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WE DON’T BUY SOFTWARE BECAUSE IT’S ‘ISLAMIC’
WE BUY IT BECAUSE IT’S GOOD.
SOLUTIONS MUST BE SHARIA-COMPLIANT BUT ALSO DO THEIR JOB
are battling for business via their Islamic windows. Regionalisation only potentially threatens domestic-only operators as larger banks look to go cross-border. It is to be hoped that as consolidation increases in the GCC and across ASEAN borders that operational lessons have been learnt about maintaining open systems. The imminent National Bank of Abu Dhabi (NBAD) and First Gulf Bank $175 billion merger is the latest example.
Challenger banks, crowd funders and other technology- based firms that want a slice of the FS pie may eventually arise in Islamic markets as well. It isn’t happening yet, but complacency is to be avoided as all these potential rivals could take business away from standalone IFIs.
Being behind the curve in tech-terms presently only really applies to Islamic banks situated in sub-Saharan Africa or other developing nations that don’t yet have adequate supporting infrastructure, identification, credit checking facilities and so on to support the general trend towards digital banking. Some markets may, however, demonstrate innovation around mobile money and microfinance, which could take business away from banks so complacency is to be avoided.
“I wouldn’t say Islamic banks are free of legacy concerns either,” cautions Yazbeck. “It’s just that they have less of it in most instances.” It is still incumbent on them to keep up as conventionally operated banks in the GCC and elsewhere overhaul their core banking systems. Modern customers want the same technological capabilities and
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Islamic sharia-compliant banking – not one or the other. FinTech
“The banking world is not yet ready to inject FinTech solutions into new business models [the so-called open API banking concept –Ed],” says EY’s Nazim, “so operationally it is following a ‘dual engine’ model at the moment.” Which means legacy IT isn’t being completely jettisoned, but rather repurposed with wrappers and front-end additions to disguise the fact the back-end hasn’t actually changed. A completely new core banking system is a mammoth task so it is rare to see anyone undertake it except a startup or an institution forced into it by a combination of an antiquated core, rising costs and customer/compliance demands that can no longer be ignored.
“Banks tend to introduce a new payment, mortgage or other module to run in parallel,” continues Nazim. “However, this is expensive and only the front-end has changed. In the coming years banks will have to sift the focus to the back-end to finish their digital transformation [and API journey].”
“In EY’s opinion banking will be very different in 10 years’ time. The bank of the future will be an amalgamation of a number of different FinTech solutions and the focus of the business will be on information (i.e. Big Data sentiment analysis and services) and the customer experience.”
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