FinTech and Islamic Finance-Challenges and Opportunities

Fintech is the merger of two terms: finance and technology. Islamic finance provides financial services to the customers in accordance to the rules and regulations prescribed by Shariah. As Islamic finance is growing by leaps and bounds since the last two decades, and so is FinTech, in the last decade. The main objective of Islamic finance is to enhance the economic growth in the society with the use of Shariah compliant financial solutions.  Likewise, FinTech provides cost effective solutions for the companies and especially startups that help in the reduction of their costs and improvement in business processes. Financial industry is a very elusive yet important sector in the society, and hence heavily regulated by the regulators. The introduction of FinTech in countries, especially developing countries like Pakistan can help to boost economic growth but this will increase the workload of regulators as they must ensure stability of the financial system and to protect it from frauds/crises. Hence, proper monitoring by the regulatory authorities is crucial to avoid cyber-attack, data leakages and data theft as it can lead to misuse of the information. For the good results of FinTech, not only the users but the regulators have to be aware with the structure and functioning of the system and the regulations should be in place proactively. This paper focuses on the three main aspects namely: explaining the FinTech, opportunities for Islamic financial institutions and the challenges/issues faced by the institutions in implementing FinTech solutions. The paper also provides the current status of FinTech application globally and the potential in it to serve the poorer segments of society. The review of literature approach is used for the paper