When it comes to technology, Islamic banks have largely focused their attention on their core systems. Given the young age of the industry and the lack of universally accepted and enforceable standards, this is not surprising. Across the Muslim world different Sharia boards have adopted different approaches, resulting in differences in the execution of the same products and services.
As the Islamic banks were being set up, they sought to minimise risks created by such diversity by partnering with established core banking platform providers, but whose products were developed for the conventional banking system. So, the vast majority of Islamic banking platforms were built on top of conventional ones with Sharia-compliant workarounds. This not only increased cost and inflexibility but also created the perception that Islamic finance is more complex.
I have always found this perception odd. After all, Islamic finance models were adopted over 1,400 years ago by communities that were essentially uneducated, with many unable to read, or write. Yet, despite these handicaps they were able to understand and adopt these models and develop economies that flourished and led the world for hundreds of years. With the levels of literacy and resources at our disposal today, to now say that that we find these models complex and difficult to implement is hard to comprehend.
Regardless, as start-ups, the fundamental drive of Islamic banks had to be growth and sales. This meant expanding Sharia-compliant products and services which fuelled work-around driven development and evolution of Sharia-compliant core banking platforms. This cycle has monopolised the attention of most Islamic banks, and has led to sales centric customer engagement models instead of service ones.
All of this however, is preventing Islamic banks from capitalising on the latest technology trends, as most of today’s trends and innovations are gravitating towards enhancing ‘customer experience’ capabilities. The result is that for Islamic banks, the ‘service’ element of their offering is significantly underdeveloped.
The assumption that the Halal nature of products is enough to retain today’s customer is flawed. With growing demands for personalised service and radical shifts in consumer behaviour, Islamic banks have no choice but to make service a priority.
The emerging technology trends of the day are undoubtedly cloud, big data, mobility, social media, and security, with the internet of things beginning to raise its head just across the horizon. While most of these names are the height of technology fashion these days, for me it’s the most understated name out of these that represent the beginning of the customer experience journey — security.
Ensuring that the wealth and personal information of customers is safe is paramount for all banks. While most Islamic banks are capable of extending standard internet banking services via mobile, unless they are able to authenticate the customer with confidence, they err on the side of caution and offer a limited selection of functionality.
But with advances in real-time transaction pattern monitoring, mobile technology, biometrics such as voice signature, facial and fingerprint recognition, as well as government services such as Emirates ID, authenticating and recognising a customer can be done conveniently and securely.
With these hurdles crossed, banks have the ability to offer a variety of personalised services to their customers like never before. ‘Big data’ is allowing banks to understand their customers’ needs and trends at a granular level whilst simultaneously providing customer with personalised insights, like showing them how they compare to others with similar demographic profiles.
Cloud technology is shrinking development life cycles and costs, thus increasing agility and unified experiences. Mobility is driving greater intimacy with customers. Smartphones, tablets, and wearable devices like Google Glass and the iWatch are bringing or expected to bring banks closer to the point of transaction. Social media is changing the way banks communicate and is empowering customers and employees alike. At Noor Bank we adopted the corporate social media platform Yammer two years ago with great success, as part of our strategy to up-skill all staff to be able to engage with customers on social media confidently and effectively.
The ‘internet of things’ is another trend to watch, with devices sharing data with each other the reality of intelligent homes is not far. You will know when you are running low on eggs and be able to order more from wherever you are. The wealth of lifestyle data generated will be the future driver of banking products and services.
But can the UAE’s Islamic banks bring themselves to refocus their attention and exploit what technology has to offer for the benefit of both their customers and their bottom lines? Dubai’s ambition to become the ‘Capital of the Islamic economy’ will, inevitably, force local Islamic banks to prioritise technology driven innovation if they wish to support the nation’s Islamic economy goals by being recognised as the best in the world. Coupled with the rapid adoption of technology by the government and regulators in the form of Emirates ID and mWallet, the Islamic banking industry is set for rapid evolution and disruption. Any Islamic bank not agile enough to adapt will be left behind, and risk disappearing completely.
Dr Fraz Chishti is chief innovation officer (CINO) at Noor Bank.
