Do you think fintech will be the single greatest driver of change in the Islamic finance industry in the next decade? Why or why not?

Fintech is fast becoming a major disruptor to the financial services industry and I believe it is going to be one of the biggest drivers of change in the new Islamic banking era, and its emergence will have a substantial impact, both socially and economically, in many parts of the world.

Fintech initiatives will not only improve existing customer’s banking experience by offering greater user friendliness, but also has the potential to bring the two billion financially-excluded individuals globally into the banking system. These people, who although they are unbanked have access to fintech through their mobile phones, where they can access credit, pay for goods and services online and start their own businesses, has the potential to transform the global Islamic banking industry. Gen Y or ‘millennials’ who have virtually grown up connected are the industry’s future customers, and financial services will be driven by these expectations.

What do you think the landscape will look like ten years from now?

Fintech in the Islamic financing space is promising and over the next decade will change the Islamic banking experience for customers and service providers. Malaysia, Indonesia, the UAE and Bahrain, driven by an influx of start-ups in the crowdfunding and payment space, have already positioned themselves to lead the field by formally regulating crowdfunding and implementing sandboxes or special fintech licencing schemes. These markets should therefore see huge growth in crowdfunding, P2P and payments platforms and even an increase in the use of AI in the form of robo-advisers.

Bahrain, in particular, has made great strides. Bahrain, with the CBB taking decisive steps towards a fintech supportive environment with the establishment of one of the first sandboxes in the region, is allowing the financial sector to test new tools and services. Regulators are an extremely important part of the financial services eco-system and, apart from their oversight of the industry’s development, have an important role in consumer protection.

The Islamic financial services industry is of systemic importance for the Kingdom of Bahrain and the leadership of the Kingdom understand this, as underscored by the CBB’s continued support, and the great effort undertaken by the Economic Development Board (EDB) in order to establish Bahrain at the centre of Islamic fintech. The more exchange and consultancy that is established between government agencies and the private sector, the better the results will be. At this point, time-to-market is of the essence and the faster authorities react cross-divisions with approvals to support the sector, the better is the chance to manifest the Kingdom of Bahrain as a centre of excellence and a reference point in the Islamic world.The UK and even the US will also see more investment in fintech startups to meet the demand for Shari’ah products in these markets.

In addition to the impact of fintech, increasing sovereign Sukuk issuances, especially in non-Muslim jurisdictions, will broaden the horizon of Islamic finance with Sukuk enhancing access to sustainable, responsible and impact investment , actively directing efforts to promote and reach out to investors whom are value driven.

What have been the key developments that Ibdar has made in terms of fintech?

Ibdar has set out a comprehensive plan for our engagement with fintech service providers. We are digitising our own operations and processes, and focusing on advising clients with regards to digital finance catering for the needs of a Global Islamic Digitised Economy (GIDE). Digitisation requires a shift in the mix of skill-sets. We are also in the process of building a world-class, in-house fintech team and are providing fintech training to upgrade the knowledge and skills of our existing team.

How is Ibdar positioning itself to continue to be a leader in the field in the long term?

For banks to compete successfully with fintech startups—and adapt and implement digital innovations—there must be culture change. We must not be held back by legacy—legacy technology, legacy processes and, most importantly, legacy thinking. This means that culture change is a big part of the overall transformation needed, and it must be sponsored from the top down in order for it to be embraced. Ibdar is a young, change-ready organisation that is embracing this change internally.

The bank is also engaging with fintech firms from all over the world. Our digital transformation is comprehensive and will permeate across our back-, middle-, and front-office. We are also opening new delivery channels providing value-added processes for our clients. We are investing substantial amounts in the further development of advisory capacity with regards to fintech, especially distributed ledger technologies (DLT) and crypto-assets for governments and the private sector.

Beyond just internal procedures, how else will customers feel the changes that fintech will bring?

Technological advances have completely changed the relationship customers have with their banks. Customers now rely less on human interactions, such as walking into a bank branch or relationship manager’s office, in order to fulfil their banking needs. Customers will enjoy increased convenience, reliability, and speed.

Fintech startups have the advantage that they have no existing structure to change, so they can really change everything! Also, the structure of Islamic financial institutions is historically hierarchical and silo-based. Banks must flatten their organisational structures in order to be more agile, and embrace a culture of transparency, collaboration and change. It is also important to ensure a customer centric, rather than an internal focus. This will be facilitated by flattening the structure and reducing internal politics. It’s all part of the required culture change that will create a foundation for creativity, innovation and change.