets cannot.
- No branches: identity checks, onboarding and support all happen in the app.
- Typical products: savings accounts, debit cards, transfers, personal loans and business credit.
- Safety rules: capital and liquidity requirements still apply, even without a branch network.
Where Asia Licensed Them
- Hong Kong: the HKMA issued eight virtual bank licences, starting in 2019.
- Singapore: MAS awarded four licences in December 2020, two for digital full banks serving consumers and two for digital wholesale banks serving businesses.
- Malaysia: Bank Negara Malaysia set a framework allowing up to five digital bank licences.
- Local rules: eligibility differs by market, so a bank licensed in one place may not serve customers in another.
How Digital Banks Make Money?
- Net interest margin: they earn more interest on loans than they pay on deposits.
- Card and payment fees: merchants pay fees when customers spend by card and some banks add foreign exchange charges.
- Lending: personal loans and small business credit often carry the highest margins.
- Wealth products: Hong Kong’s virtual banks have been broadening into wealth management after a strong rise in deposits and loans in 2024, according to Hubbis.
- Lower costs: no branch network means a leaner base, though technology and marketing spending is heavy.
The Profit Reality
- Combined pre-tax losses across Hong Kong’s eight digital banks narrowed by 58%, from HKD 3.5 billion in 2021 to HKD 1.5 billion in 2025, according to Tab Insights.
- ZA Bank and livi Bank became the first to post a full-year profit in 2025, six years after the licences were issued.
- A 2023 study by Quinlan & Associates found that an average of 55% of registered virtual bank users in Hong Kong were inactive.
- The same study estimated that more than 70% of deposits could leave once promotional rates end.
Why it matters: a polished app does not guarantee a lasting business, so judge the bank’s track record, not only its interest rate.
Digital Bank vs Traditional Bank
- Convenience: you can open and manage an account 24/7 from your phone, often with lower fees.
- Services: cash handling, branch advice and complex products may be limited.
- Track record: traditional banks have decades of history, while several digital banks are still working toward profit.
- Access: many require a local ID and phone number, so non-residents often cannot open accounts.
What to Check Before Opening an Account
- Licence: confirm the bank appears on the regulator’s official list (HKMA, MAS or Bank Negara Malaysia).
- Deposit protection: Hong Kong’s Deposit Protection Scheme covers up to HK$800,000 per depositor per bank and virtual banks are covered like traditional ones. In other markets, check the scheme’s limit.
- Interest rates: ask whether a high rate is a limited promotion and what it falls to afterward.
- Security: look for two-factor login, instant transaction alerts and clear complaint channels.
- Fit: decide whether it will be your main account or a side account for savings and travel.
The Takeaway
Digital banks offer real convenience and are maturing across Asia, but profitability and deposit loyalty are still being proven. Treat them as a regulated option to compare on rates, protection and track record, not just app design.
This article is for education only and is not financial advice. Confirm licence status with the regulator before you open an account.