Challenges And Opportunities Of Islamic Digital Banks In Malaysia

Authors

  • Azwina Wati Abdull Manaf Lecturer
  • Wong Hua Siong Lecturer
  • Norazuan Amiruddin Lecturer
  • Hafiza Abdul Razak Lecturer

Keywords:

Challenges, Islamic, Digital, Banks, Framework

Abstract

Digital banks are also known as virtual banks, neo-banks, or challenger banks are different from traditional banks as digital banks predominantly deliver banking services through digital channels with a minimal brick-and-mortar presence. Since 2020, Bank Negara Malaysia (BNM) has issued a licensing framework for the establishment of the first five digital banks in Malaysia, which is expected to be in the first quarter of 2022. The first Islamic digital bank was established in Saudi Arabia and followed by United Arab Emirates (UAE). Malaysia could also potentially join Saudi Arabia and UAE as Maybank and CIMB, both established Malaysian banks with large Islamic windows are said to be suitable candidates for the first Islamic digital banking in Malaysia. The emergence of digital banking is also an opportunity for Islamic banks that comes amidst slower growth in the industry over the past three years. This article analyzes the challenges and opportunities of the establishment of the first Islamic digital banks in Malaysia, focusing on the regulatory framework. This study aims to examine the advantages of digital banking as compared to traditional banking, analyze the challenges of adopting Shariah-compliant Islamic digital banks, and suggest solutions to solve the problem arising from the challenges. This study uses pure doctrinal research using the exploratory method and references have been made to relevant legislations, legal articles, and case law. This study identified several challenges such as customer protection, licensing and security issues, money laundering, and cyber security but few opportunities of digital banks such as efficient, cost-effective, and customer-centric.

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Author Biographies

Azwina Wati Abdull Manaf, Lecturer

Faculty of Law, Multimedia University.

Wong Hua Siong, Lecturer

Faculty of Law, Multimedia University. 

Norazuan Amiruddin, Lecturer

Faculty of Law, Multimedia University. 

Hafiza Abdul Razak, Lecturer

Faculty of Law, Multimedia University.

References

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Journal

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Published

2023-06-01

How to Cite

Abdull Manaf, A. W., Siong, W. H., Amiruddin, N., & Abdul Razak, H. (2023). Challenges And Opportunities Of Islamic Digital Banks In Malaysia. Al-Qanatir: International Journal of Islamic Studies, 30(2), 275–282. Retrieved from https://www.al-qanatir.com/aq/article/view/681

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Section

Articles