Fintech Versus I-Fintech: A Dichotomy

Abstract

As conventional financial institutions and conventional start-ups are capitalising on innovative technologies, Islamic financial institutions are yet to take advantage of such technologies. Data shows that more than $50 billion has been invested in Fintech globally since 2010; just 1% of this was channelled to the MENA region, which has a quarter of the global Muslim population (Smith, M. (2017). A Tale of Two Cities, Global Investor, viewed 13 July 2019. [online] Available at. https://fowgiliveblobstorage.blob.core.windows.net/files/GISep2017binder%20(2).pdf). The top ten global Fintech deals in 2018 were all in the US, Europe and China (Fintech Global. (2018). 2018 Is Already a Record Year for Global FinTech Investment—FinTech Global. [online] Available at: https://fintech.global/2018-is-already-a-record-year-for-global-fintech-investment/). Interest in Fintech from the Middle East has grown exponentially in the past couple of years. Fintech sandboxes and government-driven initiatives have been accelerating demand for Fintech. With the MENA region being a major Islamic finance hub, it is of no surprise that Islamic financial institutions are looking to benefit from Fintech. Practitioners believe that Fintech will offer Islamic financial institutions opportunities to thrive and develop further services to a broader market to help the industry grow further. This has given rise to a sector called ‘Islamic Fintech’. Does such a term have any substance to it? and what does it mean? How is it different from Fintech? These questions need deliberation and answers. This chapter begins with a brief introduction to Fintech and after that addresses the notion of ‘Islamic Fintech’. Thereafter, the landscape of the Islamic Fintech sector is viewed, citing some real use cases of the disruptive technology. Consequently, to demonstrate the dichotomy between Fintech in the conventional finance sector and the Islamic finance sector, six case studies are presented. Three cases are of conventional platforms, while the other three are of Shariah-compliant platforms. Subsequently, the question of dichotomy is answered. The chapter ends with some of the challenges Islamic Fintech is facing and will need to address to excel.