Exploring the relationship between artificial intelligence and Islamic finance

Abstract

It is exciting to explore the future prospects of artificial intelligence in Islamic finance. Artificial intelligence in the banking sector and specifically in Islamic banking is still developing and the future of Islamic banking looks promising with artificial intelligence. Being service-oriented, the financial sector depends a lot on technology to provide efficient services which involve both customer data collection and data management. Such databases enable application of smart analytics to better understand and serve the customers involving financial innovation. For instance, development of better electronic payment systems with enhanced features and high regulatory compliance. Similarly, today the cyber-attacks have become one of the biggest threats to financial institutions. The losses related to cybercrimes lead the banks to litigations. The major cyber risks faced by banks include phishing attacks, ransomware, credential stuffing, and Internet of Things (IoT) exploitation. In such circumstances, use of artificial intelligence can take care of the system-related vulnerability in a much better and faster way than any human ever can. Artificial intelligence is modelled around some algorithms that can better tackle cybersecurity applications, providing greater value to customers, improve employee productivity, etc. In order to reflect on the salient benefits, interests, and issues, pertaining to the use of artificial intelligence in Islamic finance, this chapter tries to critically explore the relationship between the two, which has not been explored before. It attempts to provide diverse and contrasting perspectives on the application and utility of artificial intelligence in Islamic finance in general, besides the traditional narratives, like the historical, philosophical, socio-cultural, economic, and policy perspectives. The broad themes include the difference between Islamic finance and conventional finance, evolution of Islamic finance, understanding of artificial intelligence, the connection between Islamic finance and artificial intelligence, scope of artificial intelligence in Islamic banking, benefits of applications of artificial intelligence in Islamic banking, and the challenges in applying artificial intelligence in Islamic banking. The chapter concludes that artificial intelligence in the near future will become the nerve center of Islamic finance.