Bank Negara: Fintech will be game-changer for Islamic finance

Bank Negara Malaysia deputy governor Datuk Muhammad Ibrahim : "We have now reached a critical juncture in our migration to e-payments.

KUALA LUMPUR: The Islamic finance sector must embrace the financial technological revolution, which will be the next game-changer for the industry, said the new Bank Negara Malaysia Governor.

Datuk Muhammad Ibrahim, who was appointed to the post on May 1, said on Wednesday that technologically-driven applications had spread to nearly every segment of the financial sector, with the number of fintech start-ups having doubled in the last year.

“Fintech is challenging the status quo of the financial industry,” he said in his keynote address at the Global Islamic Finance Forum 5.0. 

He said the potential impact of fintech could be significant, with 10% to 40% of banking revenue possibly at risk by 2025 due to innovations outside banking institutions that are able to offer a significant pricing advantage. 

However, he said, there were are many opportunities in the revolution, such as the Malaysian initiative to launch the Investment Account Platform (IAP) in February this year. 

It was the first Islamic banking-intermediated internet-based platform that combines the expertise of Islamic banks and efficiency of technology to channel funds from investors to viable economic ventures. 

Muhammad said Bank Negara was reviewing the changes needed to its regulatory framework to ensure that it remained appropriate to manage the risks involved, while encouraging productive innovation.