Why should you care about Islamic fintech as a consumer? Who are the target audiences of Islamic fintech offerings all over the world? What are the opportunities this growing field brings to its target audiences? Does it cater to Muslims only?
While conducting research on the topic at hand, we have spoken with a lot of movers and shakers of the Islamic fintech industry in different parts of the world. Most industry players believe the Islamic finance and Islamic fintech industries not only cater to Muslims but also to the consumers who care about ethical finance and are looking for sound alternatives to conventional financial products.
Areas of Opportunities
So, what are the areas of opportunities where we could make improvements?
Boosting the potential reach and impact of Islamic financial services
- Islamic financial institutions (IFIs) building digital-only banking and capital markets to cater to the digital-demographic
- Customer base targeting through artificial intelligence and big data analytics
- Facilitating cross-border trade and financing through P2P lending and trade financing
- Leveraging takaful-tech to provide coverage with low-cost premia
- Fostering greater collaboration between incumbent IFIs with startups and big tech companies
- Adopting open banking architecture that enables fintech to directly access banking platforms
Addressing financial inclusion gaps
- Fintech solutions can drive solutions for SMEs and unbanked retail users as well as reducing the cost of services
- Innovating payment solutions to improve market expansion
Delivering Islamic social financing to support global Sustainable Development Goals
(SDGs): Islamic fintech can tap into the Islamic social financing pool to fund wider global social funding needs.
These opportunities, however, also open up new risks that require careful mitigation. Among them:
- Increased debt-fueled consumerism from more convenient borrowing facilities
- The emergence of new methods of scams and fraud
- Lacking financial infrastructure which may hinder unbanked populations
- The acquisition of products and services that aren’t necessary by customers due to a lack of consumer knowledge by AI models
- Stringent fintech regulations may stifle industry growth
- Mitigating these risks requires ensuring adherence and compliance to Shari’a knowledge, values, and vision. This includes newer products and services that are aligned with the principles of Shari’a.
What Should the Stakeholders Do?
In driving these changes, industry stakeholders need to play their own parts to benefit the consumers of Islamic fintech products.
- Governments and regulators need to play an active role in balancing customer protection and fintech growth. Besides fostering a healthy ecosystem, they must be one step ahead of the industry to balance customer protection.
- Investors should target large Muslim markets with their Islamic fintech services as well as acquiring developing Islamic fintech solutions to boost operations.
Benefits of Islamic fintech You Should Expect As A Consumer
- Easier money management
- Faster and cheaper money remittances
- Possible disappearance of your traditional bank
- Financial advisory services in your pocket (Islamic Robo-advisory services)
- Easier management of your investments and loans
- Better control of your wallet…
- But, the threat of losing your privacy
- In short, Finance+ Technology+Shariah= Islamic fintech= A revolution in financial services
Despite all the fanfare the Islamic fintech industry offers to consumers, it looks like it may take a considerable amount of time before this sector can benefit the needy.