Question

identify the Fintech initiatives undertook in the Islamic Financial system

10 marks

Answer 1

some challenges faced by traditional Islamic financial institutions first before answering this question. Being infants relative to most conventional counterparts, Islamic financial institutions (IFIs) are generally much smaller and more constrained on budgets and talent pools. Due to this, traditional IFIs lack resources to innovate compared to their more established conventional big brothers.

Fintech companies on the other hands are generally leaned and they focus on innovating for more efficient financial services and superior customer experiences. However, these companies often lack financial backup to survive. For those that go beyond technology innovations and attempt to operate businesses as alternative financial services’ providers, they struggle to gain customers’ trust.

With such challenges faced by traditional IFIs and fintech companies, there are huge opportunities for collaborations. Traditional IFIs have customer base and enjoy their trusts while fintech companies have technology and innovation advantage. Their collaborations could bring to the market innovative Islamic fintech solutions that would benefit end customers. One way to encourage this collaboration is via the concept of open banking which is a new and revolutionary way of using financial data by third party providers for the benefit of bank account holders.

In terms of effort in increasing Islamic Fintech share in the market, different countries have different agendas such as sandbox, innovation labs, hackatons, co-working space, etc. The agenda may be for fintech in general and Islamic fintech would definitely be able to take advantage of these programs. It is also encouraging to see Islamic finance conferences and seminars covering more and more fintech related initiatives and this indirectly encourages fintech innovation in Islamic finance space.