FinTech and Islamic Finance-Challenges and Opportunities
DOI:
https://doi.org/10.26710/reads.v5i4.887Keywords:
Fintech, Finance, Shariah, Branchless Banking, Shariah Compliance, Islamic Financial Institutions (Ifis), Islamic BankingAbstract
Fintech is the merger of two terms: finance and technology. Islamic finance provides financial services to the customers in accordance to the rules and regulations prescribed by Shariah. As Islamic finance is growing by leaps and bounds since the last two decades, and so is FinTech, in the last decade. The main objective of Islamic finance is to enhance the economic growth in the society with the use of Shariah compliant financial solutions. Likewise, FinTech provides cost effective solutions for the companies and especially startups that help in the reduction of their costs and improvement in business processes. Financial industry is a very elusive yet important sector in the society, and hence heavily regulated by the regulators. The introduction of FinTech in countries, especially developing countries like Pakistan can help to boost economic growth but this will increase the workload of regulators as they must ensure stability of the financial system and to protect it from frauds/crises. Hence, proper monitoring by the regulatory authorities is crucial to avoid cyber-attack, data leakages and data theft as it can lead to misuse of the information. For the good results of FinTech, not only the users but the regulators have to be aware with the structure and functioning of the system and the regulations should be in place proactively. This paper focuses on the three main aspects namely: explaining the FinTech, opportunities for Islamic financial institutions and the challenges/issues faced by the institutions in implementing FinTech solutions. The paper also provides the current status of FinTech application globally and the potential in it to serve the poorer segments of society. The review of literature approach is used for the paper.
References
Startupbootcamp. (2018, October 30). Startupbootcamp launches first FinTech accelerator in Dubai. Retrieved from www.startupbootcamp.org.
Arner, D. W., Barberis, J., & Buckley, R. P. (2016). The Emergence of RegTech 2.0: From Know Your Customer to Know Your Data. Journal of Financial Transformation, 79-86. Retrieved from https://www.researchgate.net/publication/313365398_The_Emergence_of_Regtech_20_From_Know_Your_Customer_to_Know_Your_Data
Arthur, K. N. (2017). The emergence of financial innovation and its governance-a historical literature review. Journal of Innovation Management.
Bernama. (2018, October 13). Moneymatch conducts its first cross border transaction on blockchain. Retrieved from The Edge Markets: http://www.theedgemarkets.com/article/moneymatch-conducts-its-first-crossborder-transaction-blockchain
Bofondi, M., & Gobbi, G. (2017, December 23). The Big Promise of Fintech. EUROPEAN ECONOMY. Retrieved from https://european-economy.eu/2017-2/the-big-promise-of-fintech/
Business Wire. (2019, May 7). Wahed Becomes the First Globally-Accessible Halal Robo-Advisor. Retrieved from https://www.businesswire.com/news/home/20190507005561/en/Wahed-Globally-Accessible-Halal-Robo-Advisor
Chen, K. (2018). Financial Innovation and Technology Firms: A Smart New World with Machines. In Banking and Finance Issues in Emerging Markets (pp. 279-292).
CommerzBank. (2018, October 19). Press Release: Commerzbank announces plans to automate selected compliance relevant pre-checks in trade finance transaction processing by 2020.
Corporate Hub. (2016, September 29). Finocracy and CH9 announce “1st global Islamic Fintech hub to be positioned in CH9”. Retrieved from http://chnine.com/finocracy-and-ch9-announce-1st-global-islamic-fintech-hub-to-be-positioned-in-ch9/
Cuesta, C., Ruesta, M., Tuesta, D., & Urbiola, P. (2015, July 16). The digital transformation of the banking industry. Digital Economy Watch. Retrieved from https://www.researchgate.net/publication/291357544_The_digital_transformation_of_the_banking_industry
Direction, S. (2018). "Securing the future of finance in Hong Kong: The role of Fintech in Hong Kong's global financial center. 18-20.
European Banking Federation. (2015, June). The digital transformation of banks and the Digital Single Market. Brussels: European Banking Federation.
EY. (2017). EY FinTech Adoption Index 2017. EY.
Forbes. (2018, October 8). 3 Ways Financial Advisors Are Using Technology To Better Serve You. Forbes. Retrieved from forbes.com/sites/adamsarhan/2018/10/08/3-ways-financial-advisors-are-using-technology-to-better-serve-you/#2492cc255d7a
(2017). Global Islamic Finance Report. Global, F. (2018, July 11). 2018 is already a record year for global FinTech investment. Retrieved from http://fintech.global/2018-is-already-a-record-year-for-global-fintech-investment/
IMF. (2018). The Bali FinTech Agenda. International Monetary Fund. (2016). Fintech: Unlocking the Potential for the MENAP and CCA Regions. IMF.
Islamic Finance News. (2013, 12 5). Bursa Suq Al-Sila’. Retrieved from https://www.islamicfinancenews.com/bursa-suq-al-sila-2.html
Kelly, S., Ferenzy, D., & McGrath, A. (2017). How Financial Institutions and Fintechs Are Partnering for Inclusion: Lessons from the Frontlines. Center for Financial Inclusion at Accion; Institute of International Finance.
Lee, I., & Shin, Y. J. (2018). Fintech: Ecosystem, business models, investment decisions, and challenges. Business Horizons, 61(1), 35-36.
Lochy, J. (2019, September 9). Big Data in the Financial Services Industry - From data to insights. Retrieved from www.finextra.com/: https://www.finextra.com/blogposting/17847/big-data-in-the-financial-services-industry---from-data-to-insights
London Business School Review. (2015). The Fintech Revolution. London Business School Review. Retrieved from https://onlinelibrary.wiley.com/doi/epdf/10.1111/2057-1615.12059
Malaysia, B. N. (2017). Value Based Intermediation: Strengthening the Roles and Impact of Islamic Finance.
Mc Kinsey and Co. (2017, March). Insurtech—the threat that inspires.
McSpadden, K. (2016, April 7). Islamic Fintech Alliance Islamic launched in KL. Kuala Lumpur, Malaysia.
Navaretti, G. B., Calzolari, G., & Pozzolo, A. F. (2017). Fintech and Banking. Friends or Foes? European Economy.
Oseni, U. A., & Ali, S. N. (Eds.). (2019). FINTECH IN ISLAMIC FINANCE. Routledge.
PriceWaterhouse Coopers. (2017). Global FinTech Report 2017. PriceWaterhouse Coopers.
PwC. (2016). Catching the FinTech Wave. PriceWaterhouse Coopers.
PwC. (2016). Global FinTech Report 2016. PriceWaterhouse Coopers.
Raghu, M. (2017, May 20). The Emergence of Fintech: Where Does Islamic Finance Stands? Retrieved from www.islamiceconomist.com: https://www.islamiceconomist.com/?p=1466
Reserve Bank of India. (2017). Report of the Working Group on FinTech and Digital Banking. Mumbai: Reserve Bank of India. Retrieved from https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/WGFR68AA1890D7334D8F8F72CC2399A27F4A.PDF
Reuters. (2016, February 17). Malaysian Islamic banks launch investment account platform. Retrieved from https://www.reuters.com/article/malaysia-islamic-finance/malaysian-islamic-banks-launch-investment-account-platform-idUSL8N15W08M
Romanova, I., & Kudinska, M. (2017). Banking & Fintech: A Challange or Opportunity. Contemporary Studies in Economic and Financial Analysis, 21-35.
Schueffel, P. (2016). Taming the Beast: A Scientific Definition of Fintech. Journal of Innovation Management. Retrieved from https://www.researchgate.net/publication/314437464_Taming_the_Beast_A_Scientific_Definition_of_Fintech
TechCrunch. (2016, August 2). Looking beyond the hype at fintech in Southeast Asia.
The Economist. (2017, June 1). The race to become Islamic banking’s fintech hub. The Economist.
The Express Tribune. (2015, November 21). Islamic Banking Solution: Meezan-Upaisa launched. Retrieved from https://tribune.com.pk/story/995641/islamic-banking-solution-meezan-upaisa-launched/
The Express Tribune. (2018, February 9). Dubai Islamic Bank to begin branchless banking by June.
The News International. (2017, December 28). PMEX Facilitates Pakistan’s First Electronic Murabaha Transaction. Karachi. Retrieved from https://www.thenews.com.pk/print/261334-pmex-facilitates-pakistan-s-first-electronic-murabaha-transaction
World Economic Forum. (2017). Beyond Fintech: A Pragmatic Assessment Of Disruptive Potential In Financial Services. Retrieved from http://www3.weforum.org/docs/Beyond_Fintech_-_A_Pragmatic_Assessment_of_Disruptive_Potential_in_Financial_Services.pdf