Islamic Fintech

Report 2018
Current Landscape
& Path Forward
2 ISLAMIC FINTECH REPORT 2018: A PREVIEW CURRENT LANDSCAPE & PATH FORWARD
 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 3

Contents

1 Executive Summary 4

2 Summary infographics 6

3 Global Fintech Context 8

3.1 Defining Fintech & Market Overview 9

3.2 Global Drivers of Fintech Growth 14
3.3 Global Landscape 16

4 Islamic Fintech landscape 18

4.1 Islamic Fintech Overview 18

4.2 Islamic Fintech Drivers 19
4.3 Islamic Fintech Landscape 21
4.4 Case Studies 22

5 Gaps and opportunities 28

6 Roadmap 31

7 Acknowledgements 32

8 Glossary 33

9 Appendix 35
4 1 EXECUTIVE SUMMARY

Executive
Summary
The fourth industrial revolution has driven tremendous innovation in
the global financial services industry, with over 12,000 startups emerging
globally to disrupt every aspect of finance. The Islamic Finance industry
has begun experiencing unprecedented innovation, but Islamic Fintech
has a long journey ahead.

he Global Financial services industry has peer technology solutions to facilitate consumer and
T seen unprecedented change bought about business financing, and a further 14 of which enable
by three core technological drivers, all deposits and transfers via blockchain technology.
linked closely to the fourth industrial revolution – Indonesia, followed by the U.S., UAE and the UK, host
automation, disintermediation and decentralization. the largest number of Islamic Fintech startups.
Young, digitally native customers are the main
stakeholders driving change, and startups are Islamic Fintech has substantial room for growth,
responding – there are now over 12,000 startups however, with largely unaddressed opportunities in
globally, with fintech investments reaching $57.9 several areas, the three most significant of which
billion in the first half of 2018. are: (1) the leveraging of big data and AI in providing
Islamic banking services; (2) the use of blockchain
The large established financial institutions are in facilitating the growth of Islamic trade finance,
embracing the change, with 74% of financial which at $186 billion is a fraction of the global $12
institutions investing in data analytics, 34% in trillion trade finance industry; and (3) the use of AI
Artificial Intelligence (AI), and with 77% expecting to in facilitating investments, in particular addressing
adopt blockchain by 2020. institutional investor needs

The Islamic Finance Industry holds much promise, There are many promising government-led initiatives
with assets expected to reach $3.9 trillion by 2023 such as DIFC’s $100 million Fintech Fund, and
according to Thomson Reuters, however, Islamic Bahrain’s regulatory sandbox, to support Islamic
Fintech is at the very beginning of an exciting, Fintech. Exciting private sector initiatives have also
transformative journey for the industry, one still been launched, such as the Islamic Fintech Alliance
dominated by largely domestic and OIC-based in Singapore, and Turkey-based Al Barakah Banks
financial institutions. A young, digitally native Muslim Accelerator arm to support Islamic Fintech.
demographic that is on average younger than the
worlds non-Muslim population, is driving the growth As the industry develops, a concerted effort will
of Islamic Finance. be needed across government entities, financial
investors and financial institutions, to help fill the
This report has identified 90 Islamic Fintech startups many gaps in the Islamic Fintech ecosystem – doing
globally that are delivering customer-facing financial so is strategically important for many OIC countries,
service solutions, 65 of which are providing peer-to- as well as existing Islamic Finance Institutions.
ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 5
6 2 SUMMARY INFOGRAPHICS

Global Ecosystem & Momentum

Technology Drivers Greater automation Disintermediation leading Greater decentralization

from insights to activity to open access to services and security

Services

Deposits Investments ($ millions) Deal volume (#)

60,000 3000
Biz & Consumer 2,694
Financing
7,500 50,000 Global Fintech 2500

Trade Financing FinTech firms Financing Activity

globally have 40,000 1,805 2000
raised $110 bill
Treasury since 2010* 30,000 1500
1,194 27,445
949 23,255

$58 bill
21,170
Wealth 20,000 812 1000
Management 638
476 13,337
raised in 10,000 338 500
Insurance H1 2018 3,231
4,819
1,889 2,548
0 0
2010 2011 2012 2013 2014 2015 2016 2017

Operations Back Office Middle Office Front Office

*Source: Accenture Research analysis of CB Insights data

Key takeaway: Fintech is disrupting every area of the financial services industry, empowered by
investments.

Islamic Fintech Ecosystem

4
Number of Islamic Fintech
Startups by country 2
Number of startups
31 Indonesia 1 3
by core function
12 US 2 5
1

93 65
11 UAE 3 Business and consumer financing 65

10 UK 4 Wealth management (incl.Zakat) 15

7 Malaysia 5 Islamic Fintech Islamic Fintech Deposits and transfers 8

startups globally* startups focused
22 Other 6 on P2P finance Other 5
Number of Number of
5 10 15 20 25 30 35 startups startups 70 60 50 40 30 20 10
*Note: Includes customer-facing solutions only; excludes software and payment systems

Key takeaway: There is an emerging global Islamic Fintech ecosystem, with a strong focus to
date on P2P finance.
 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 7

Gaps and Opportunities in the Islamic Fintech Ecosystem

BIG AI QUANTUM P2P OPEN MOBILITY BLOCKCHAIN CLOUD CYBER-

DATA COMPUTING FINANCE BANKING ADOPTION SECURITY

Deposits A
Borrowing
And Lending

Treasury

Trade B
Financing
Wealth C
Management

Insurance D

- high adoption - trend is substentially - moderate adoption - trend is - very limited - very high
adopted by service area partially adopted by service area
- low adoption adoption potential impact

A B MAKING ISLAMIC WEALTH C SUPPORTING THE D

AUTOMATING GROWING ISLAMIC TRADE
MANAGEMENT MORE AUTOMATED DEVELOPMENT OF
ISLAMIC BANKING FINANCE THROUGH BLOCKCHAIN
ACROSS STAKEHOLDERS TAKAFUL STARTUPS

Key takeaway: There is substantial room for growth across the Islamic Fintech Ecosystem.

The Roadmap for Islamic Fintech

Budding support ecosystem Roadmap
Government: Enhance regulation
Growing government and investment support
and provide direct support
$100 million
fund Government
mandated Investors: Develop hypothesis
ecosystem around Islamic Fintech & support
Regulation support promising startups

Startups: Engage venture builders

Emerging venture support ecosystem
Consumers: Leverage marketing
and education to raise consumer
awareness

Key takeaway: Stakeholders stand to benefit substantially from supporting Islamic Fintech, with
important commitment already seen from a budding ecosystem.
8 3 GLOBAL FINTECH CONTEXT

Global Fintech
Context

Introduction

he global finance industry has experienced

T tremendous disruption from financial
technology startups – with entrepreneurs
identifying a shift in demand from consumers for
more nimble, convenient services. This report
has identified in particular nine core technology
trends that are shaping financial services, spanning
automation and decentralization, and that are
disruptively shifting market dynamics among the
mature, established financial services industry.
 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 9

3.1 Defining Fintech & Market Overview

Definition is unequivocally reshaping global financial service
We begin with a clear definition of Fintech to business models, operational models and customer
better scope and evaluate its developments and experience. We are defining Fintech as follows:
trajectory. Technology and automation have been a
key part of the financial services market worldwide “4th Industrial Revolution*driven technologies
for decades now. However, the emergence of the exponentially enhancing and/or disrupting 20th
‘Fintech’ revolution has brought about a disruptive century financial services, operations, business
shift in the financial services sector. This disruption models, and customer engagement.”

Diagram #1: Global Fintech Framework

Fintech
4th Industrial Revolution* driven technologies exponentially enhancing and/or
disrupting 20th century banking services, operations, business models, and customer engagement.

NINE FINTECH TECHNOLOGIES BY CORE IMPACT THEMES

Greater Disintermediation Greater

Services automation leading to decentralization Customers
from insights open access and security
to activity to services
Deposits Consumers

Biz & Consumer

Financing
(AI) ARTIFICIAL MOBILITY BLOCKCHAIN Businesses
INTELLIGENCE
Trade Financing
Financial
Treasury Institutions
BIG DATA OPEN BANKING CLOUD ADOPTION
Wealth
Management

Insurance
QUANTUM P2P FINANCE CYBER-SECURITY
COMPUTING

Operations
Back Office Middle Office Front Office

Source: Global Fintech Framework. DinarStandard. Copyright 2018.

* The term “Fourth Industrial Revolution” was coined by Klaus collectively referred to as cyber-physical systems . It is marked by
Schwab, the founder and executive chairman of the World Economic emerging technology breakthroughs in a number of fields, including
Forum. It is characterized by a fusion of technologies that is blurring robotics, artificial intelligence, nanotechnology, quantum computing,
the lines between the physical, digital, and biological spheres, biotechnology, and the Internet of Things (IoT).

1 Schwab, Klaus. “The Fourth Industrial Revolution: What It Means and How to Respond.” World Economic Forum. January 14, 2016. Accessed
March 20, 2018. https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/
10 3 GLOBAL FINTECH CONTEXT

Global Fintech Framework technologies. These Fintech solutions ultimately

A framework to represent the overall Fintech address all the customers’ financial service needs,
landscape is presented in Diagram #1. It covers while also addressing efficiencies in financial
end customers as the ultimate drivers of Fintech services operations.
solutions being led by nine identified Fintech

CUSTOMERS:
• Consumers: Key retail customers with core segments of low income,
middle income, high income, ultra-high net worth, and youth
• Businesses: Corporate/business customers including large corporates,
SMEs and social organizations
• Financial institutions: Asset managers, pension funds, insurance companies
and hedge funds

FINANCIAL SERVICE NEEDS:

• Deposits: Bank-held deposits and investment accounts
• Biz & consumer finance: Unsecured and secured lending; equity-based
finance
• Trade finance: Working capital/supply-chain finance; letter of credit;
collections
• Treasury: Bank treasury
• Wealth management: Private and retail wealth; institutional funds
• Insurance: Direct, re-insurance

OPERATIONS:
• Customer lifecycle/front office: Customer origination/acquisition;
due diligence; customer servicing; service delivery; advisory
• Middle office: Risk management; treasury; payments
• Back office: Collections; data storage/ security; portfolio management;
risk management
 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 11

Core Fintech technologies:

TECHNOLOGIES
DESCRIPTION PROBLEM BEING SOLVED
BY THEME

GREATER AUTOMATION FROM INSIGHTS TO ACTIVITY

A set of technologies to enable computers to Automates labor-intensive tasks and

execute “smart” tasks through technologies helps improve customer experiences
such as natural language processing, expert by generating insights and making
systems and machine learning, a process predictions.
Artificial that applies algorithms to analyze data to
intelligence generate insights and make predictions.
Uses analytical tools to process large data Significantly reduces the time and
sets from multiple different sources driving error from traditional and often
business decisions. manual business intelligence
Big Data/
methods.
Analytics
Applies principles from quantum theory to Solves complex problems much
develop computers with significantly more more effectively than conventional
processing power. computers.
Quantum
Computing

DISINTERMEDIATION LEADING TO OPEN ACCESS TO SERVICES

A technology-based service that connects Expands access to financing, in

businesses directly with investors, through particular for SMEs, and makes
a web-based platform for a fee. verification/credit checking easier
Peer 2 Peer for investors
Finance
Uses application program interfaces (APIs) Enables customers and businesses
that allow third-party service providers to to access all their bank data in real-
access customer banking data. time, allowing more accurate and
Open Banking ip-to-date information on finances.

Describes the ability to access information Enables user to access information

or applications in an untethered manner, and applications “on the go”, without
usually through portable, networked needing to be in a fixed location.
Mobility computing devices such as smartphones.

GREATER DECENTRALIZATION AND SECURITY

Tracks and records data using a distributed Removes the need, and associated
digital ledger system - verifying and storing cost, of keeping transactions/
data across hundreds or thousands of contracts in a central repository
computers globally. database, improves accountability
Blockchain and improves security.
A set of technologies, processes and Data breaches are a major issue,
practices used to protect networks, impacting 22 global financial
computers, programs and data from attack institutions, incl. Lloyds and
or unauthorized access. Santander. A global market worth
Cybersecurity ~$75 billion in 2015.
Stores resources on the internet (in a “cloud”) Cloud adoption significantly
and retrieves them using web-based tools reduces banks’ capital expenditure
and applications instead of on a direct server on expensive internal servers.
connection.
Cloud adoption
12 3 GLOBAL FINTECH CONTEXT

Global Market Size & Investments the KPMG Pulse of Fintech report, global
Fintech investment reached $57.9 billion
In Fintech’s most rudimentary area of in the first half of 2018, across 875 deals.
digital/mobile banking, an estimated 2 This is a significant increase from the
billion users worldwide were accessing $38.1 billion invested in all of 20174.
retail banking services via smartphones,
tablets, PCs and smartwatches, and that Payments, Regtech and blockchain
number is projected to reach 3 billion by investments have been the most prominent
2021 (Juniper Research2). in H1 of 2018. In payments, a number
of large exits in the first half of the
In terms of adoption, 33% of consumers year included successful IPOs by EVO
NEARLY
in 20 major markets are estimated to use Payments and GreenSky, Paypal’s $2.2
Fintech services (EY)3. This rate is higher at billion acquisition of iZettle, and Vantiv’s US$100
46% across the emerging markets of Brazil, acquisition of WorldPay in the UK. In the BILLION
China, India, Mexico and South Africa. Regtech sector, $1.37 billion were invested, HAS FLOWED
INTO FINTECH
surpassing the 2017 total5. In blockchain,
VENTURES
Investments across Fintech space is on investments included $100 million+ rounds
SINCE 2010
the rise and are also a good indicator of to R3 and Circle Internet Finance in the US,
Fintech’s size and scale. According to and $77 million to Ledger in France.

Global fintech financing activity by region

2010 - 2017

Investments Global deal volume Deal volume

(SM) (#)
50,000
RoW APAC 3,000
2,694
Europe North America
2,500
40,000

1,805 2,000
30,000
27,445
21,170 23,255 1,500
1,194
20,000
949
812 1,000
13,337
638
10,000 476
338 500
4,819
2,548 3,231
1,889
0
2010 2011 2012 2013 2014 2015 2016 2017

Source: Accenture Research analysis if CB Insights data

2 "Digital Banking Users to Reach Nearly 3 Billion by 2021, Representing 1 in 2 Global Adult Population." Digital Banking Users to Reach Nearly 3
Billion by 2021. February 8, 2017. https://www.juniperresearch.com/press/press-releases/digital-banking-users-to-reach-nearly-3-billion-by
3 EY FinTech Adoption Index 2017. EY, 2017. https://www.ey.com/Publication/vwLUAssets/ey-fintech-adoption-index-2017/$FILE/ey-fintech-
adoption-index-2017.pdf
4 The Pulse of Fintech – 2018. H1 2018. KPMG, 2018. https://home.kpmg.com/xx/en/home/insights/2018/07/pulse-of-fintech-h1-2018.html
5 ibid
ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 13
14 3 GLOBAL FINTECH CONTEXT

3.2 Global Drivers of Fintech Growth

Growth drivers

Technology megatrends impacting finance • Open banking gaining momentum: Open banking is
continuing to grow worldwide. In Hong Kong, the (SAR)
• Blockchain is coming to life: The hype around Monetary Authority recently published its open API
blockchain, a type of distributed ledger technology, framework. In Australia, a new open-banking regime
is beginning to gain real traction in its applications for has been agreed to by their federal government.
financial services. This is being driven by widespread All major banks will need to make data available
applicability of blockchain to help harness operational on credit and debit card, deposit, and transaction
efficiencies. According to a PwC industry survey, accounts by July 1, 20199.
77% expect to adopt blockchain as part of an in-
production system or process by 2020. The most • Artificial intelligence (AI) & data analytics gaining
likely business use cases of blockchain, as seen by attention: According to the PwC industry survey,
55% of respondents, is in payments infrastructure, 74% of large financial Institutions are investing
followed by fund transfer infrastructure (50%), and in data analytics and 34% in artificial intelligence
digital identity management (46%)6. (AI). AI is expected to drive unprecedented levels of
personalization for financial consumers. It is also
• Regtech is experiencing big growth: Financial being applied in advanced risk management.
institutions’ need to manage compliance in all aspects
of business is getting complex and Fintech solutions Customers are driving substantial change
are coming to the rescue to bring efficiency and cost
effectiveness in its management. Besides existing • The young 'digital natives': There is now a generation,
regulations such as Basel and Comprehensive Capital Generation Z (up-to-22-years-old this year10) that has
Analysis and Review (CCAR), newer regulations such been born and raised completely with the internet,
as the General Data Protection (GDPR) and Revised and as such, have very strong expectations of digital
Payment Service Directive (PSD2) are further driving financial services. This is further driven by the fact that
the need for innovative solutions. According to a 70% of the world’s youth are online, compared to total
PwC survey, 54% of incumbents see data storage, population at 48% in 201711.
privacy, and protection as the main regulatory barrier
to innovation.7 • The unbanked: While a big percentage of global
adult population is still unbanked (31% of global adult
• InsureTech is also growing: Fintech solutions population in 2017, approx. 1.6 billion people) the rate
addressing the insurance sector are also gaining of financial inclusion is rapidly rising. 515 million adults
traction. The banking consortium R3 expanded its obtained an account since 2014. Fintech is expected to
mandate to include insurance companies while the continue to drive this and is key to achieving the World
key insurance consortia B3i has also expanded. Bank goal of universal financial access by 202012.
Insurtech companies attracted a significant amount
of investment, including $100 million+ megarounds • Heightened expectations: Customers are harder to
to Oscar and Lemonade8. acquire and retain due to heightened expectations
of banks resulting from the digital technologies they
regularly make use of in other areas of their lives.

6 Global FinTech Report 2017. PwC, 2017. https://www.pwc.com/gx/en/industries/financial-services/assets/pwc-global-fintech-report-2017.pdf

7 Global FinTech Report 2017. PwC, 2017. https://www.pwc.com/gx/en/industries/financial-services/assets/pwc-global-fintech-report-2017.pdf
8 The Pulse of Fintech – 2018. H1 2018. KPMG, 2018.
9 McLean, Asha. "Australia to Force 'big Four' to Open Banking Data by July 2019." ZDNet. May 10, 2018. https://www.zdnet.com/article/
australia-to-force-big-four-to-open-banking-data-by-july-2019/
10 While no exact date ranges are set, demographers are referring to those born between 1995-2010 as Generation Z, and Millennials are
generally referred to as those born beginning in the 1980s through the mid-1990s.
11 ICT Facts and Figures 2017. International Telecommunications Union, July 2017. https://www.itu.int/en/ITU-D/Statistics/Documents/facts/
ICTFactsFigures2017.pdf
12 2017 Global Findex Database. World Bank, 2017. https://globalfindex.worldbank.org/
 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 15

Banks are responding Startups are creating new opportunities

• Banks responding to digital disruption: Banks are • Startups forcing banks to move at a faster
responding to customer demands by adapting their pace: The increased number of Fintech startups
core business models to become more "digital" - in existence, driving developments such as mobile
combining digital services with incumbent physical payments through non-bank institutions, is forcing
offerings. According to a PwC industry survey, 77% banks to move at a faster pace in responding to
of financial institutions are increasing internal effort technology changes.
to innovate, and 82% expect to increase Fintech
partnerships in the next 3-5 years13. Banks' responses • Startups posing a considerable threat to incumbent
are being driven by the threat of digital disruption and banks: Startups can innovate at a faster, more agile
the need to keep costs down, as well as the motivation pace and more efficiently create mobile-focused
to attract customers and increase profits. services or products at a fraction of banks' cost, due
to advantages such as being free of legacy technology
• Banks seeking efficiency gains: Banks are systems and having to cope with significantly less
also looking to offer fewer branches with more regulation than banks.
differentiated functions to cater to different regions and
customer functions and are looking to make efficiency • Fintech firms are disrupting established players:
gains and reprioritize their service offerings. This Fintech firms have developed a reputation for offering
includes effectively leveraging third-party technologies accessible, convenient and tailored services and
such as cloud computing, mobility, big data. products that pose considerable disruption to the
existing financial services industry players.

13 Global FinTech Report 2017. PwC, 2017. https://www.pwc.com/gx/en/industries/financial-services/assets/pwc-global-fintech-report-2017.pdf

16 3 GLOBAL FINTECH CONTEXT

3.3 Global Landscape

There are over 12,000 Fintech startups worldwide, Below is a profile of select Fintech companies, both
with the highest numbers based out of the Americas, startups and larger financial institutions, and their
followed by EMEA, and then the Asia-Pacific regions. Fintech initiatives.

Startup example Conventional provider example Conventional provider example

(Americas/Europe) (Asia-Pacific)

Personetics Technologies JP Morgan's Contract Intelligence (COIN) Singapore-based DBS Bank

offers a predictive program applied machine-learning-based is using artificial intelligence
interaction solution for artificial intelligence to perform manual to offer mobile-only banking
Artificial financial institutions contract-related tasks in a fraction of the in India, enhancing customer
intelligence to deliver personalized time it previously took. service by offering a truly
customer experiences. branchless banking experience.
Barclays is investing heavily in developing
its artificial intelligence capabilities.

Blockstream is a R3, a consortium that includes 42 of the Singapore-based OCBC Bank

bitcoin-focused Fintech world’s largest banks including European has become the first bank
company that works banking powerhouses such as Barclays, in Southeast Asia to apply
Blockchain in cryptocurrencies, Deutsche Bank, Commerzbank and Societe blockchain in its local and cross-
open assets, and smart Generale, is experimenting with Microsoft’s border payment funds transfer
contracts, enabling more Blockchain-as-a-Service to create a services, reducing the time it
secure payments and bank-to-bank global transaction system, takes customers to make fund
transparent, more efficient already developing a smart contract transfers from up to a day to
contracts. implementation that will lead to more just 5 minutes.
efficient and transparent transactions for
end customers.

Verafin provides Societe Generale is taking cybersecurity Maybank is partnering

compliance, anti-money- more seriously: given that 86% of their with organizations such as
laundering and fraud incoming contacts are from digital Cybersecurity Malaysia to
Cybersecurity detection software, helping accounts, and with 700 million mobile increase customers' awareness
to reduce instances of logins annually, there are heightened of Internet banking safety by
money laundering and cybersecurity challenges for them. conducting an awareness
fraud in the banking sector. Customers will benefit from enhanced campaign and promoting safe
security through fewer cases of online banking, helping enhance
cybercrime. customer service by reducing
the number of customers that
fall victim to cyberattacks or
online scams.

TransferWise lets expats, UK-based Monzo Bank is a bank that In China, all peer-to-peer lending
foreign students and offers current accounts and was funded firms must have a custodian
businesses move money through crowdfunding14. bank by August 2017. City
Peer 2 Peer globally at a substantially commercial banks are taking up
Finance lower-cost alternative Zopa, the UK's oldest peer-to-peer lender, this role, and the banks would
to traditional transfer applied for a UK banking license in 2016. be responsible for safeguarding
services. It will then be able to offer customer billions of Chinese yuan in
deposits and credit cards, offering peer-to-peer assets. This will
customers a cheaper alternative to increase consumer confidence
incumbent banks. in peer-to-peer finance in China
and likely result in increased
customer acquisition.

14 Monzo Bank Website. Accessed 24 April 2017. https://monzo.com/about/

 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 17

Startup example Conventional provider example Conventional provider example

(Americas/Europe) (Asia-Pacific)
Wecash is a big data credit Goldman Sachs has substantially Singapore-based OCBC
assessment platform that developed its big data and artificial Bank used analytics to better
provides extensive credit intelligence capabilities, resulting in a understand their customers'
Big data/ assessments and builds significant reduction of the size of its US profiles, enhancing OCBC’s
Analytics predictive models that help equities trading desk. customer servicing abilities
financial institutions better through targeting offerings.
manage customers’ credit Deutsche Bank is making increased use of
risk. data analytics in its processes.

Simple is a web- and- Capital One has launched a developer Mizuho Financial Group
mobile application that portal and three new open APIs, increasing Partnered with Fintech startup
unifies various accounts the provision of open banking services for Moneytree to use Moneytree's
Open into one accessible bank customers. API technology.
Banking card.
Deutsche Bank have developed "Autobahn",
an app market that gives clients access
to apps to meet their banking needs, thus
improving customer servicing through
infrastructure development.
Mint is a financial planning Capital One is a heavy user of cloud Indian bank HDFC uses
app that made extensive computing service Amazon Web Services, software-as-a-service-based
use of cloud computing to reducing the cost of its servers and cloud services to more
Cloud save on costs and scale potentially creating cost savings for end efficiently run its entire
Adoption quickly. customers. e-commerce business, its credit
card acquiring business, and
Deutsche Bank is investing heavily in cloud its merchant services, thus
computing with a 10-year deal with HP providing customers with more
Enterprise. efficient services.
M-Pesa, a Kenyan US-based Montgomery County Employees Japan's E-Bank provides
startup, enables users to Federal Credit Union introduced fingerprint 24-hour real-time electronic
make and receive mobile authentication for users of their mobile banking services without any
Mobility payments using their app, increasing security for existing physical branches or ATMs,
smartphones, increasing customers. creating a truly branchless
financial inclusion to experience for time-pressed
underserved communities Swiss-based Postfinance, in co-operation customers who wish to
and increasing customer with other Swiss banks such as UBS and avoid engaging with physical
convenience. Credit Suisse, has launched Twint, a mobile branches.
payments solution that provides a viable
and serious alternative to Apple Pay and
increases customer choice in Switzerland.
Australia-based Goldman Sachs is investing in leading Australia-based
QuintessenceLabs has developers of quantum computing QuintessenceLabs has created
created a set of data technology, such as Canadian quantum a set of data technology
Quantum technology products computing firm D-Wave, to create better products and solutions based
Computing and solutions based on portfolios for clients. on quantum computing
quantum computing Deutsche Bank Securities and the CME technology to enable secure
technology to enable Group partnered with quantum computing data transfer and storage,
secure data transfer firm D-Wave Systems to develop "Quantum enhancing customer service
and storage. for Quants", a program that allows through infrastructure
financial industry analysts to use quantum development.
computing tools to analyze large, complex
data sets and better solve financial
problems such as portfolio optimization
for existing customers.
18
4 ISLAMIC FINTECH LANDSCAPE

Islamic Fintech
Landscape
slamic Fintech promises to be a disruptive CAGR to reach $3.8 trillion in 2023. The disruption
I force in the Islamic finance industry, and innovation that can be observed across the
spearheading necessary innovation. global finance industry is also impacting Islamic
The Islamic finance Industry has been estimated at finance, with notable developments in particular
$2.4 trillion in 2017 and is projected to grow at 7.7% in the last few years.15

4.1 Islamic Fintech Overview The segmentation of Islamic finance services, which
comprises twelve categories as outlined in the
Islamic Fintech has potential to disrupt all aspects below diagram, correlates to the six broad service
of the industry. The Islamic Fintech industry has areas identified globally, serving the same underlying
emerged robustly since 2010, mirroring the growth needs of retail consumers and businesses, as
of the broader global Fintech ecosystem, with well as the institutional needs of financial service
the focus of development on shariah-compliant providers, adjusted of course for the Islamic faith-
business and consumer financing. based requirements of customers.

Diagram #2: Mapping the Islamic Fintech Ecosystem

Islamic Fintech
Fintech technologies exponentially enhancing and disrupting 20th century
Islamic financial services, operations, business models, and customer engagement.

FINTECH TECHNOLOGIES BY CORE IMPACT THEMES

Services Greater Disintermediation Greater

automation leading to decentralization Customers
Deposits Shariah deposit from insights open access and security
and inv. acct. to activity to services
Consumers
Biz & Consumer Sukuk
Financing Ijarah financing
Islamic Private Eq.
(AI) ARTIFICIAL MOBILITY BLOCKCHAIN Businesses
Musharaka &
Mudaraba INTELLIGENCE

Murabaha working Financial

Trade Financing Institutions
capital/supply cho
BIG DATA OPEN BANKING CLOUD ADOPTION
Wakalah LOC

Treasury Bank treasury

Wealth Islamic retail

Management private wealth QUANTUM P2P FINANCE CYBER-SECURITY
COMPUTING
Islamic
Institutional Fund
Operations
Insurance Takaful
Re-Takaful Back Office Middle Office Front Office

15 “State of the Global Islamic Economy Report, 2018/19”, Thomson Reuters, 2018
 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 19

4.2 Islamic Fintech Drivers

The young, digitally native Muslim demographic are pushing for innovation in Islamic finance with
governments, especially those with broader Islamic economy strategies, leading the response.

Figure: Overview of key drivers

GOVERMENT INITIATIVES
CUSTOMERS
$100 million planned
fund by DIFC (Dubai International Young demographic: 24 years
Financial Center) to invest in median age of Muslims worldwide
Fin-tech start-ups. Bahrain and (compared to 32 globally)
Malaysia have setup ‘regulatory
sandbox’ for Fintech growth 15 of top 50 countries w/Smartphone
penetration are Islamic economies
STARTUPS
72% unbanked population in OIC member
93 Islamic FinTech players countries (core Islamic finance markets)
globally compared to 49% worldwide. (Global Findex)

Government is driving change in the Islamic finance ecosystem

The digital Islamic economy is a broader area of strategic importance that several OIC companies are
prioritizing, with a particular focus on Islamic Fintech.

Select OIC initiatives

COUNTRY ORGANIZATION DESCRIPTION

UAE Dubai International Dubai International Financial Centre (DIFC), a leading international
Finance Center financial hub announced a $100 million FinTech-focused fund to
investing in Fintech start-ups from incubation through to growth stage.

Malaysia Malaysia Digital MDEC is a government-owned entity responsible for developing

Economy Corporation Malaysia’s digital business ecosystem. The organization also actively
supports halal economy businesses through providing shariah
certification and providing a network and link to venture capital investors16

Bahrain Bahrain Fintech Bay Bahrain’s Fintech Bay is a dedicated co-working space dedicated to
attracting and developing Fintech and particularly works with. Islamic
Fintechs in partnership with leading Islamic finance institutions that
operate in Bahrain and across the GCC17

Indonesia Financial Services While startups are driving Islamic fintech growth in Indonesia Government
Authority (OJK) agencies are realizing their impact and starting to facilitate. The Financial
Services Authority (OJK), has established a regulatory framework for P2P
lending platforms.

16 Malaysia Digital Economy Corporation Website. https://www.mdec.my/islamicdigitaleconomy/#Wrapper

17 "Bahrain FinTech Bay Opens: Announces Startups & Founding Partners." Bahrain FinTech Bay. June 03, 2018. https://www.bahrainfintechbay.
com/s ingle-post/2018/02/26/Bahrain-FinTech-Bay-Opens-Announces-Startups-Founding-Partners
20
4 ISLAMIC FINTECH LANDSCAPE

COUNTRY ORGANIZATION DESCRIPTION

Other UK, Kazakhstan, UK regulators have been supportive of its domestic Islamic Fintech Panel
IDB, Saudi Arabia and startup ecosystem. The launch of Astana International Financial
Center is also seeking to develop Islamic finance and fintech. Similarly,
Saudi Arabian Monetary Authority has recently launched FintechSaudi.
Finally, the multi-lateral Islamic Development Bank has launched a
Fintech Challenge supporting Islamic Fintech startups.

Muslim consumers are young and demanding digital change

The global Muslim population is expected to rise Muslim consumers are younger, on average, than non-
from 1.7 billion in 201418 to 2.2 billion by 2030 Muslims20, and a large portion of the world’s unbanked
(26.4%), according to Pew Research Center’s are Muslims21. According to a Pew Research Center
Forum on Religion & Public Life, growing at about survey in 2011 of over 38,000 Muslims22, 76.3% of
twice the rate of the non-Muslim population over Muslims consider religion to be ‘very important’.
the next two decades – with an average annual
growth rate of 1.5% for Muslims, compared with With 15 of the top 50 countries with smartphone
0.7% for non-Muslims19 penetration being OIC countries, the demand for
practical, digital Islamic finance solutions are emerging.

Startups are leading the response, supported increasingly by startup builders

Islamic Fintech startups have represented the first line of response for providing innovative digital Islamic
finance solutions, with a rapidly emerging ecosystem. Most notably, to support startups, dedicated
accelerators and incubators are emerging, which offer the promise of catalyzing funding and sharpening
business propositions.

Select examples of startup builders

COUNTRY ORGANIZATION DESCRIPTION

Singapore Islamic Fintech Alliance The Islamic Fintech Alliance (IFT Alliance), a global collaboration
of Islamic Fintech startups was launched in 2016 to “facilitate
the adoption of finance technology among Muslims”.

Turkey Al Baraka Bank The Islamic Fintech Alliance (IFT Alliance), a global collaboration
of Islamic Fintech startups was launched in 2016 to “facilitate
the adoption of finance technology among Muslims”.

UAE Goodforce labs Goodforce Labs, established in 2018, is the first social impact
foundry in the MENA region, and is working with and supporting
10 startups focused on the Islamic and ethical economy

18 Derived from 2010 baseline and 1.5% growth estimated by The Future of the Global Muslim Population, Pew Research Forum, 2011.
19 The Future of the Global Muslim Population, Pew Research Forum, 2011. Accessed 8 August 2016. http://www.pewforum.org/2011/01/27/
the-future-of-the-global-muslim-population/
20 "Why Muslims Are the Fastest-Growing Religious Group." Pew Research Center. April 23, 2015. http://www.pewresearch.org/fact-tank/2017/04/06/
why-muslims-are-the-worlds-fastest-growing-religious-group/ft_15-04-23_muslimmedianage/
21 2017 Global Findex Database. World Bank, 2017. https://globalfindex.worldbank.org/
22 According to a Pew Research Center survey in 2011 of over 38,000 Muslims in the Middle East, North Africa, Southeast Asia, South Asia,
Central Asia, Sub-Saharan Africa, and South-Eastern Europe.
23 Augustin, Stephanie. “Albaraka Turk Expanding Fintech Footprint with Own Accelerator, Launching Digital-only Islamic Bank in Germany.”
Salaam Gateway. September 19, 2018. https://www.salaamgateway.com/en/story/albaraka_turk_expanding_fintech_footprint_with_own_
accelerator_launching_digitalonly_islamic_bank_in_germany-SALAAM19092018080315/
 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 21

4.3 Islamic Fintech Landscape that provide software or supporting technologies for
Islamic financial services, which have been included
This report has identified 93 Islamic Fintech in other lists of the Islamic Finance Ecosystem.
companies predominantly leveraging peer-to-
peer technology to disrupt personal and business Indonesia has the most Islamic Fintech startups,
finance and excludes supporting service providers. followed by the US and the UAE.

The focus on Islamic Fintech companies has been Indonesia, which has the world’s largest Muslim
very concentrated on making consumer and business population, is home to 31 out of 93 startups identified,
finance more accessible, addressed by 66 of the with a readily increasing number of Islamic Fintech
startups, while simultaneously opening market companies registering with the country’s Islamic Fintech
access to individual retail and institutional investors. Association. The UAE and Malaysia follow as the next
two largest Muslim-majority countries by number
Blockchain, and in particular cryptocurrencies, is of startups, reflecting the broad Islamic Economy
beginning to make headway, with 14 startups identified. strategies that both countries have put in place.

The list only includes companies that are active, Interestingly, the US and UK together host 21
providing front office, customer facing solutions, and startups despite having a small combined share of
recognized by an Association or through an external the global Muslim population, both reflecting a robust
credible source. It does not include companies that venture financing ecosystem that has recognized and
have not been identified as shariah compliant, or supported the business case for Islamic Fintech.

Figure: Examination of the Islamic Fintech Ecosystem

Breakdown by core technology Breakdown by function

Blockchain, 14 Wealth Management, 15

Deposits, 8
Business & Consumer
P2P finance, 65 Other, 14 Financing, 65 Other, 5

Breakdown by geography
35
31
30

25
22
20

15
12 11
10
10
7
5

0
Indonesia USA UAE UK Malaysia Other

Source: DinarStandard analysis

24 The list has been compiled based on a review of over 60 sources, including a comprehensive list of 120 Islamic finance companies,
and a review of associations, top freezones and accelerators in leading Islamic finance markets.
25 The list has been compiled based on a review of over 60 sources, including a comprehensive list of 120 Islamic finance companies,
and a review of associations, top freezones and accelerators in leading Islamic finance markets.
22
4 ISLAMIC FINTECH LANDSCAPE

4.4 Case Studies

Several case studies have been selected to show a combination of Islamic Fintech startups success stories and
successful examples of banks working with solutions providers to address next-generation technology leads.

Case study 1 – Startup success story: Wahed Invest

The world’s first shariah-compliant robo-advisory platform. Wahed Invest is a Shariah-

compliant robo-advisory investment platform that was launched in 2015, and leverages
automated trading techniques. The company currently operates out of the U.S., and has
secured SEC registration, but is seeking to attain global coverage, and provide affordable
investment opportunities to Muslims regardless of location and income.

Global
benchmarks

Wealthfront is the Betterment is a FutureAdvisor is a Personal Capital

only automated smart automated registered investment combines award-
financial advisor to investing service that advisory firm that winning online
offer the combination provides optimized manages a user's financial tools
of financial planning, investment returns existing IRA, 401(k), that provide
investment for individual, IRA, and other investment unprecedented
management and ROTH IRA, and accounts.26 transparency into
banking-related rollover 401(k) your finances with
services exclusively accounts.. personal attention
through software. from registered
financial advisors.

Opportunity • The global market for Islamic Finance assets has been estimated at $2.4 trillion in 2017
being and is expected to grow by 7.7 percent CAGR and reach $3.8 trillion in 2023. Islamic
addressed banking assets are expected to grow from $1.7 trillion in 2017 by 6 percent CAGR to reach
$2.4 trillion in 2023.27
• Although the global Islamic Finance sector is maturing, the American market still has
a number of gaps and opportunities. The Muslim Green: American Muslim Market Study
2014/15 has surveyed the Muslim market to find that the demand for Islamic Finance
offerings has increased between 2010 and 2014. However, credible and authentic Islamic
Finance offerings and Shariah-compliant investment options have not been readily
available. Muslim consumer surveys in America have also found that 58 percent of
respondents are asking for clarity in Islamic Finance concepts and contracts as Islamic
Finance services are complex and difficult to understand.

26 Crunchbase business description, FutureAdvisor, 2018, https://www.crunchbase.com/organization/futureadvisor.

27 The State of the Global Islamic Economy Report 2018/19, by Thomson Reuters, DinarStandard and DIEDC, 2018.
28 The Muslim Green: American Muslim Market Study 2014/15, by the American Muslim Consumer Consortium and DinarStandard, 2015,
http://www.dinarstandard.com/american-market-2014/.
 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 23

Opportunity • According to Pew Forum statistics in 2011, Muslim-majority countries are among the
being poorest countries in the world, measured by GDP per capita.29 The average GDP per capita
addressed in OIC countries stands at $4,000, which is substantially less than $33,700 of developed
countries in 2011, according to Pew Research statistics. Muslims in OIC countries that
live below the poverty line are in dire need of services, but struggle to access Shariah-
compliant investment opportunities due to high minimum investment requirements.
• Wahed Invest seeks to make Shariah-compliant investing more efficient, charging lower
fees than existing Islamic Finance investment managers, and more accessible, planning
to make the platform available to Muslims globally, with low minimum investment
amounts required.

Company • Funding: Wahed Invest raised over $12.6 million from investors including Cue Ball Capital,
trajectory BECO Capital, and Other Institutional Investors30
• The company most recently launched its automated investment service in the United
Kingdom

Key • Wahed represents a successful case of innovation, learning from mainstream fintech to
takeaways address unique needs for Muslim consumers
• The company was able to build a powerful case for investment among conventional
investment firms

29 The Future of the Global Muslim Population - Pew Forum, 2011, http://www.pewforum.org/2011/01/27/future-of-the-global-muslim-
population-related-factors/
30 The State of the Global Islamic Economy Report 2018/19, by Thomson Reuters, DinarStandard and DIEDC, 2018.
24
4 ISLAMIC FINTECH LANDSCAPE

Case study 2 – Startup success story: EthisCrowd

EthisCrowd is the world’s first real estate Islamic crowdfunding platform, investing
in entrepreneurial, business, trade and real estate activities in ‘Emerging Asia’. Based
in Singapore, and with a presence in Indonesia, Malaysia and Australia, the company
crowdfunds the construction of affordable and commercial housing, mostly in Indonesia,
through private and institutional investors, as well as Islamic banks.

Global
benchmarks

Fundrise offers RealtyMogul. Leading commercial Prodigy Network

an alternative to com is an online real estate is a company
investing in stock and marketplace for real investment platform dedicated to
bonds -- the first low- estate investing, giving accredited Crowdfunding in real
cost, direct private connecting investors access estate projects
market investment borrowers and to investment in New York
platform sponsors to investors opportunities online and Bogota

Opportunity • According to the Global Impact Investment Network, impact investing assets - investing
being made into enterprises, organizations and funds with the intention to generate social
addressed and environmental returns, alongside financial ones, are currently valued at $228 billion
in 2018.31
• According to McKinsey Global Institute in 2014, it was estimated that approximately
330 million households did not have access to affordable housing, and that this figure
could increase to 440 million households in 2025—the equivalent of 1.6 billion people.
Addressing this gap could cost up to $16 trillion.32
• EthisCrowd seeks to address the affordable housing gap, capitalizing on a booming
Indonesian real estate market and an increasingly accessible pool of social and ethical
small and medium-sized investors through real-estate crowdfunding, a $3.5 billion
industry in 2016 (according to research and advisory firm Massolution), linking such
investors directly with contractors and real estate developers.33

Company • Funding: The company has 24,373 community members with $5.59 million in crowd-
trajectory investments made and $1.64 million of payouts to crowd-investors. The total value of
projects by EthisCrowd in 2018 is $52.8 million.34

Key • Ethis has been an impressive innovator, and shows how an original idea, around Shariah-
compliant real estate, can be expanded to cover a range of product areas

31 Global Impact Investor Network, Annual Impact Investor Survey, GIIN, 2018, https://thegiin.org/research/publication/annualsurvey2018.
32 Tackling the world’s affordable housing challenge, McKinsey Global Institute, 2014, https://www.mckinsey.com/featured-insights/urbanization/
tackling-the-worlds-affordable-housing-challenge.
33 The World Bank’s Indonesia Economic Quarterly, Closing the Gap, October 2017, https://www.worldbank.org/en/country/indonesia/
publication/indonesia-economic-quarterly-october-2017.
34 EthisCrowd, company website, accessed on October 15th 2018, https://www.ethiscrowd.com/.
 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 25

Case study 3 – UAE Startup success story: Adab Solutions

Adab Solutions, is UAE-based cryptocurrency startup that

has announced the launch of the First Islamic Cryptocurrency
Exchange (FICE), the only cryptocurrency exchange globally
that is designed to adhere to shariah-compliant law.

Opportunity being • According to data from CoinMarketCap the global

addressed cryptocurrency market cap is $186 billion and the number
of shariah-compliant offerings are limited.35
• The purpose of the project is to ensure an enhanced quality of
assets available for exchange and increase inclusion
of Islamic cryptocurrencies.
• The project aims to be a universal solution to attract Muslim
involvement and users of Islamic finance models in the
cryptocurrency market.

Company trajectory • Adab Solutions is launching the project’s Initial Coin Offering in
September and will be guided by an in-house Shariah Advisory
Board to ensure the exchange will be in full compliance with
Shariah law.36

Key takeaways Leverage leading blockchain technology to solve fundamental

issues that exist between counterparties seeking to use faith-
based products.

35 Total cryptocurrency market cap shrinks to $186 billion, Mashable, September 2018, https://mashable.com/article/crypto-market-cap-lowest-
2018/#seGMiJEEOsqi
36 UAE Startup Launches First-Ever Sharia-Compliant Islamic Crypto Exchange, August 2018, CCN, https://www.ccn.com/uae-startup-launches-
first-ever-sharia-compliant-islamic-crypto-exchange/
26
4 ISLAMIC FINTECH LANDSCAPE

Case study 4 – Startup success story: Waqfe

Waqfe is a fintech digital community banking

platform for deposit mobilization. The solution
is designed for Islamic banks to build a loyal
customer base, attract longer tenor deposits,
improve cross-sell and generate higher annual
customer value. Waqfe enables Islamic banks
to acquire digital-ready customers through
an engagement model that is built around
their lifestyle needs. Its offerings include an
integrated digital saving account, personal
financial management tool, and a community
marketplace.37

Opportunity being addressed • GCC banking assets are expected to increase

to $110.9 billion by 2020, an increase by 25%
per year from $45.8 billion in 2016.38 However,
banks are becoming digitally irrelevant with low
customer profitability and high churn.
• Customer Solutions: Waqfe offers a fully
digital onboarding and community experience
for customers opening accounts through the
platform.
• Bank Solutions: Waqfe offers banks secure
digital-ready, deposit-making customers from
Waqfe, building longer-lasting relationships with
a more loyal customer base.

Company trajectory • Funding: Waqfe has raised seed capital and has
a POC developed in Bahrain with the platform’s
first banking customer signed up.

Key takeaways • Waqfe’s success shows the importance of a

robust partnership with government and industry
entities
• The company identified and strongly tested
a clear market need for an enhanced digital
experience among customers of Islamic Finance

37 Company website, Waqfe, accessed on October 15th 2018, http://www.waqfe.com/.

38 EY’s World Islamic Banking Competitiveness Report 2016, EY, 2016, https://www.ey.com/Publication/vwLUAssets/ey-world-islamic-banking-
competitiveness-report-2016/%24FILE/ey-world-islamic-banking-competitiveness-report-2016.pdf.
 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 27

Case study 5 – Collaboration success story

Oman’s Alizz Islamic Bank partners with Ireland-

based Ubanquity to provide customers with
enhanced experiences. Ubanquity signs an
agreement with Alizz Islamic Bank, a dynamic
Oman-based bank pursuing the principles of
Islamic banking and digital excellence.39

Ubanquity Systems Ld. Is a leading white-label

omnichannel solution provider to banks and
financial institutions in Ireland. Ubanquity’s API
driven Platform integrates with any Core Banking
System, ATM switch, Payment Gateway, and all
Social Networks. Ubanquity’s solutions can be
deployed to production in Arabic, English, and
French. Alizz Islamic Bank is a shariah-compliant
financial institution established in Oman in 2012.

Description of partnership and impact • Core challenge: Alizz Islamic Bank in Oman
seeks to become a fast growing and dynamic
bank in the GCC. The company aims to enhance
customer experiences using real-time analytics.
• Solution: Islamic banking is growing in appeal
across the globe and Ubanquity is very excited to
cater to this segment, bringing leading technology
innovation for the further and ongoing prosperity
of Alizz Islamic Bank customers. Ubanquity will
provide Alizz Islamic Bank with an integrated and
rich set of Omnichannel banking solutions. This
will grant the bank unique control over its existing
systems, using extensive real-time analytics
enabling augmented banking experiences.

Key takeaways • Partner with technology-driven solution providers

to enhance customer experiences

39 Ubanquity company website, accessed on October 15th 2018, https://www.ubanquity.com/ubanquity-signs-agreement-alizz-islamic-bank-

dynamic-oman-based-bank-pursuing-principles-islamic-banking-digital-excellence/.
28
5 GAPS AND OPPORTUNITIES

Gaps and
opportunities
Introduction

While the Islamic Fintech ecosystem has evolved substantially, there has been a clear concentration
in peer-to-peer finance, to address the critical need of making shariah-compliant financing more accessible
for businesses and consumers. Relative to demand and market potential, however, many gaps remain.

Ecosystem gaps

Reviewing the ecosystem in more detail, there are five particular areas of opportunity that this report
identifies, with substantial variation in the extent to which each has been addressed.

Diagram – mapping of current state of innovation

across Islamic financial services landscape

BIG AI QUANTUM P2P OPEN MOBILITY BLOCKCHAIN CLOUD CYBER-

DATA COMPUTING FINANCE BANKING ADOPTION SECURITY

Deposits A E
Borrowing
And Lending

Treasury

Trade B
Financing
Wealth C
Management

Insurance D

- high adoption - trend is substentially - moderate adoption - trend is - very limited - very high
adopted by service area partially adopted by service area
- low adoption adoption potential impact

Source: DinarStandard analysis and synthesis

 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 29

A. The role of analytics and big data in Islamic banking

Analytics and big data have played substantial roles in disrupting the global banking system – from identifying
and engaging customers to reducing operating costs through deploying machine-learning capabilities.

Islamic finance institutions have sought to incorporate AI and big data into their operations – notably,
Maybank has a group finance office that employs analytics, and Emirates Islamic using HR Panda,
an AI program that could automate 50% of the bank’s recruitment processes.40

However, there remains substantial room for greater application of AI and big data across the Islamic finance
Industry.

B. The critical and varied need for Islamic trade financing – enter the blockchain

Global trade finance is a $12.3-trillion industry in 2016, representing 75% of global trade41, with total intra-OIC
trade at $250 billion in 2017, with $1.8 trillion in imports across the OIC. Despite substantial potential, the
Islamic trade finance industry was estimated at only $186 billion in 2016, with substantial room for growth.42

It is clear Islamic trade finance is a critical priority – and is linked to facilitating greater trade across the OIC,
and there is a need for more startups, as well as better investment in innovation among Islamic finance
institutions, to fill a substantial funding gap.

Blockchain’s use in trade finance – where there is a need for substantial documentation and independent
verification, all of which can be simplified through smart contracts, has been strongly validated. Most notably,
HSBC issued a letter of credit for US food and agriculture firm Cargill via a smart contract earlier in 2018.
The trade finance transaction involved a bulk shipment of soybeans from Argentina to Malaysia. The letter
of credit was issued from HSBC to Dutch lender ING.43

By becoming more competitive, Islamic finance can position itself at the forefront of the broader ethical
finance industry, with ethical screening applied to $15 trillion of assets in 2016.44

C. Using AI and automation in wealth management

The success story of Wahed Invest is a particularly important development, with the company raising $12
million across Seed and Series A rounds45, solving a fundamental problem for Muslim consumers around the
world – providing cost-effective access to shariah-compliant equity investments.

The company has taken an important step towards making Islamic investing more accessible and more
automated. However, there remains substantial room for development in this segment of Islamic Fintech
– in particular, broadening access to equity investments, as well as introducing innovative models – such
as depositing spare change from users’ accounts and directly investing in a range of assets – such as
Acorns, a US-based startup, or providing a comprehensive and automated assessment of user financial
management, as provided by US-based Fintech companies, such as Mint.

40 "Emirates Islamic Fosters Innovation in Islamic Finance." MENA Herald. December 27, 2016. https://www.menaherald.com/en/money/finance-
investment/emirates-islamic-fosters-innovation-islamic-finance
41 Shariah-compliant Trade Finance:Developments and Opportunities. Salaam Gateway, 2017. https://repository.salaamgateway.com/images/iep/
galleries/documents/201704120808265506.pdf
42 Ibid.
43 Browne, Ryan. "HSBC Says It's Made the World's First Trade Finance Transaction Using Blockchain." CNBC. June 01, 2018. https://www.cnbc.
com/2018/05/14/hsbc-makes-worlds-first-trade-finance-transaction-using-blockchain.html
44 McKenna, John. "Here's What You Need to Know about Ethical Investment." World Economic Forum. August 23, 2017. https://www.weforum.
org/agenda/2017/08/what-you-need-to-know-about-ethical-investment/
45 Takahashi, Dean. "Wahed Raises $7 Million for Halal-based Investment Platform." VentureBeat. November 01, 2017. https://venturebeat.
com/2017/11/01/wahed-raises-7-million-for-halal-based-investment-platform/
30
5 GAPS AND OPPORTUNITIES

D. The varied need for Takaful and Re-Takaful

The Takaful industry has seen very limited Fintech activity, with a substantial role for startups to address
a range of needs. The development of a mutual health insurance scheme in India, which is seen as an
alternative to healthcare, is promising , and needs to be built upon, given the varied needs of Muslim
consumers from healthcare and auto to travel and home ownership.

With 80 startups identified globally as substantial disrupters to the conventional trillion-dollar insurance
industry47, Takaful is a hot area of focus in Islamic Fintech.

E. P2P finance and the next stage in its evolution

P2P finance has been a substantial focus to date for Islamic Fintech – with notable and exciting success
stories such as the rapid evolution of Ethis Ventures, among several other examples. P2P finance also plays
a critical link to the social development promise of Islamic Finance – connecting the unbanked to the financial
system and bringing economic benefits to the poor.

The next stage of P2P Islamic Fintech is scaling up – to that end, there is a substantial role for government
investment vehicles, as well as venture capitalists, as well as Islamic finance institutions – to provide the
financing, as well as the global platform, for established P2P finance startups to have a global impact.

The way forward

Islamic Fintech has much to offer – and there position to improve their service offering. Failing
is an important role of collaboration between to do so could lead to any number of unideal
startups and the established Islamic finance outcomes – existing banks could be relegated
institutions. The case of Al Barakah establishing to providing back office support, or could lose
an accelerator is an important example to substantial ground to either existing startups,
learn from – banks that work with Fintechs to or conventional financial institutions plugging
accelerate innovation are in a much stronger the gap for market demand.

45 Takahashi, Dean. "Wahed Raises $7 Million for Halal-based Investment Platform." VentureBeat. November 01, 2017. https://venturebeat.
com/2017/11/01/wahed-raises-7-million-for-halal-based-investment-platform/
46 Kader, Syed Ameen. "Muslims in India Develop Mutual Health Insurance Scheme as Alternative to Takaful." Salaam Gateway. May 24, 2018.
https://www.salaamgateway.com/en/story/muslims_in_india_develop_mutual_health_insurance_scheme_as_alternative_to_
takaful-SALAAM24052018121153/
47 "80 Hottest InsuranceTech Companies Shaking up the Trillion-Dollar Insurance Industry." Medici. March 09, 2016. https://gomedici.
com/80-hottest-insurancetech-companies-shaking-up-the-trillion-dollar-insurance-industry/
 6 ROADMAP 31

Roadmap
Given the tremendous opportunity identified earlier, Islamic Fintech is poised to drive Islamic Finance industry
to its next phase of evolution and opportunity. It is also the biggest platform to leapfrog the industry beyond
its current market penetration in Islamic economies that ranges from 5% to 30% in most Islamic economies.
Below is a high-level roadmap for the Islamic Fintech development for different stakeholders.

• Government agencies:

- Regulatory sand boxes: Many of the fintech driven business models are new to the regulators, peer-to-
peer lending, blockchain/cryptocurrency, data protection and security challenges arising etc. While UAE,
Malaysia, Bahrain are driving fintech sandboxes, there is much acceleration needed around these efforts
to be competitive with the conventional fintech markets
- Fintech innovation hubs & knowledge sharing: Again, as fintech entrepreneurs and established
institutions are seeking to innovate, government support through incentives and sharing best practices
are critical to developing consistency and generating best-in-class operating models
- Cybersecurity/ ML & KYC: Identifying and assessing money laundering (ML) and Know-your-customer
(KYC) risks associated with fintech firms and technology providers.
- Consumer protection/ awareness: A key consideration to enabling the Islamic fintech opportunity is
to support consumer protection policies and regulations and at the same time promoting consumer
awareness of Islamic fintech’s viability and trustworthiness. General Data Protection Regulation (GDPR)
compliance and other trust factors should be promoted.

• Financial institutions & startups

- Incumbent institutions engaging with startups/ innovation hubs: Established Islamic financial
institutions have woken up to the reality of the Fintech opportunity. CEO’s and their Boards need to treat
this as mission critical for the future of the organization and growth. The proven strategy worldwide
is driving corporate venture investment by identifying and engaging with startups and innovation hubs.
- Startups: Effectively engaging with incumbent institutions is key to the success of Islamic fintechs.
FinTech startups don’t just need capital, they need customers. At the same time, incumbents need
new approaches to drive change and deliver innovation. This is the current global fintech success trend
as highlighted by PwC in a 2017 survey showing worldwide, 82% of participants on average, expect to
increase partnerships with FinTech companies over the next three to five years.48
- Customer awareness: The general market, especially retail ambivalence towards Islamic finance, could
be seriously addressed with enhanced customer experience, engagement and Islamic finance’s social
impact potential through fintech adoption.

• Investments

- VC/PE Opportunity: Relative to a fast growing global fintech universe, Islamic fintech has seen only
a miniscule of investments. While this report has not exactly sized Islamic fintech VC/PE investments,
it is a fraction of the $38.1 billion invested globally in all of 2017 (see Global section).
- Corporate investments: Established Islamic banks are now investing in fintech projects. While this
is a good sign, the scale and scope of the investments need to be accelerated relatively to global trends.

48 PwC Global Fintech Report 2017

32
7 ACKNOWLEDGEMENTS

Acknowledgements

The Dubai Islamic Economy Development Centre and financial services sector, as well as the non-
(DIEDC) was established in December 2013 to financial sector. In this capacity, it will conduct
make Dubai the ‘Capital of Islamic Economy’, as research and specialist studies to determine the
envisioned by His Highness Sheikh Mohammed contribution of shariah-compliant activities to the
Bin Rashid Al Maktoum, Vice-President and Prime Emirates’ gross domestic product and explore
Minister of the UAE and Ruler of Dubai. The DIEDC how to extend this contribution to boost the
is equipped with the financial, administrative economy. The DIEDC is also mandated to create
and legal tools to promote economic activities new products and lines of service to law firms
compatible with Islamic law in Dubai’s goods specializing in finance structuring.

Email: [email protected]

www.instagram.com/iedcdubai/

https://twitter.com/IEDCDubai

www.linkedin.com/company/dubai-islamic-economy-development-center/

Dinar Standard™ is a USA based growth strategy sectors. Since 2008, DinarStandard has been global
research and advisory firm with branch office in thought leader on future innovation foresight and
Dubai and partner offices in Kuala Lumpur, Jakarta, strategies, the Islamic economies, as well social
Cairo and Istanbul. Its vision is to empower entrepreneurship. Its market insights are recognized
organizations for profitable and responsible global regularly in global media (CNN, BBC, Economist, etc.)
impact. Dinar Standard specializes in innovation, It has delivered over 50 high impact consultancy
investments and marketing strategies with a focus projects for clients from 12 different countries
on halal/Tayyab food, Islamic/ethical finance, halal representing most dynamic global corporates and
travel, Islamic NGOs and OIC-member country innovative government entities.
 8 GLOSSARY 33

Glossary

• Artificial Intelligence (AI): A set of technologies to • Mobility: Describes the ability to access
enable computers to execute “smart” tasks through information or applications in an untethered manner,
technologies such as natural language processing, usually through portable, networked computing
expert systems and machine learning, a process devices such as smartphones.
that applies algorithms to analyze data to generate
insights and make predictions. • Mudaraba: A contract between a capital provider
and a mudarib (skilled entrepreneur or managing
• Big Data: Uses analytical tools to process large partner), whereby the Islamic financial institution
data sets from multiple different sources driving provides capital to an enterprise or activity to
business decisions. be managed by the mudarib. Profits generated
by such an enterprise or activity are shared in
• Blockchain: Tracks and records data using a accordance with the terms of the mudaraba
distributed digital ledger system - verifying and agreement, while losses are borne solely by the
storing data across hundreds or thousands of capital provider, unless the losses are due to the
computers globally. mudarib’s misconduct, negligence, or breach of
contractual terms.
• Cloud Adoption: Stores resources on the internet (in a
“cloud”) and retrieves them using web-based tools and • Murabaha: The financing of a sale at a determined
applications instead of on a direct server connection. markup (cost plus profit margin).

• Cryptocurrency: A digital currency in which • Musharakah: A contract between an Islamic

encryption techniques are used to regulate the financial institution and a customer to provide
generation of units of currency and verify the transfer capital to an enterprise, or for ownership of real
of funds, operating independently of a central bank. estate or a moveable asset, either on a temporary
or permanent basis. Profits generated by the
• Cybersecurity: A set of technologies, processes enterprise or real estate/asset are shared in
and practices used to protect networks, accordance with the terms of the musharakah
computers, programs and data from attack agreement, while losses are shared in proportion
or unauthorized access. to each partner’s share of capital.

• Fintech: “4th Industrial Revolution* driven • Organisation of Islamic Cooperation (OIC):

technologies exponentially enhancing and/or An international organization with 57-member
disrupting 20th century financial services, operations, countries and with 53 countries being Muslim
business models, and customer engagement.” Majority countries. The organization states that
it is ‘the collective voice of the Muslim world’.
• Ijarah: Equivalent to lease financing in conventional
finance. The purchase of the leased asset at the • Open Banking: Uses application program
end of the rental period is optional interfaces (APIs) that allow third-party service
providers to access customer banking data.
• Insurtech: The use of technology innovations
designed to squeeze out savings and efficiency • Payments/Transactions: Companies whose
from the current insurance industry model. business model revolves around using technology
to provide the transfer of value as a service and/or
• Islamic Fintech: Fintech technologies exponentially ANY company whose core business is predicated
enhancing and disrupting 20th century Islamic on distributed ledger (blockchain) technology
financial services, operations, business models, AND/OR relating to any use case of cryptocurrency
and customer engagement. (e.g. Bitcoin).
34
8 GLOSSARY

• Peer 2 Peer Finance: A technology-based service • Wakalah: An agency contract where the
that connects businesses directly with investors, investment account holder (principal) appoints an
through a web-based platform for a fee. Islamic financial institution (agent) to carry out an
investment on its behalf, either with or without a fee.
• Quantum Computing: Applies principles from
quantum theory to develop computers with • Wealth/Investment Management: Platforms
significantly more processing power. whose primary business involves the offering of
wealth management or investment management
• Regtech: The use of information technology services using technology to increase efficiency,
to enhance regulatory processes. It puts a lower fees or provide differentiated offerings
particular emphasis on regulatory monitoring, compared to the traditional business model. Also
reporting and compliance and is thus benefiting includes technology platforms for retail investors
the finance industry. to share ideas and insights both via quantitative
and qualitative research.
• Retakaful: A form of Islamic reinsurance that
operates on the takaful model. • Zakat: One of the five pillars of Islamic, a
religious obligation for all Muslims who meet the
• Robo-advisors: Applications that combine digital necessary criteria of wealth. It is a mandatory
interfaces and algorithms, and can also include charitable contribution, the right of the poor to find
machine learning, in order to provide services relief from the rich, and is considered to be a tax,
ranging from automated financial recommendations or obligatory alms.
to contract brokering to portfolio management
to their clients, with limited human intervention
or none. Such advisors may be standalone firms
and platforms, or can be the in-house applications
of incumbent financial institutions.

• Sadaqah: An Islamic term that means to voluntarily

give charity.

• Shariah-compliant: Meeting the requirements

of Islamic law.

• Smart Contracts: Programmable applications

that, in financial transactions, can trigger financial
flows or changes of ownership if specific events
occur. Some smart contracts are able to self-verify
their own conditions and self-execute by releasing
payments and/or carrying out others’ instructions.

• Sukuk: Trust certificates that are generally

issued by a special-purpose vehicle (SPV or the
issuer), the proceeds of which are, generally, on-
lent to a corporate, financial institution, insurance
company, sovereign, or local or regional government
(the sponsor), for the purpose of raising funding
according to Islamic principles. Sukuk are issued
on the basis of one or more Islamic contracts (ijara,
murabaha, wakala, among others), reflecting either
investment or financing contracts.

• Takaful: A form of Islamic mutual insurance based

on the principle of mutual assistance
 9 APPENDIX 35

Appendix
List of Islamic Fintech companies identified for this report:

Company Name Country Area of Focus

570easi France Business & Consumer Financing
Abundance UK Business & Consumer Financing
Adab Solutions UAE Business & Consumer Financing
Alami Sharia Indonesia Business & Consumer Financing
Amartha Indonesia Business & Consumer Financing
Ammana Indonesia Business & Consumer Financing
Angsur Indonesia Business & Consumer Financing
ArabCoin UAE Deposits
ArabianChain UAE Deposits
Asy-Syirkah Indonesia Business & Consumer Financing
Ataplus Malaysia Business & Consumer Financing
Beehive UAE Business & Consumer Financing
BerryPay Indonesia Deposits
Blossom Finance Indonesia Business & Consumer Financing
bsalam Indonesia Business & Consumer Financing
CoinBundle USA Wealth Management
CoinFunded Sweden Business & Consumer Financing
ConexCap France Wealth Management
Croowd Indonesia Business & Consumer Financing
Dana Syariah Indonesia Business & Consumer Financing
DANAdidik Indonesia Business & Consumer Financing
Danakoo Indonesia Business & Consumer Financing
Divvy USA Business & Consumer Financing
Easi Up! France Business & Consumer Financing
eCarWorld.in India Business & Consumer Financing
efunding Indonesia Business & Consumer Financing
Energia Positivia Italy Business & Consumer Financing
Ethis Crowd Singapore Business & Consumer Financing
Eureeca UAE Business & Consumer Financing
Everex Singapore Business & Consumer Financing
Finocracy UAE Business & Consumer Financing
Finterra Singapore Wealth Management
Global Sadaqah Malaysia Wealth Management
Goolive Indonesia Business & Consumer Financing
Growmada UAE Business & Consumer Financing
Habibi Coin UAE Wealth Management
HalalSky USA Business & Consumer Financing
36
9 APPENDIX

HelloGold Malaysia Business & Consumer Financing

Humming Crowd Realty UAE Business & Consumer Financing
Huulk Switzerland Business & Consumer Financing
iGrow Indonesia Business & Consumer Financing
Indves Indonesia Business & Consumer Financing
Insha Germany Deposits
Insure Halal UK Insurance
InvesProperti Indonesia Business & Consumer Financing
Investree Indonesia Business & Consumer Financing
Investroo USA Wealth Management
Invoice Wakalah Pakistan Trade financing
JBK Indonesia Business & Consumer Financing
kandang.in Indonesia Business & Consumer Financing
Kapital Boost Singapore Business & Consumer Financing
kerjasama.com Indonesia Business & Consumer Financing
Kitabisa.com Indonesia Business & Consumer Financing
LaunchGood USA Business & Consumer Financing
Lemonade USA Insurance
Liberis UK Trade financing
Maliyya UAE Business & Consumer Financing
Maslahatkita Indonesia Business & Consumer Financing
Mehrabane Iran Business & Consumer Financing
Mercy Crowd UK Business & Consumer Financing
Mobilima Indonesia Business & Consumer Financing
MoneeMint UK Wealth Management
Money Fellows UK Business & Consumer Financing
Oorth Indonesia Wealth Management
Ovamba USA Business & Consumer Financing
PayHalal Malaysia Wealth Management
PayZakat Russia Wealth Management
pitchIN Malaysia Business & Consumer Financing
PropTech Crowd UK Business & Consumer Financing
Provesty Indonesia Business & Consumer Financing
QardHasan UK Business & Consumer Financing
Qazwa Indonesia Business & Consumer Financing
Ripple USA Deposits
Rohingya Project Malaysia Business & Consumer Financing
Seedout Pakistan Business & Consumer Financing
Shekra Egypt Business & Consumer Financing
Skola Fund Malaysia Business & Consumer Financing
SmartCrowd UAE Business & Consumer Financing
Smile For Charity USA Wealth Management
Stellar USA Deposits
StrideUp UK Business & Consumer Financing
Syarfi Indonesia Business & Consumer Financing
 ISLAMIC FINTECH REPORT 2018: CURRENT LANDSCAPE & PATH FORWARD 37

SyarQ Indonesia Business & Consumer Financing

Tamasia Indonesia Wealth Management
Teek Taka Bangladesh Deposits
Uplift Mutuals India Insurance
Wahed Invest USA Wealth Management
Wakapp Indonesia Wealth Management
Waqfe Bahrain Deposits
Yielders UK Business & Consumer Financing
Yomken Egypt Business & Consumer Financing
Zakatify USA Wealth Management
Zoomaal Lebanon Business & Consumer Financing