The Islamic finance sector are urged to embrace the financial technological revolution which Bank Negara Malaysia Governor Datuk Muhammad bin Ibrahim says has the potential to be the next game-changer.

In his keynote address to the Global Islamic Finance Forum 5.0, the newly-appointed governor said technologically-driven applications have spread to nearly every segment of the financial sector, with the number of fintech start-ups having doubled in the last one year.MDimg1_1

“Fintech is challenging the status quo of the financial industry,” he told the audience of some 1,000 delegates from around the world.

He noted that the potential impact can be significant, with 10 to 40 per cent of banking revenue possibly at risk by 2025 due to fintech innovations outside banking institutions that are able to offer significant pricing advantage.

He, however, said there are many opportunities in this revolution, with one example being the

Malaysian initiative to launch the Investment Account Platform (IAP) in February this year. This innovation is 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.

But as fintech is not without risk, he said Bank Negara is reviewing the changes needed to its regulatory framework to ensure that it remains appropriate to manage the risk while encouraging productive innovation.

He also said Islamic finance was one of the fastest-growing segments in the financial industry in many parts of the world, having registered a double-digit growth rate in the last decade. It is estimated to surpass US$3 trillion in total asset size by 2025.

He said its reach and influence has extended beyond traditionally Islamic markets, with global sukuk issuances increasing by 13 per cent in the first quarter of this year.

“The values and principles that Islamic finance carry have opened new pathways towards achieving economic prosperity while safeguarding the interest of the public. What used to be a novel idea has become mainstream. Indeed, Islamic finance is for all,” he said.

As it continues to grow, Datuk Muhammad urged the sector to embrace the cause of responsible, inclusive and sustainable finance which is gaining significant momentum in the developed markets as well as emerging markets.

“Islamic finance is uniquely positioned to champion this cause, guided by the overarching Shariah principle which emphasises the protection and preservation of the benefits and interests of society at large,” he said.

He noted that the first Socially Responsible Investment Sukuk issued last year was a good example of impact investing that generated positive social outcomes.

Over the longer term to sustain a value-based financial ecosystem, he said there has to be serious efforts to align performance measures to take into account both economic and social outcomes, as well as to ensure the continued availability of top-notch talent to drive innovative business strategies to realise the full potential of Islamic finance.

To elevate the Islamic finance industry to the next level, he said, there has to be a formulation of game-changing strategies to bring in elements that leverage on technology, accelerate innovation and develop well-rounded talent.

“Our future will be secured if we remain relevant.”