Is Islamic Banking in Malaysia Lagging Behind in Fintech?

Abstract

Fintech ” Financial Technology ” refers to technology enabled financial solutions. Finance and Technology have been working hand in hand as a package in the banking industry across three distinctive eras. In line with the growth of Islamic finance worldwide, Fintech has unlocked substantial opportunity in this Shariah-compliant industry and resulting in the emergence of ‘Islamic Fintech.' Over the years, the Islamic financial landscape has been transformed, driven primarily by leading innovations in the space of e-finance, mobile technologies, social media and artificial intelligence.

This Paper aims to study public perceptions regarding:

The progress of Islamic Banking in Malaysia in the digital transformation, using (1) customer experience, (2) product innovation and (3) technology – process agility as the key parameters

The challenges faced by IFIs in maneuvering this change

The contributions of various stakeholders in promoting Islamic Fintech

The Study also recommends areas for improvement primarily for consideration by the IFIs as well as policy setters.

This qualitative research explores the applicable literature in relation to Fintech with survey questionnaire being distributed to gather feedback in meeting the objectives of the Paper. Interview session has also been carried out as supplementary findings for the research.

The research findings indicate that IFIs in Malaysia are mostly in the development phase, striving to play catch-up in the Fintech field; with the critical success factors include(1) customer-centric product innovation,(2) agile business model and (3) robust infrastructure, highly resilient to data privacy and cyber security threats.

Besides, members of the public highlight that the greatest challenge to progress smoothly is lack of talent, primarily attributed to lack of public awareness and interest. The risk-averse culture of IFIs coupled with cyber security and data privacy are also regarded as the main obstacles for the industry.

From the survey, the public is of the opinion that government, IFIs, educational institutions and mass media are currently performing below the satisfactory level in promoting Islamic Fintech.

The future of Fintech promises much, but also requires much from all the stakeholders in the industry. More collaborations are needed to achieve the end goals ” a superior risk-return profile with operational efficiency, maintaining customer data security while enhancing the customer experience with minimal disruption to customers.