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2019 | Book

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Fintech and Islamic Finance

Digitalization, Development and Disruption

Authors: Nafis Alam, Lokesh Gupta, Abdolhossein Zameni

Publisher: Springer International Publishing

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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About this book

Financial Technology (Fintech) has revolutionized the financial world as one of the fastest-growing segments in both the technology and financial sectors. With the usage of underlying principles of Blockchain technology, Fintech is bringing the financial community together and making financial services accessible to everyone. Fintech has far-reaching implications for Islamic finance such as banking, investment, insurance (takaful) and wealth management, which are benefitting from this usage. This book provides a comprehensive review of how Fintech is shaping the Islamic finance industry through three key aspects: Digitalization, Development and Disruption. The book will provide insight on the Shariahtech (Fintech in line with Shariah principle) and its application in the Islamic finance industry. The book also gives an overview of Blockchain and Fintech evolution and how they act as the building blocks of the digital financial landscape.

Readers of the book will also get a detailed discernment on the Islamic viewpoint on cryptocurrency as well as the application of the smart contract in different Islamic financial services. The book provides students, academics and researchers with a detailed description of the Blockchain and Fintech application in Islamic finance.

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Table of Contents

Frontmatter

Chapter 1. Digitalization and Disruption in the Financial Sector

Abstract

Financial institutions are embracing digitalization to improve the delivery of financial services. To realize the full potential of digitalization, financial institutions are applying artificial intelligence, augmented reality, biometrics and cloud computing amongst others in their financial services offerings. While financial institutions are getting transformed due to digitalization, they are also getting disrupted from the rising force of fintech startups. If not catered for the digital disruption, the startups have the potential to shrink the role and relevance of incumbent financial institutions. This chapter delves into how the financial sector, including Islamic finances, is getting transformed in the wake of digitalization.

Nafis Alam, Lokesh Gupta, Abdolhossein Zameni

Chapter 2. Fintech Emergence and Global Evolution

Abstract

Fintech is redefining the financial services customer journey. The digital era has unleashed a disruptive development and emergence across the financial industry allowing financial technology firms to attract previously “unbanked” people in emerging markets while holding already existing conventional bank customer. The fintech sector evolved after the global financial crisis in 2008, despite obstacles such as poor infrastructure and limited internet penetration. Fintech is a new generation of tech-savvy firms that are supported by disruptive technologies such as behavioural and transactional analytics, machine learning, big data, blockchain, biometrics, cloud and mobile. Fintech would allow conventional market participants to overhaul the old-fashioned procedures, operational model and their infrastructure which eventually renovates the end user experience. This chapter will explore the emergence and global evolution of fintech.

Nafis Alam, Lokesh Gupta, Abdolhossein Zameni

Chapter 3. Fintech as Disruptors and Empowering Financial Industry

Abstract

Over the past few years, fintech companies have meaningfully disrupted the financial services landscape and have empowered the financial industry by leveraging on cutting-edge technologies, data science and connectivity that have altered the traditional way of financial transactions and have also introduced entirely new financial products and services which are accessible almost to everyone around the globe. In view of this, big data analytics can help firms to better understand the information contained within the data which will help identify data that is most important to the businesses and future business decisions. This chapter focuses on how fintech is both empowering and disrupting the financial industry and what are the opportunities for the incumbents.

Nafis Alam, Lokesh Gupta, Abdolhossein Zameni

Chapter 4. Emergence of Shariah-Tech and Its Landscape

Abstract

Fintech has changed the landscape of financial products and services in the twenty-first century for conventional and Islamic banking offerings. “Islamic fintech” is a new buzzword; and there has been a curiosity to understand what it is all about and does the fintech require to be categorized when it is Shariah neutral (not violating any Shariah rules). The application of fintech in Islamic finance or commonly known as Islamic fintech is following the footprints of Islamic finance, that is, to promote ethical responsible finance and social economic development of the society with the use of digital payments and mobile wallets. This chapter discusses the emergence of fintech innovation in the Islamic finance landscape.

Nafis Alam, Lokesh Gupta, Abdolhossein Zameni

Chapter 5. Application of Blockchain in Islamic Finance Landscape

Abstract

Blockchain and cryptocurrency are making inroads in the financial sector including Islamic finance. Islamic financial institutions are jumping into the bandwagon although in the early stage of catching up digitalization wave to offer efficiency, convenient and better experience to the customers. Financial institutions working on blockchain enable them to reduce the transactions cost, but also create new products and services that can generate new revenue streams. In Islamic finance, blockchain can be applied for smart contracts, payment and remittance as well as streamlining the business processes. This chapter explores the application of blockchain in different financial services offerings of Islamic finance such as payment and remittance.

Nafis Alam, Lokesh Gupta, Abdolhossein Zameni

Chapter 6. Cryptocurrency and Islamic Finance

Abstract

A cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure financial transactions, control the creation of additional units and verify the transfer of assets. There is an ongoing debate about the legality and permissibility of cryptocurrency in Islamic finance. Cryptocurrencies have the potential to become the future currency and maybe even backed by the government in the long run, but in order to be accepted in the mainstream Islamic finance, it has to overcome negative sentiments surrounded by the excess volatility and use in fraudulent activity and well regulated by both banking law and Shariah law. This chapter will provide an insight into the issue of the usage and challenges of cryptocurrency from an Islamic finance perspective.

Nafis Alam, Lokesh Gupta, Abdolhossein Zameni

Chapter 7. Smart Contract and Islamic Finance

Abstract

A smart contract is a disruptive technology and gaining market share at a rapid pace. The main purpose of smart contract is to facilitate the transfer of digital assets between the contracting parties based on pre-agreed stipulations or terms. The concept of smart contracts makes enormous sense to Islamic financial institutions to implement it for Islamic financing services. A smart contract is closer to Islamic contract and in compliance with Shariah objective to ensure transparency in business dealings or transactions such as asset definition, payment terms, enforcement and following the principle of trust. This chapter focuses on the application of smart contract in Islamic finance in areas of cash financing, trade financing, remittance and so on.

Nafis Alam, Lokesh Gupta, Abdolhossein Zameni

Chapter 8. Fintech Regulation

Abstract

Well-established financial regulation is the key to innovation in the financial services industry; and with the emergence of numerous startups in the domain of payment, remittance, open banking, digital currency, there is much more need of formal regulation and oversight for the new participants of the finance industry. Regulatory sandboxes are giving innovators the opportunity to understand the expectations of customers in the financial services sector. Sandbox tests can help also help participants gather valuable regulatory input on design, evaluate strategy and devise potentially safer financial products. This chapter explores the need of regulation for fintech providers and presents a case study on fintech regulation in Malaysia, one of the key hub of Islamic finance.

Nafis Alam, Lokesh Gupta, Abdolhossein Zameni

Chapter 9. Challenges and Success Factors for Islamic Fintech

Abstract

One among many of the substantial reasons that caused the growth of Islamic finance in the previous decade was its business model that proved its worth and value by avoiding the sub-prime crisis. Losing trust on conventional banking industry, penetration of internet and technology globally, lack of accessibility of funds to everyone no matter with or without track record with banks, speed of transactions, transaction cost along with clients craving for a trustworthy financial system among other reasons were main incentives behind the growth and expansion of the Islamic fintech. This chapter presents the challenges and success factors for Islamic fintech in the time to come and how the industry can cope up with those challenges.

Nafis Alam, Lokesh Gupta, Abdolhossein Zameni

Backmatter

Title: Fintech and Islamic Finance
Authors: Nafis Alam
Lokesh Gupta
Abdolhossein Zameni
Copyright Year: 2019
Publisher: Springer International Publishing
Electronic ISBN: 978-3-030-24666-2
Print ISBN: 978-3-030-24665-5
DOI: https://doi.org/10.1007/978-3-030-24666-2