How is Islamic fintech going to evolve in 2021? What are the trends it expects to follow? Is it going to impact the global financial markets significantly? These and many other related questions have become important as the Islamic fintech industry, a subset of the global fintech sector, saw a lot of activity in 2020 despite the COVID-19 pandemic.
Southeast Asia and the Middle East have seen strong growth in the product offerings by Islamic fintech companies. However, the UK still leads the industry as there are now 27 Islamic fintech players in the country. It is a much larger number than in Malaysia, Indonesia, and the UAE. Malaysia has 19 fintech start-ups, followed by the UAE with 15, Indonesia with 13, and Saudi Arabia and the US with nine each.
Let us take a look at some Islamic fintech trends that the industry is going to face in the year 2021 and beyond.
Top Trends In The Islamic Fintech Industry In 2021
Traditional banks are most notable for safeguarding people’s money. With growing awareness of financial education, more people want to invest their money rather than keep it in a bank. Third-party financial institutions give offer more flexible high-income-generating investments and consumers are keying into it via open banking. Open banking gives third-party financial service providers access to consumer banking data via Application Programming Interfaces (APIs) for investment purposes consented by the consumers.
Although there are security concerns over the exposure of consumers’ data in open banking, stakeholders can prevent these damages by collaborating.
Long queues at banks are a pain in the neck for most consumers. Despite the provision of online banking, there are still queues at banks, especially, in some developing countries due to the limitations of their online services.
The total eradication of physical contacts for banking transactions seemed far-fetched until the pandemic hit in 2020. Accessing funds virtually became a survival need that conventional banking could not meet completely. A McKinsey study showed that digital payment is one of the biggest fintech products. New generation financial institutions rose to the occasion by leveraging fintech solutions to offer convenient digital-only banking services that required no physical contact. The growing competition among financial institutions in offering digital-only banking services is good news to consumers as they have an array of enticing offers to choose from.
Consumers’ financial literacy level influences their finances either positively or negatively. According to a Bankrate report, an average American household has $8,863 in bank or credit union savings. Younger people and singles have lesser savings. In the same vein, 55% of respondents in a recent study revealed that they lacked sufficient funds for their needs. The situation would most likely be different if consumers were better informed about their finances.
Fintech solutions are effective tools for financial literacy. With the collection of big data, consumers with bad finances can learn from those that have their finances sorted properly. Modern fintech tools can offer basic financial education to their customers so that they make prudent financial decisions.
Convenience is a watchword in offering fintech solutions. Islamic fintech players are keen on giving consumers the best they can offer. Gen Zs are on the frontlines of technology trends. Products that they find appealing become instant successes and Islamic fintech is tapping into that trend to make its solutions more attractive with the introduction of voice technology. The youngsters who have a penchant for chatting are gravitating toward voice-based tools in their online interactions. AI-powered fintech voice assistants offer convenience and simplicity in handling finance-related tasks. Voice technology also advances secure payments with the use of biometric data for payment authorization.
Opportunities in Islamic fintech are endless as the innovation thrives on the ever-evolving technology. Affluent Muslim consumers want to do more with their finances and fintech solutions are rising to the occasion. With a track record of offering useful financial information, payment security, speedy and transparent transactions among others, fintech trends are fast becoming the standard in Islamic financial markets. This trend is especially becoming evident in Southeast Asia, the Middle East, UK, and the US.