Digital Revolution in Islamic Banking: Towards the Islamic Finance Era 5.0
Abstract
This research examines the digital transformation in the Islamic banking industry towards the Islamic finance 5.0 era, with a focus on analyzing the impact of digitalization on operational efficiency, implementation challenges, and the development of effective governance models. Using a qualitative approach with an interpretive-constructivist paradigm, this study applies a systematic literature review with the PRISMA protocol to analyze primary sources from internationally reputable journals. The results show that digital transformation has resulted in a significant increase in operational efficiency, with a decrease in the Cost-to-Income Ratio of 12.5% and an increase in the accuracy of customer feasibility assessments by up to 78% through the implementation of big data analytics. The implementation of an artificial intelligence-based automation system in the sharia compliance screening process has reduced transaction processing time by up to 65%. The main challenges include the digital infrastructure gap, the complexity of sharia compliance in digital systems, and cybersecurity issues. The governance model developed integrates the Three Lines of Defense with the Digital Shariah Compliance Committee, resulting in an 83% reduction in the incidence of sharia non-compliance. The socio-economic impact can be seen from the increase in Islamic financial inclusion, with service penetration increasing by 156% in the last three years and the distribution of microfinance worth Rp 12.5 trillion to MSMEs. This research contributes to the development of a conceptual framework for digital transformation of Islamic banking that integrates aspects of technology, regulations, and sharia values, as well as provides practical recommendations for the sustainable development of digital Islamic banking.
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Tessa Ningrum, A., Wijay, R., Rizal Abdul Aziz, M., Yudha Mauluda, M., & Rosyani, P. (2024). Face Detection of Objects in Images and Videos with YOLOv8 (Counting Objects). Journal of Artificial Intelligence and Decision Support Systems, 2(2), 119–126. https://jurnalmahasiswa.com/index.php/aidanspk/article/view/1485
Ullah, S., Kiani, U. S., Raza, B., & Mustafa, A. (2022). Consumers' Intention to Adopt m-payment/m-banking: The Role of Their Financial Skills and Digital Literacy. Frontiers in Psychology, 13(April), 1–12. https://doi.org/10.3389/fpsyg.2022.873708
Yusof, M. N. Bin, Mohd Faudzi, N., Jasni, N. A. B., Nillian, E., Senoo, S., & Ching, F. F. (2024). Comparisons on Growth Performance, Survivability, Organoleptic Qualities and Economic Feasibility of Asian Seabass (Lates calcarifer) Reared in Different Salinities. Malaysian Applied Biology, 53(1), 127–136. https://doi.org/10.55230/mabjournal.v53i1.2723
Ahmad, H., Hasan, N., & Sanghi, S. (2024). On the evolution and circulation dynamics of the counter rotating vortex rings in the starting phases of under-expanded jets. Physics of Fluids, 36, 16150. https://doi.org/10.1063/5.0180369
Al-Karablieh, N., Al-Shomali, I., Al-Elaumi, L., Tabieh, M., Al-Karablieh, E., Jaghbir, M., & Del Bubba, M. (2024). The impact of treated wastewater irrigation on strawberry development, fruit quality parameters, and microbial and chemical contaminant transfer: A health risk assessment. Scientia Horticulturae, 329, 113014. https://doi.org/10.1016/j.scienta.2024.113014
Alandejani, M. (2022). Does issuing islamic bonds through banks increase banking efficiency? Heliyon, 8(8), e10041. https://doi.org/10.1016/j.heliyon.2022.e10041
Alwi, Z., Parmitasari, R. D. A., & Syariati, A. (2021). An assessment on Islamic banking ethics through some salient points in the prophetic tradition. Heliyon, 7(5), e07103. https://doi.org/10.1016/j.heliyon.2021.e07103
Awais, M., Ullah, N., Sulehri, N. A., Thas Thaker, M. A. bin M., & Mohsin, M. (2022). Monitoring and Efficiency in Governance: A Measure for Sustainability in the Islamic Banking Industry. Frontiers in Psychology, 13(June). https://doi.org/10.3389/fpsyg.2022.884532
B.ibrahim, I., Amin, A., & Abdel, A. (2024). Citation: Ibrahim Bahjat Ibrahim et al. (2024) Organizational Culture And Its Role In Supporting Digital Transformation In University Institutions: An Exploratory Study Of The Opinions Of A Sample Of Teachers. 30, 466–475. https://doi.org/10.53555/kuey.v30i5.2872
Hartoyo, & Arsyad. (2021). PenKoMi Journal: Education & Economics Study. Journal of PenKoMi: Education & Economic Studies, 4(1), 1–17.
Hassanain, O., El Ghoneimy, A., Albagoury, A., & Alaa, M. (2024). Hassanain et al-2024-Scientific Reports. Scientific Reports.
Howard, N. (2024). Digital micro-banking as a health and protection intervention for street-connected children and youth? Analysis from a Togolese pilot. BMJ Paediatrics Open, 8(1), 1–5. https://doi.org/10.1136/bmjpo-2023-002423
Husodo, M., Sugiarti, L. R., & Erlangga, E. (2024). The Effect of Optimism on Student Resilience in Boarding Schools. Engineer, 5(1), 28.
Jia, K., He, Y., & Mohsin, M. (2023). Digital financial and banking competition network: Evidence from China. Frontiers in Psychology, 13(January), 1–11. https://doi.org/10.3389/fpsyg.2022.1104120
Karim, S., Naeem, M. A., & Abaji, E. E. (2022). Is Islamic FinTech coherent with Islamic banking? A stakeholder's perspective during COVID-19. Heliyon, 8(9), e10485. https://doi.org/10.1016/j.heliyon.2022.e10485
Kasri, R. A., Indrastomo, B. S., Hendranastiti, N. D., & Prasetyo, M. B. (2022). Digital payment and banking stability in emerging economy with dual banking system. Heliyon, 8(11), e11198. https://doi.org/10.1016/j.heliyon.2022.e11198
Madah Marzuki, M., Nik Abdul Majid, W. Z., & Rosman, R. (2023). Corporate social responsibility and Islamic social finance impact on banking sustainability post-COVID-19 pandemic. Heliyon, 9(10), e20501. https://doi.org/10.1016/j.heliyon.2023.e20501
Mi Alnaser, F., Rahi, S., Alghizzawi, M., & Ngah, A. H. (2023). Does artificial intelligence (AI) boost digital banking user satisfaction? Integration of expectation confirmation model and antecedents of artificial intelligence enabled digital banking. Heliyon, 9(8), e18930. https://doi.org/10.1016/j.heliyon.2023.e18930
Prima Nugroho, A., Nasrul, R., Sutiarso, L., Falah, M., & Dzaky, M. (2024). Evaluating Smart Greenhouse Viability Through Engineering Design and Software Cost Modelling. IOP Conference Series: Earth and Environmental Science, 1290, 12012. https://doi.org/10.1088/1755-1315/1290/1/012012
Rahman, M. K., Hoque, M. N., Yusuf, S. N. S., Bin Yusoff, M. N. H., & Begum, F. (2023). Do customers' perceptions of Islamic banking services predict satisfaction and word of mouth? Evidence from Islamic banks in Bangladesh. PLoS ONE, 18(1 January), 1–18. https://doi.org/10.1371/journal.pone.0280108
Rogers. (2003). Implementation of Innovation Diffusion on the Ability of New Media in Forming Popular Culture (Study on Youtube Media among Adolescents). Expression and Perception : Journal of Communication Sciences, 1(1), 83–102. https://doi.org/10.33822/jep.v1i01.447
Saâdaoui, F., & Khalfi, M. (2024). Revisiting Islamic banking efficiency using multivariate adaptive regression splines. Annals of Operations Research, 334(1–3), 287–315. https://doi.org/10.1007/s10479-022-04545-2
Schreieck, M., Huang, Y., Kupfer, A., & Krcmar, H. (2024). The Effect of Digital Platform Strategies on Firm Value in the Banking Industry. Journal of Management Information Systems, 41(2), 394–421. https://doi.org/10.1080/07421222.2024.2340825
Shepherd, M., Turner, J. A., Small, B., & Wheeler, D. (2020). Priorities for science to overcome hurdles thwarting the full promise of the 'digital agriculture' revolution. Journal of the Science of Food and Agriculture, 100(14), 5083–5092. https://doi.org/10.1002/jsfa.9346
Tariq, M., Maryam, S. Z., & Shaheen, W. A. (2024). Cognitive factors and actual usage of Fintech innovation: Exploring the UTAUT framework for digital banking. Heliyon, 10(15), e35582. https://doi.org/10.1016/j.heliyon.2024.e35582
Tessa Ningrum, A., Wijay, R., Rizal Abdul Aziz, M., Yudha Mauluda, M., & Rosyani, P. (2024). Face Detection of Objects in Images and Videos with YOLOv8 (Counting Objects). Journal of Artificial Intelligence and Decision Support Systems, 2(2), 119–126. https://jurnalmahasiswa.com/index.php/aidanspk/article/view/1485
Ullah, S., Kiani, U. S., Raza, B., & Mustafa, A. (2022). Consumers' Intention to Adopt m-payment/m-banking: The Role of Their Financial Skills and Digital Literacy. Frontiers in Psychology, 13(April), 1–12. https://doi.org/10.3389/fpsyg.2022.873708
Yusof, M. N. Bin, Mohd Faudzi, N., Jasni, N. A. B., Nillian, E., Senoo, S., & Ching, F. F. (2024). Comparisons on Growth Performance, Survivability, Organoleptic Qualities and Economic Feasibility of Asian Seabass (Lates calcarifer) Reared in Different Salinities. Malaysian Applied Biology, 53(1), 127–136. https://doi.org/10.55230/mabjournal.v53i1.2723
DOI: http://dx.doi.org/10.21043/malia.v8i2.29630
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