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Growing muslim populations in the West and non- muslim ethical investors are also attractive potential growth drivers. “Noor Islamic bank in the UAE, for example, rebranded itself as Noor Bank in an attempt to market itself more neutrally and attract a wider customer base,” says Marwan Abouzeid, Misys’ core banking team leader for islamic banking.
The vendor battle is mirrored by the banks themselves with standalone Islamic banks increasingly facing competition from ‘Islamic windows’ offered by conventional counterparts (where this is permitted) that want to break into the marketplace.
“In many ways the Islamic core banking technology marketplace apes the conventional market. They want digital channel transformation too,” says Alex Kwiatkowski, Senior Strategist, banking & digital channels, at Misys, adding that Islamic banks want to target Millennials as well.
“They must follow the technology trends if they want to continue to grow,” says Fadi Yazbeck, Temenos’ Product Manager for Islamic banking. This includes the flexibility to be able to cater for new regulation or technologies such as artificial intelligence (AI), blockchain or payment apps in the future.
New FinTech developed niche bolt-ons, which banks may want to add to their core systems in an open application programming interface (API) world, must also be accessible to the core banking solutions of the future. This is yet another driver for investment.
“We need to be able to offer comparable rates, tech and services [to conventional banks] – and then add sharia
compliance on top as our unique selling point (USP),” says Mohamed Gamil, Chief Operating Officer (COO) at Al Rayan Bank, formerly the Islamic bank of Britain from 2005, until it rebranded in 2014 with Qatari help.
Conventional vs specialist vendors
“There are general core banking vendors in the marketplace such as Temenos, Sopra and Misys,” says Jost Hoppermann, Vice President of banking applications & architecture at Forrester. Each offers its respective Islamic suite; Amplitude Islamic solution; and FusionBanking Essence Islamic core banking system.
“These fight with specialists in Islamic banking such as ITS, Path Solutions and Intertech in Turkey. Path has historically had the most installations.”
More than 70 live Path installations are cited in the recent Forrester Vendor Landscape: Islamic Banking Platforms 2016 report, although it does have a longer history in the market segment so should have more installations. “The specialist vendors are focused on Islamic core banking technology provision and can help banks with strong regional or custom requirements.” They have a better marketing standpoint, as solely Islamic vendors.
“The key difference between the two types of technology providers is that the general vendors offer both conventional and Islamic core banking capabilities,” continues Hoppermann. Effectively general vendors are promoting ‘switches’ that can activate demarcation lines and allow conventional banks to offer ‘Islamic windows’ to customers that want sharia-compliant banking.
“A piece of code can be applied to switch off conventional features such as interest if required, or restrict investment into gambling, alcohol or other banned companies – prioritising the Nasdaq Islamic index instead for example,” explains Temenos’ Yazbeck.
Forrester’s Hoppermann sounds a note of caution, however. “There are still some local sharia committees that insist on total separation and won’t allow conventional and Islamic systems to run side-by-side,”
www.ibsintelligence.com © IBS Intelligence 2016
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