IBS Journal November 2016


31


“For instance, in Islamic banking you have to possess an offer and acceptance before a transaction can proceed, with a trade in the middle [as there is no usury-based interest –Ed]. Any decent core banking system can accept these procedural differences: it’s not difficult technologically, just a different business model.” No investments in gambling, pork, alcohol or other related companies that participate in such banned activities are permitted in islamic commercial or investment banking either, but again systems can accommodate these strictures.


“A ledger is a ledger,” continues Gamil. “Every core banking solution has a calculation engine. It may come into use in a different fashion but it remains the same. I like to compare it to halal and non-halal chicken. It’s still chicken; it just gets to the plate in a different way.”


“I’d always be inclined to go for an established vendor as they’ve been around for years and have proven technology and resiliency,” adds Gamil, explaining that his bank presently uses the Misys Equation core banking solution. Gamil used to work for Misys for seven years, as well as for a Middle Eastern bank. Each COO must make up their own mind if a specialist or general vendor suits their needs based upon price, resiliency local installation expertise and so on.


“Conventional vendors often give you easier access to cloud capabilities and flexibility,” argues Gamil. “Our Misys system, for instance, has APIs for everything and wrappers are available via a web service middleware layer to enable me to add new functionality [without changing the back-end –Ed]. I last did this when I introduced a Salesforce CRM system to give us a 360-degree view of clients and help with mortgage processing and selling. All a bank COO should have to do is choose the platform. You can then bolt-on whatever FinTech solutions you want.”


What matters most: Tech or sharia compliance?


Aligning the procedure to the technology to get compliance, and customers, is ultimately what matters. How a bank goes about this is up to them. According to Laurence Leyden, General Manager for FS, EMEA, SAP: “Our strategy is to provide a standard generic core for the back-end processing and accounting, coupled with


a partner solution for the Islamic specific processes.” This approach straddles the technology and islamic compliance issues, but each bank must pick their own solutions to fit their particular requirements.


“In common with conventional banks Islamic institutions don’t want to use bespoke systems anymore that could expose them to high running costs and inflexibility,” says Forrester’s Hoppermann. “The general move of the industry is away from this, but some Islamic banks aren’t always happy with the available off-the-shelf core banking solutions from established multinational vendors so they are exploring blended solutions that are custom built and mix different elements to meet their sharia, technology and customer expectations.”


“I’ve spoken to a few banks that weren’t happy with what conventional vendors were offering. One executive at a Middle Eastern bank that I cannot name told me, ‘it was obvious there was no deep understanding of Islamic banking, just a surface capability’. That is the challenge for conventional vendors right there.” It is perhaps why specialist vendors will always have a place in this market, even if they may find it more difficult to maintain their dominance in future.


Legacy


The trend towards digital transformation or refresh projects, and the elimination of aging silos in retail and corporate banking systems, is moving at different speeds, in different markets, across the Islamic banking world and indeed the conventional arena.


Islamic financial institutions (IFIs) set up in the West, such as the UK’s Al Rayan Bank operation, or in more traditional markets in the GCC and ASEAN countries, generally have newer technology as they started after conventional banks.


“Sometimes it is easier for Islamic banks to adopt newer technology because they do not suffer from the same legacy constraints,” says Temenos’ Yazbeck.


However, conventional banks in the GCC, ASEAN or elsewhere can have equally modern systems and


www.ibsintelligence.com


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52