Issues in Technology: An Analysis of the Potential Role of Fintech in Reshaping the Islamic Financial System

Abstract

The fourth industrial revolution, as well as the financial crises in 2008, set the foundation for fintech to disrupt the financial system. Technologies have enabled financial institutions to improve their services. It has also found new service providers that offer financial services in a completely new way. As a result, the Islamic financial system has the chance to evolve and develop. This chapter reviews the potential role fintech can have in reshaping the Islamic financial framework. It analyzes the position of fintech in the Islamic financial framework and discusses the different categories of fintech solutions that could disrupt the Islamic finance industry. The study also highlights the main issues hindering the proliferation of Islamic fintech and provides possible solutions. Namely, conducting regulatory and legal reforms, providing Shariah compliance quality controls, establishing and fostering knowledge centers for talents development, facilitating access to capital, and developing the required infrastructure. Fintech seems to be the new change agent for the financial industry. This might very well be a means of empowerment of a true Islamic financial system by avoiding to be mere replica of conventional interest-based banking.