Islamic banks face a silent crisis as outdated legacy systems hinder their growth and service quality, despite booming demand for Shari’ah-compliant finance. Recent reports from 2025 highlight how these old technologies fail to meet modern digital needs, leading to customer complaints and lost opportunities in regions like the Middle East and Asia-Pacific.
The Hidden Crisis in Islamic Banking Tech
Legacy systems, built decades ago, now struggle to handle the fast-paced world of digital finance. Banks in key markets spend most of their IT budgets just keeping these systems running, leaving little room for new ideas.
This issue has grown worse in 2025, with global Islamic finance assets hitting $3.8 trillion. Yet many institutions lag behind because their core tech cannot support quick, transparent services that customers expect today.
Experts point out that these systems often date back to before smartphones became common. They lack the flexibility needed for Shari’ah rules, which demand ethical and clear dealings in every transaction.
In places like Malaysia and Indonesia, banks report frequent outages that erode trust. Customers face delays in simple tasks like transfers or account checks, pushing them toward fintech rivals.
Why Legacy Systems Fail Modern Demands
Outdated tech cannot keep up with rising customer expectations for speed and reliability. Research from 2025 shows that 70 percent of large Middle Eastern banks still rely on these old setups.
This leads to high maintenance costs, eating up 68 percent of IT funds in Asia-Pacific regions. Instead of investing in growth, banks pour money into fixes for constant breakdowns.
Common problems include slow processing times and errors in Shari’ah compliance checks. These glitches not only frustrate users but also risk violating core Islamic finance principles like fairness.
In recent cases, digital failures have spiked customer complaints by 76 percent over the past two years. Banks in Oman and the Philippines have seen similar trends, where legacy issues block seamless online banking.
Real-World Impacts on Customers and Banks
Everyday users suffer the most from these tech woes. Imagine trying to pay bills or invest ethically, only to hit system errors that delay everything.
Banks lose out too, as younger customers turn to modern fintech apps that offer quick, Shari’ah-friendly options without the hassle.
- Frequent outages disrupt daily transactions, leading to lost time and money for users.
- Billing mistakes erode trust, making people question the bank’s commitment to transparency.
- Limited mobile features push customers away, especially in underserved Muslim communities.
In 2025, events like the Thimar conference in Oman spotlighted these problems, urging banks to adopt sustainable digital tools.
Modern Solutions Gaining Traction
Forward-thinking banks are turning to cloud-based cores and digital platforms to replace legacy systems. Companies like Mambu and Temenos provide flexible tech that embeds Shari’ah rules right into the software.
These solutions promise faster services and better compliance, helping banks compete in a digital world. For instance, Maybank Islamic in Malaysia partnered with AWS for a full tech overhaul in early 2025.
Adoption is speeding up across Southeast Asia, with Indonesia and the Philippines leading in Shari’ah-compliant digital lending.
| Solution Type | Key Benefits | Examples in 2025 |
|---|---|---|
| Cloud Core Banking | Faster processing, lower costs | Mambu adopted by banks in Malaysia |
| Digital Platforms | Enhanced transparency, mobile access | Temenos for personalized Islamic services |
| FinTech Integrations | Scalable Shari’ah compliance | Audax and AWS for Maybank Islamic |
This shift not only cuts maintenance expenses but also opens doors to new markets, serving the two billion underserved Muslims globally.
Experts predict that by 2026, more banks will fully transition, boosting efficiency and customer satisfaction.
Challenges in the Transition Process
Switching to new tech is not easy. Banks must navigate data migration without disrupting services, which can be costly and time-consuming.
Regulatory hurdles add complexity, as Shari’ah boards need to approve every change to ensure ethical standards.
In Pakistan, identity theft risks have risen with digital shifts, prompting calls for stronger security tools.
Despite these hurdles, success stories from 2025 show that careful planning pays off, with banks reporting fewer complaints post-upgrade.
Training staff on new systems remains key to smooth operations.
The Future of Islamic Finance Tech
Looking ahead, innovation will define Islamic banking’s success. Trends like AI-driven compliance and blockchain for transparent transactions are set to transform the sector.
By embracing these, banks can uphold their core values while meeting global demands. The projected growth to $4 trillion in assets by 2027 depends on leaving legacy systems behind.
Share your thoughts on how tech is changing Islamic finance. Have you faced issues with bank apps? Comment below and spread this article to spark discussion.
