Social responsibility and ethical practices are among top priorities for the next generation of Islamic banking customers but a lack of reliable digital services is holding the industry back.
More than half (53%) of millennials and Gen Z Muslims said they would adopt Islamic banking if it were more accessible, according to a report from cloud banking platform Mambu.
In its recent report titled, ‘Faith and Finance: The changing face of Islamic banking’, Mambu highlighted the growing appeal of Islamic finance services around the world. This significant growth reflects a wider demand for ethical banking services in the wake of COVID-19, as consumers seek to make more sustainable and socially conscious choices post-pandemic.
The Islamic finance market is growing rapidly. Total assets in the sector have exceeded $2 trillion in recent years and are expected to reach $3.8 trillion by 2023. But a lack of digital services could be a major barrier to service uptake among the next generation of consumers.
According to Mambu’s research, 76% of young Muslims said the lack of online banking options is a dealbreaker. Specifically, 70% said that it’s important they can invest without having to see someone in person, 74% said it’s important they can access their bank’s services via a mobile app, and 80% said it’s important they can access banking services anywhere, at any time.
Miljan Stamenkovic, general manager MENA, Mambu, said, “This is a generation that’s technologically savvy and more globally mobile than the generations before them. They want Islamic banking services that align with their lifestyle and values, without compromising on flexibility or ease of use.
“The Islamic banking industry is only around 40 years old and has already proven to be tremendously successful – a showcase for the ethical banking opportunity. But with younger generations set to account for three-quarters of all Islamic banking revenue by 2023, the industry must listen to the demands of these digital natives, both in the Middle East and beyond, if it wants to stay ahead of the curve.”
Islamic banking is not only growing in the Middle East. There has been an explosion of Islamic fintechs globally over the last few years, with this market expected to be worth $128 billion by 2025.
The United Kingdom currently leads with the most Islamic fintechs, a total of 27 companies, followed by Malaysia with 19 companies, and the UAE with at least 15 companies.
The Islamic finance industry is built on a promise that products and services comply with Shariah law. It was founded on a set of moral and ethical principles that promote the public good and the belief that ‘money shouldn’t make money – an interest-free financial system.
Digital Services Offering Islamic Finance Solutions
There are plenty of digital services offering all types of Islamic banking solutions. However, they face some formidable challenges before they are able to serve today`s tech-savvy Muslim consumers. Some of these challenges are as follows.
- Is customer data secure on the digital app in question?
- Have the digital apps fully embraced big data and AI
- Have these apps fully integrated with blockchain technology?
- Are these Islamic fintech apps compliant with government regulations?
- Are they compatible with Shariah to give peace of mind to the end-users?
- Do Islamic fintech owners have expertise with mobile technologies?
- Are they using in-house expertise or outside help to market their Islamic fintech solutions?
- Do they know how to grow and retain customers?
- Do they offer great customer services to satisfy their customers?
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