FINTECH: - Fintech overview - Landscape of Fintech update - Islamic Fintech - Fintech applications - Fintech risk

1. FINTECH:
overview and
applications

2. Dr. ABDULLAH MOH’D AHMED AYEDH
Associate Professor at Faculty of Economic and Muamalat,
Universiti Sains Islam Malaysia (USIM)
Dr. KINAN SALIM
Assistant Professor at the School of Graduate
and Professional Studies, INCEIF

4. New technology to
improve the delivery &
use of
financial services
Technology
companies offering
alternative solutions
to the conventional
banking system

5. What happened? Why Fintech?

7. Technology
inclusion

8. How does Fintech disrupt banks?
Source: Landscaping UK Fintech Commissioned by UK Trade & Investment

9. Fintech in
Financial
Services

10. Banks vs Fintech

11. Future of Banking: Disruptive FinTech
25% of financial
services are at risk of
being lost to standalone
FinTech companies
within five years
Disrupters attack
some of the most
profitable elements
of the financial
services value
chain
Source: PwC Financial Services Technology 2020 and Beyond

12. Source: https://www.cnbc.com/2020/09/16/market-value-of-big-fintech-companies-rises-to-1-trillion-more-than-the-largest-banks.html

13. Klarna
“buy now pay
later”
At $31 billion, the company’s
value is comparable to major
financial houses such as
Barclays, Credit Suisse and
Swiss Re and is larger than
Germany’s biggest lender
Deutsche Bank
Source: https://www.reuters.com/article/us-klarna-fundraising-idUSKCN2AT22U
Fintech vs Banks

14. Fintech vs Banks

15. Big tech credit
Large IT companies whose primary activity is digital
services, rather than financial services even though their
primary offering is digital services.

16. Future of Banking: Disruptive Fintech
Source: https://www.cbinsights.com/research/report/amazon-across-financial-services-fintech/

17. Big Techs and Challenger Banks Strengths

18. Source: https://voxeu.org/article/fintech-and-big-tech-credit-markets-around-world
Big tech is Overtaking Fintech

19. 2020 $16.7 B

20. Update of the world
landscape of
FinTech

21. Source: Pulse of FintechH1'20, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of 31 December 2020.
$105.3
Total global investment activity (VC, PE and M&A) in FinTech 2017-2020*
2,861 deals

22. Global FinTech investments in 2020
$105.3B with 2,861 deals
Source: Pulse of FintechH1'20, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of February 2021.

23. In 2020, fintech investment in the
Americas reached
$79.25B with 1,364 deals

24. 7
5

25. Payments/Transactions
55%
Lending
15%
Digital Banking
17%
Regtech
8%
Wealth/Investment
5%
Fintech Investment Segments 2020
Payments/Transactions Lending Digital Banking Regtech Wealth/Investment
Source: Pulse of FintechH1'20, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of 30th June 2020.

27. $95B

28. FinTech
Adoption

29. Consumer FinTech
adoption across 27
markets
Average Global
FinTech adoption
64%
Source: Global FinTech Adoption Index 2019, EY.

30. Source: Global FinTech Adoption Index 2019, EY.

31. SME FinTech
adoption across
5 markets
61% China
23% USA
18% UK
16% South Africa
11% Mexico
25% of SMEs have
adopted FinTech
globally
Source: Global FinTech Adoption Index 2019, EY.

33. Islamic
FinTech

34. Is IF different
from CF?

35. WHY ISLAMIC FINANCE/FINTECH?
Broad Objectives of Shari’ah
Promote and develop what is good
Prevent and prohibit what is harmful

36. WHY ISLAMIC FINANCE/FINTECH?
Prevent the act of
creating money
through lending
Promote justice
and equitable
distribution of
wealth
Promote high
moral standard
and ethical
values
Ensure wealth does
not circulate among
the few rich
Create a society of
investors rather
than debtors

37. WHY ISLAMIC FINANCE/FINTECH?
No “unequal transactions” or “unethical” investments
Real Economic transactions
Risk & Profit Sharing
No engaging in businesses
involved in forbidden activities
No gambling
No Gharar
No
Riba

38. Fintech Product
• Innovation
• Financial Inclusion
• Solving problems in light of
the Islamic worldview
Contract Elements
(Micro)
• Riba
• Gharar
• Maysir
Content & Process Elements
(Micro)
• Prohibited Item (for Muslims)
• Financial Model
Islamic Fintech Product
• Shariah compliant product
Consequential Elements
(Macro)
• Promote justice in society
• Preserve wealth distribution
• Humanity
ISLAMIC FINTECH PRODUCT DEVELOPMENT

39. Muslims have been under-served by both traditional banks and
modern Fintech
Muslim
population
50%
20%
Average Age
below 30
Muslim youth are digital natives
Source: “The Future of the Global Muslim Population” Pew Research, January 2011

40. Alternative
Financing Blockchain &
Cryptocurrencies
Takatech
(Islamic
Insutech)
Personal Finance
Management
Islamic
Enablers P2P Financing
Robo Advisers
Trading &
Investment
Payment,
Remittance & FX
Crowdfunding
Digital Banking
Data &
Analytics

41. Source: IFN FINANCIAL INNOVATION REPORT, 2020

42. IFN Fintech Survey-Report, 2020

43. Source: IFN FINANCIAL INNOVATION REPORT, 2020

44. 12211
5779
3583
2849
144 14 83 47
0
2000
4000
6000
8000
10000
12000
14000
Total North America Europe, the Middle East and Africa Asia Pacific
Fintech Start-up Islamic Fintech start-up
Number of Global Conventional Fintech Startups vs Islamic Fintech Startups
Financeonline 2020, & IFN Fintech Survey-Report, 2020

45. IFN Fintech Survey-Report, 2020

46. Source: IFN FINANCIAL INNOVATION REPORT, 2020

47. Source: IFN FINANCIAL INNOVATION REPORT, 2020

48. Source: IFN FINANCIAL INNOVATION REPORT, 2020

49. Source: IFN FINANCIAL INNOVATION REPORT, 2020

50. (Digital Banking)
Source: IFN FINANCIAL INNOVATION REPORT, 2020

51. Source: IFN FINANCIAL INNOVATION REPORT, 2020

52. Source: IFN FINANCIAL INNOVATION REPORT, 2020

53. Source: IFN FINANCIAL INNOVATION REPORT, 2020

54. Source: IFN FINANCIAL INNOVATION REPORT, 2020

55. Source: IFN FINANCIAL INNOVATION REPORT, 2020

56. Source: IFN FINANCIAL INNOVATION REPORT, 2020

57. Source: IFN FINANCIAL INNOVATION REPORT, 2020

58. Source: IFN FINANCIAL INNOVATION REPORT, 2020

59. Fast Growing
Source: Global Islamic Fintech Report 2021

60. Source: Global Islamic Fintech Report 2021

61. Country Index of Islamic Fintech
Source: Global Islamic Fintech Report 2021
64 key Islamic Fintech markets
OIC vs. non OIC countries
90%
Top 10
30%
Next Top 10

62. Digitalisation in Islamic banks

63. Driving Innovation
in Banking Services:
Product Innovation
Through Fintech
(Fintech Verticals)

64. Fintech tree
A taxonomy of the
fintech environment
Source: https://www.bis.org/fsi/publ/insights23.pdf
Fintech
activities
Enabling
technologies
Policy
enablers
Cyber security
Innovation facilitators
Data protection
Digital ID
Open banking

65. How Banks Responding to the Fintech

66. First-Year Engineering/Management Graduate Salaries
Source: Bloomberg

69. Building Agile Fintech Platforms & an Ecosystem
Challenger-driven
a broader range of
services to satisfy the
clients’ needs
Incumbent-driven
Multiple cooperation
vehicles, optimise internal
processes, customer journey
launch joint products,
create an ecosystem of
financial services around the
bank.
Source: https://medium.com/@untone/rebundling-the-new-mantra-for-financial-services-6e066fbe2d4e

70. Fintech

71. Fintech
Risk
•IPOs
•Mergers & Accquisitions
•No substantial operational
history for investors to evaluate
•Evolving regulation issues
•Over-regulation and regulatory
uncertainty
•Reputational risk
•Behavioural risk
•Anti Money Laundering
specifications
•Attraction and retention of talent
•Wellbeing & Performance of staff
•Staff Competency
•Fraud
•Clients, Products & Business
Practice
•Governance Processes
•Service Provision
•Data provision & privacy
•Complexity of IT and reliance
on IT
•Cyber
•Volatility Risk
•Interest Rate Risk
•Asset value
•Cash flow & Liquidity
•Valuation
•Competition to generate
investment from venture capital
firm
•Credit Risk
Strategic
Regulatory
Conduct
People
Operational
Financial

72. Cybersecurity
Risk

73. Cyber
Risk
Index
Cyber Risk
Infrastructure
Risk
Operational
Risk
Human Capital
Risk
Data Risk
Top Cyber-Threats:
- Social engineering
- Clikjacking
- Ransomware
- Botnets
- SQL & code codeinjection
Top Infrastructure Risks:
- Negligent insiders
- Malicious insiders
- IoT devices & apps
- Mobile devices
- DNS server environment
Top Human Capital Risks:
- Lack of educating employees
about cyber-security
- Lack of investing on recruiting
and retaining security IT
personnel
Top operational risks:
- Lack of interoperability
- Lack of scalability
- Lack of agility within the IT
security architecture
Top data types at risk:
- R&D information
- Customer accounts
- Trade secrets
- Confidential company data

74. Online Hacking Risk
Application Security Risk
New Encryption Technology
Digital Identity Risks
Cloud-based Security Risks
Data Integrity Risks
…..

75. Yearly Increment % of Cyber-hacking to FIs
Credit card compromised
Credential leaks experienced
Malicious apps
Transfer fraud
Home equity loan fraud
0
50
100
150
200
250
Credit card
compromised
Credential leaks
experienced
Malicious apps Transfer fraud Home equity loan
fraud
212%
129%
102%
47%
31%

76. Knowledge Sharing Session
Q & A

77. Reference
• https://www.islamicfinancenews.com/supplements/ifn-financial-innovation-report-2020
• https://legal.thomsonreuters.com/en/insights/articles/understanding-the-risks-of-fintech
• https://www.startus-insights.com/innovators-guide/5-top-risk-management-startups-impacting-financial-services/
• https://www.paymentsjournal.com/cybersecurity-7-hidden-risks-of-fintech-industry/
• https://home.kpmg/xx/en/home/insights/2018/12/fintech-credit.html
• https://insights.samsung.com/2015/06/10/securing-the-internet-of-things-risks-to-benefits/
• https://in.pinterest.com/pin/301952349998958477/
• https://www.pcmag.com/news/iot-security-is-still-a-gigantic-mess
• https://purplesec.us/resources/cyber-security-statistics/
• https://disruptive.asia/nec-neoface-facial-recognition-ai/
• https://twitter.com/FGraillot/status/1318804225179213826
• https://www.heidrick.com/What-We-Do/Executive-Search/Industry/Financial-Services/Financial-Technology
• https://www.e-zigurat.com/innovation-school/blog/evolution-of-fintech/
• https://sifted.eu/articles/islamic-fintechs-europe-survive/
• https://www.statista.com/statistics/893954/number-fintech-startups-by-region/
• https://financesonline.com/fintech-statistics/
• https://www.aon.com/unitedkingdom/insights/how-psd2-will-revolutionise-fintech.jsp