Banking Regulators' Views on FinTech Disruption in the Islamic Finance Industry

Abstract

The Islamic finance sector has experienced increasing interest in the FinTech movement, viewed as a driver of innovation, growth, efficiency, and competitive edge. Conversely, there is mounting documented evidence of the detrimental impacts of technology on employment, the environment, social structures, and overall quality of life, among other issues. There is a dearth of research investigating the perspectives of principal stakeholders in the Islamic finance sector regarding the impacts of FinTech adoption. This study employed a qualitative research methodology, utilizing expert interviews to obtain the viewpoints of central bank regulators regarding the impact of FinTech on the Islamic finance sector. The research demonstrates that FinTech substantially impacts Islamic finance. FinTech promotes the financial inclusion of a substantial portion of the unbanked demographic. The findings reveal adverse effects, including employment losses due to labour displacement. FinTech has revolutionized the engagement between banking staff and clients. Obstacles to FinTech adoption encompass awareness, the scale of the financial institution, security, and Shariah compliance, among other factors. The future of FinTech will produce both beneficial and detrimental effects, with Islamic finance expected to experience a higher ratio of favorable results.