ARTIFICIAL INTELLIGENCE IMPLICATIONS IN ISLAMIC BANKS: POTENTIAL AND CHALLENGES

Abstract

As new digitalization strategies storm the banking industry, banks which are behind the technological curve may struggle to keep pace. This is a well-known challenge in the Islamic banking sector in particular; however, this research shows that little is being done to achieve unified digitalization in operations. Artificial Intelligence (AI) is a disruptive force in the financial sector, promising increased financial inclusion, economic development, and a excess of efficient, transparent, Shariah-compliant financial solutions due to its integration of technology with Islam’s profound ethical principles. The objective of this paper is to study the potential and challenges of AI implications in Islamic Banks. This is a qualitative study using focus group interviews with five Islamic Banking experts consists of Shariah Committee Member, academic experts and Islamic banking executive from different banks in Malaysia. SC members from different Islamic banks. Following the interviews, a thematic analysis of the transcribed data was conducted using computer-assisted qualitative data analysis software. The participants were generally receptive towards the utilization of AI tools in the Islamic banks which give a significant impact of the Islamic banking landscape. The participants recognize the potential of AI for improving the efficiency and effectiveness of the Islamic banking operations. However, they raised some concerns about the challenges that need to be addressed such as replacing of manpower with AI in some area in Islamic banks. The novelty of this research provides a novel discussion of potential and challenges of AI implications in Islamic banks and at the same time add to the Islamic banking literature in this area. The size of the focus group was limited to five participants to optimize group size and composition to allow adequate participation by each group member. Further sampling from more SC members and experts may elicit additional findings. The first-hand views from the focus group interviews provides valuable input for potential and challenges of adopting AI in the Islamic banking operations.