KULLIYYAH OF ECONOMICS AND MANAGEMENT SCIENCES

SEMESTER 2 (2018/2019)

COURSE TITLE:
PRINCIPLES AND PRACTICES OF TAKAFUL AND RE-TAKAFUL

PROJECT TITLE:
ARTICLE REVIEW

NAME : HUMAIRA BINTI AHMAD 1621646

SECTION : 1

LECTURER : NURDIANAWATI IRWANI BT. ABDULLAH

DATE OF SUBMISSION : 30/9/2019

 The Challenges of using FinTech and Its Digital Disruption

1. Brief introduction to the article

Financial technology or known as FinTech is used to explain about the new

technology that is used to automate and improve the delivery and the use of financial services
such as design and delivery, and provider of financial investment such as payments,
insurance or takaful, deposits, financing, saving and banking. The financial services adopt
technological innovations or also known as disruptive innovations. This study is about the
challenges of using FinTech and its digital disruption. The purpose of the study is to analyze
the challenges of using FinTech in Islamic Finance and its digital disruption in Takaful
operation.

2. 3 issues stated in the articles

The first issues stated is the uses of FinTech may effect the main purposes of banking
industries which is to keep the consumers money safely. However, the uses of FinTech may
risk the safety of the consumers’ money as FinTech may exposes to online risk. Besides that,
FinTech have its own cost and integration requirements which can be a barrier to growth.
Finally, traditional Takaful Institutions may face reduction in their customer base if they are
not apply FinTech in their daily operation as majority of them already include the technology
as part of their life.

3. Agree or not with the author’s view

I agree with the first issue that FinTech may face with risks that bound in online
transactions. I’m not agree with the author’s view that the cost incurred to apply FinTech can
hinder the growth of Islamic Financial Institutions. Lastly, I agree with the last issues that
without the use of FinTech, the financial services like Takaful can have a decline in their
customers’ number.
4. The opinion and reason for my stand.

I agree with the first issue because FinTech has to deal with cybersecurity issues. As
FinTech use more online activities, they are exposed to hackers, scammers and online
phishing. When the financial institutions like Takaful companies failed to protect the data
or the participants’ money to hackers, they will end up losing vital client data as well as
their reputation and participants’ trust.

Secondly, I disagree that the cost and requirement of using FinTech can block the
growth of financial institutions because FinTech is vital to keep pace with the competitors
to maintain and grow its market share. Many people now prefer more using online
transactions as it can save their energy and time. It may requires a lot of money to
develop FinTech in daily operation, but to gain something we need to sacrifice
something. Therefore, unwillingness to sacrifice some costs to practice FinTech may
instead downsize the growth of financial institutions.

Thirdly, I agree that the using the same old traditional way can reduce the numbers of
their customers who is tech-savvy. According to IFEC(2018) , “Fintech has altered the
way we make payments, purchase goods and manage our personal finances.” These
people prefer more flexible and simpler financial services. If they want to maintain and
increase their customers, they need to specialize in business segments which cannot be
replicate by using FinTech. This can be a favour to old citizen and people in rural area
which prefer in more traditional way.

5. Conclusions

To conclude, even though FinTech can gives several challenges but it also can give
major positive advantages. Islamic Financial Institutions and Takaful Operator should
apply Takaful in their operations as it can give abundances of benefits and opportunites.
These institutions should find a secured way to safeguard their customers data and money
so that they can gain people trust and loyalty. Moreover, the industry need to invest more
in research and development on how FinTech can advantage more to the institutions. To
reduce the cost, it is important for the industry to identify which feature of the fintech are
most suitable and necessary. Lastly, traditional institutions should be courage to take new
step in developing FinTech in their daily operation. In these modern world, it is hard to
success if you unable to keep up the pace with the rapidly evolving industry.

References
1. Azwina Wati, (2019). Fintech And The Challenge Of Digital Disruption In Takaful
Operation. Retrieved, 2019 from APSS :
file:///C:/Users/User/Downloads/Fintech_and_the_Challenge_of_Digital_Disruption_i
n.pdf
2. Natoo, B. (2017, May 10). Fintech For Islamic Finance Faces Standardisation
Challenges. Retrieved, 2019 from N Business :
https://www.thenational.ae/business/fintech-for-islamic-finance-faces-standardisation-
challenges-1.42460