Islamic banking has grown rapidly due to the convergence of several factors an increase in the number of Islamic banks, an increase in the number of conventional banks offering Islamic (Shariah-compliant) products and services through a ‘dedicated window’ (availability), and changing consumer preferences (adoption of Islamic products).
With the aim of driving digital innovation, Islamic Banks are increasingly forging partnership with FinTech companies, both in the Middle East and worldwide.
Most FinTech companies usually target the more significant segment of conventional banking, and hence the number of tailor-made Islamic FinTech solution providers is limited. Following this, knowledge of Islamic Banking and Shariah compliance is still in its infancy in the FinTech scene.
Meanwhile, from a demand perspective, the demand for Islamic banking FinTech services and solutions continues to grow. In recent years, traditional demand for core banking and digital channels has expanded further to other services including wealth management, treasury, lending, and risk management.
For FinTechs, the growing commercial opportunity means the time is right to ramp up investments in Islamic products and services and Shariah-compliant solutions.
Islamic banking has opened wider access to the unbanked/underbanked population. Customers initially hesitant to access banking services via conventional banking routes are now accessing these services, which has significantly improved financial inclusion in various countries.
As the number of Islamic FinTechs increases, the banks can leverage the ecosystem’s synergies. Islamic banks are also positioned to fully utilize the potential of emerging technologies such as open banking, blockchain, and artificial intelligence, among others.