JEDDAH: Over the past decade, financial technology — widely referred to as FinTech — has grown primarily due to growing Internet access worldwide and the emergence of smartphones and apps.
According to the Ericsson Mobility Report published last year, 70 percent of the world’s population is expected to be using smartphones by 2020.
As smart devices are increasingly becoming part of everyday life for most people in the digital age, it is essential for the banking sector to become more innovative to enhance its productivity.
“We’re transitioning toward a situation where growth for companies and economies will have to depend more on productivity than before,” said Jarmo Kotilaine, chief economist at the Bahrain Economic Development Board (EDB).
“To achieve that, you will need better management, better innovations, new distribution channels and new capital.”
Increasing the efficiency of digital banking will particularly serve customers in Saudi Arabia, where banks’ working hours overlap with those of most employees.
Comprehensive digital banking can save them a journey to the branch. Moreover, Saudi Arabia is a pioneer when it comes to technology penetration in the region.
“The usage of technology in Saudi Arabia is advanced, whether in retail banking, cash management or corporate,” said Talat Hafiz, secretary-general of Saudi banks’ Media and Banking Awareness Committee.
“When it comes to technology, what applies in conventional banking also applies in Islamic banking.”
He added: “Using financial technology improves the quality of the banking experience among clients. It influences the speed and accuracy of the experience. Technology makes products more reachable to clients.”
The change in behavior patterns among clients in the banking sector requires banks to respond to new customer needs and rethink how they deliver services to their clients, taking them to a phase of digital banking.
“As a matter of policy, we in SAMA (the Saudi Arabian Monetary Authority) encourage all regulated institutions to be responsive to the needs of their customers, and have always supported the development of products that meet those needs,” said SAMA Gov. Ahmed Al-Kholifey.
A report published this month by Ernst & Young (EY) said the adoption of financial technology is not an option anymore, but an essential requirement for Islamic banks to gain more market share.
As customer technology penetration in the Gulf Cooperation Council (GCC) increases, users are expected to become more familiar with using digital tools in their banking transactions, retail investments and peer-to-peer (p2p) lending and crowdfunding.
According to the EY report, Saudi Arabia, the United Arab Emirates (UAE) and Malaysia are the three largest Islamic banking markets in terms of assets.
Saudi Arabia takes the lead with 34 percent market share, followed by 17 percent and 13 percent in the UAE and Malaysia, respectively.
Ashar Nazim, partner in EY’s Global Islamic Banking Center, said the “FinTech revolution” — in terms of data, analytics, robotics and artificial intelligence — has the ability to bring scattered data together and help decision-makers make better decisions.
“We believe the last 20 years of Islamic banking have been about innovation in Shariah contracts and Shariah-compliant products,” said Nazim.
“The next 20 years will be about combining smart technology with Islamic banking in order to grow further.”
The size of the Islamic finance industry is now close to $2 trillion. “We believe there’s an additional trillion dollars in the industry which isn’t formally captured,” Nazim added.
He said this additional trillion dollars is primarily from endowments (waqf), high net worth and institutional investing done in a number of infrastructure projects in the conventional and Islamic markets.
“Bringing the additional $1 trillion into the Islamic finance industry is where FinTech can be very important,” Nazim said.
FinTech: A threat?
As financial technology is deemed to better facilitate banking services, it can also be seen as a disruption to the banking sector.
Looking at the history of Islamic finance, it was seen as a disruption to conventional finance.
“FinTech is now disrupting the overall finance world. The big banks are slower in adopting technology because they have a legacy to protect, but start-ups are more welcoming in adopting change,” Nazim said.
The EY report showed that in FinTech space in the GCC, Islamic finance is still in “dismissive mode,” thinking it is not going to impact the industry.
Nazim said the mindset has to change: “We have to start thinking as a start-up, and that requires a complete change in behavioral economics, in terms of how organizations are run.”
He added: “Bringing smart technology by itself is of no use unless the organization’s culture changes. Islamic banks are in better positions because they’re smaller than conventional and more local. It’s easier for them to change.”
FinTech can open doors for further national and international collaboration in the banking industry.
There is a growing realization within banks that they cannot afford to do everything by themselves.
“There has to be collaboration within the industry. At the moment collaboration is at a national level, and in future it will be at cross-country level. The next 20 years will be collaborating in terms of smart technology,” said Nazim.
“FinTech shouldn’t be seen as a threat or as competition. There is tremendous potential for collaboration between the GCC and Malaysia in FinTech.”
He added: “These smart technologies increase levels of trust and the speed with which you do these transactions.”
Speaking at the recent World Islamic Banking Conference (WIBC) in Bahrain, Rasheed Mohammed Al-Maraj, governor of the Central Bank of Bahrain (CBB), said the smart use of technology is a game-changer in banking, just as in other aspects of daily life.
“Technology has made it possible to access more customers, in a more comprehensive way, at a lower cost, than in the past,” he said.
“Islamic banks must make full use of these technological enhancements and invest more in this space.”
Al-Maraj added: “The CBB believes in embracing new technology, and will soon be issuing regulations to facilitate FinTech solutions. We’d like to see Islamic banks come forward and take the lead in this area. FinTech is leading the way.”
According to SAMA’s Al-Kholifey, all the 12 banks operating in Saudi Arabia offer Shariah-compliant finance, as do several branches of foreign banks that are licensed to operate in the Kingdom.
“Saudi retail banking is overwhelmingly comprised of Shariah-compliant products, and we note significant growth of Shariah-compliant growth in the corporate sector as well, growth that we expect to see continue in the next decade,” he said.
EY says the introduction of FinTech will increase the Islamic finance customer base, which is roughly 100 million today, to 250 million by 2020.
“So more than twice the growth in customers can be achieved with the adoption of FinTech,” Nazim said.
• In this continuing special and exclusive series on Islamic Finance and Banking, Arab News will deal with another crucial aspect of the industry on Sunday, Dec. 25.
The dawn of financial technology in Islamic finance
The dawn of financial technology in Islamic finance
World must prioritize resilience over disruption, economic experts warn
- Al-Jadaan said that much of the anxiety dominating markets reflected a world that had already been shifting for years
- Pointing to Asia and the Gulf, Al-Jadaan said that some countries had already built models based on diversification and resilience
DAVOS: Saudi Arabia’s Finance Minister Mohammed Al-Jadaan urged policymakers and investors to “mute the noise” and focus on resilience, as global leaders gathered in Davos on Friday against a backdrop of trade tensions, geopolitical uncertainty and rapid technological change.
Speaking on the final day of the World Economic Forum in Davos, Al-Jadaan said that much of the anxiety dominating markets reflected a world that had already been shifting for years.
“We need to define who ‘we’ are in this so-called new world order,” he said, arguing that many emerging economies had been adapting to a more fragmented global system for decades.
Pointing to Asia and the Gulf, Al-Jadaan said that some countries had already built models based on diversification and resilience. In energy markets, he pointed out that the focus should remain on balancing supply and demand in a way that incentivized investment without harming the global economy.
“Our role in OPEC is to stabilize the market,” he said.
His remarks were echoed by Saudi Arabia’s Minister of Economy and Planning Faisal Alibrahim, who said that uncertainty had weighed heavily on growth, investment and geopolitical risk, but that reality had proven more resilient.
“The economy has adjusted and continues to move forward,” Alibrahim said.
Alibrahim warned that pragmatism had become scarce, trust increasingly transactional, and collaboration more fragile. “Stability cannot be quickly built or bought,” he said.
Alibrahim called for a shift away from preserving the status quo towards the practical ingredients that made cooperation work, stressing discipline and long-term thinking even when views diverged.
Quoting Saudi Arabia’s founding King Abdulaziz Al-Saud, he added: “Facing challenges requires strength and confidence, there is no virtue in weakness. We cannot sit idle.”
President of the European Central Bank Christine Lagarde stressed the importance of distinguishing meaningful data from headline noise, saying: “Our duty as central bankers is to separate the signal from the noise. The real numbers are growth numbers not nominal ones.”
Managing Director of the IMF Kristalina Georgieva echoed Lagarde’s sentiments, saying that the world had entered a more “shock prone” environment shaped by technology and geopolitics.
Director General of the World Trade Organization Ngozi Okonjo-Iweala said that the global trade systems currently in place were remarkably resilient, pointing out that 72 percent of global trade continued despite disruptions.
She urged governments and businesses, however, to avoid overreacting.
Okonjo Iweala said that a return to the old order was unlikely, but trade would remain essential. Georgieva agreed, saying global trade would continue, albeit in a different form.
Georgieva warned that AI would accelerate economic transformation at an unprecedented speed. The IMF expects 60 percent of jobs to be affected by AI, either enhanced or displaced, with entry-level roles and middle-class workers facing the greatest pressure.
Lagarde warned that without cooperation, capital and data flows would suffer, undermining productivity and growth.
Al-Jadaan said that power dynamics had always shaped global relations, but dialogue remained essential. “The fact that thousands of leaders came here says something,” he said. “Some things cannot be done alone.”
In another session titled Geopolitical Risks Outlook for 2026, former US Democratic representative Jane Harman said that because of AI, the world was safer in some ways but worse off in others.
“I think AI can make the world riskier if it gets in the wrong hands and is used without guardrails to kill all of us. But AI also has enormous promise. AI may be a development tool that moves the third world ahead faster than our world, which has pretty messy politics,” she said.
American economist Eswar Prasad said that currently the world was in a “doom loop.”
Prasad said that the global economy was stuck in a negative-feedback loop and economics, domestic politics and geopolitics were only bringing out the worst in each other.
“Technology could lead to shared prosperity but what we are seeing is much more concentration of economic and financial power within and between countries, potentially making it a destabilizing force,” he said.
Prasad predicted that AI and tech development would impact growing economies the most. But he said that there was uncertainty about whether these developments would create job opportunities and growth in developing countries.
Professor of international political economy at the University of New South Wales in Australia, Elizabeth Thurbon, said that China was driving a Green Energy transition in a way that should be modeled by the rest of the world.
“The Chinese government is using the Green Energy Transition to boost energy security and is manufacturing its own energy to reduce reliance on fossil fuel imports,” she explained.
Thurbon said that China was using this transition to boost economic security, social security and geostrategic security. She viewed this as a huge security-enhancing opportunity and every country had the ability to use the energy transition as a national security multiplier.
“We are seeing an enormous dynamism across emerging market economies driven by China. This boom loop is being driven by enormous investments in green energy. Two-thirds of global investment flowing into renewable energy is driven largely by China,” she said.
Thurbon said that China was taking an interesting approach to building relationships with countries by putting economic engagement on the forefront of what they had to offer.
“China is doing all it can to ensure economic partnership with emerging economies are productive. It’s important to approach alliances as not just political alliances but investment in economy, future and the flourishment of a state,” she said.
The panel criticized global economic treaties and laws, and expressed the need for immediate reforms in economic governing bodies.
“If you are a developing economy, the rules of the WTO, for example, are not helpful for you to develop. A lot of the rules make it difficult to pursue an economic development agenda. These regulations are not allowing the economies to grow,” Thurbon said.
“Serious reform must be made in international trade agreements, economic bodies and rules and guidelines,” she added.
Prasad echoed this sentiment and said there was a need for national and international reform in global economic institutions.
“These institutions are not working very well so we can reconfigure them or rebuild them from scratch. But unfortunately the task of rebuilding falls into the hands of those who are shredding them,” he said.
WEF attendees were invited to join the Global Collaboration and Growth meeting to be held in Saudi Arabia in April 2026 to continue addressing the complex global challenges and engage in dialogue.
