Credit By: Edge Middle East
According to a report titled “State of Fintech: The Islamic Banking Industry” by red_mad_robot, the GCC countries will lead the way as the worldwide Islamic banking sector is expected to develop significantly and reach a startling $4 trillion by 2026. Islamic banking assets have increased dramatically over the past four years, rising from $1.8 trillion to $2.8 trillion.
Fintech Driving Growth
Digitalization will significantly impact Islamic finance in the future, and fintech companies are leading the way in implementing new technology. These creative players accelerate the development of the Islamic financial system, establishing new benchmarks for cooperation in the financial sector. Global Islamic fintech transactions were estimated to have reached $79 billion in 2021 alone. The market is expected to increase at an average annual pace of 18%, reaching $179 billion by 2026. Saudi Arabia, Iran, Turkey, United Arab Emirates, Malaysia, and Indonesia, which comprise the biggest fintech markets, are significant contributors to this expansion.
Diverse Fintech Applications
Innovative solutions have been effectively adopted by fintech companies in the Islamic economy, spanning multiple sub-sectors. These include insurance, other fintech products, digital banks, payment services, robo-advisors, blockchain and smart contracts, cryptocurrency, crowdfunding, investment platforms, and information security in the financial industry.
Challenges and Opportunities
Although the future seems bright, the paper points out significant obstacles to the digitalization of Islamic banking. Regulatory gaps, a need for qualified human resources, understanding and awareness of Islamic products, a small market share in the Islamic economy, and the requirement for extensive, high-quality internet coverage to enable access to new digital financial products are some challenges.
Digital Transformation as a Game-Changer
Fintech and digital transformation in Islamic banking offer Islamic financial organizations many prospects. To carve out new markets and create demand, these organizations try to set themselves apart while maintaining competitive prices. Although fintech companies, based on new technology, are pushing change and defining new standards in the financial sector, traditional banks may not have been the forerunners in digital developments. The paper highlights the crucial role that fintech played in providing a significant boost to the development of the Islamic financial system, emphasizing that user-friendliness, accessibility, and ongoing innovation will be critical characteristics influencing Islamic banking in the future.
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