THE halal economy is thriving not just within the Southeast Asian region, but worldwide as well. The global halal economy was valued at approximately US$3.2 trillion in 2012 and is forecast to double to US$6.4 trillion by 2018, according to the Malaysia International Islamic Financial Centre (MIFC).
This tremendous growth is driven by both demand and supply across a number of sectors, including finance and tourism.According to the State of the Global Islamic Economy Report 2014/2015, the Islamic finance market in particular is estimated to reach US$4 trillion in 2019 compared to US$1.21 trillion in 2013.
“Many countries are realising that it is important to have a well-established Islamic finance ecosystem to meet the needs of a large segment of their population. Malaysia is already known as the hub for Islamic finance and we have Indonesia, with the world’s biggest Muslim population, quickly adapting to meet the needs and demands of this sector,” said MasterCard’s Safdar Khan, group country manager, Indonesia, Malaysia and Brunei, and group head, Islamic Payments, Southeast Asia.
According to him, this growth is not limited to Organisation of Islamic Cooperation (OIC) countries. Even non-OIC countries like Singapore are investing in this sector. These markets have been progressive in their efforts to boost the development of Islamic finance with the building of a strong infrastructure and talent pool and also encouraging local businesses to offer relevant product offerings and services, to support the industry. These efforts bode well for ASEAN as it provides more opportunities for the region to develop its presence in Islamic finance and become a leading region in the sector. Despite the current economic climate, Safdar believes there will always be a need and demand for Islamic finance and this would also cover payment products and services, the tools and technology integral for commerce activities to take place According to him, tapping into the demographic dividend is a huge opportunity for all Islamic financial institutions.
“Research and studies reveal that consumers are waiting for a significantly better customer experience and enhanced value propositions from their Islamic banks. A key opportunity for the sector lies in banks building new and relevant propositions and in leveraging technology to improve customer service and customer engagement. This will drive consumers to move more transactions to Islamic banking as well as bring in new consumers,” he said. Islamic payment products are not just faith-based; they are competitive offerings, with relevant features and benefits for consumers, which are in line with their religious beliefs. In fact, Syariah-compliant payment products are not restricted to Muslims, but can be used by anyone who values Islamic finance principles such as ethical financing.According to Safdar, MasterCard has collaborated with many Islamic Banks to provide payment products which will help increase the adoption of Syariah-compliant card products. This includes its partnership with Maybank Islamic Berhad on the Maybank Islamic MasterCard Ikhwan Card-i, the first of its kind to present consumers with the opportunity to win an all-expenses-paid Umrah for two persons on a weekly basis. The card also allows cardholders to contribute to the underprivileged through its charity component.
The company has also partnered with CIMB Islamic to roll out CIMB Islamic credit and debit cards, and the RHB Islamic World MasterCard Card was launched, targeting the affluent consumer. HSBC, Affin Bank, AmBank, Bank Islam, Bank Kerjasama Rakyat and Bank Simpanan Nasional also have Islamic Cards with MasterCard.In Indonesia, MasterCard has Islamic card products with CIMB Niaga Syariah and BNI Syariah; whereas in Brunei, the largest Islamic bank in Brunei Darussalam, Bank Islam Brunei Darussalam, offers exclusive MasterCard credit and debit products.
MasterCard is also exploring more partnership opportunities with both banks and industry leaders, as the company sees that it is integral to gathering insights collaboratively and combining expertise in order to build a strong portfolio of Islamic cards. It will also help accelerate the adoption of Islamic cards due to greater awareness and competitive, innovative solutions.
By 2030, 29% of the global young population comprising 15 to 29-year-olds is projected to be Muslim and therefore innovation becomes even more critical to target and meet the needs of these consumers.“Islamic finance will be influenced by a mostly youthful population who have high mobile and Internet penetration rates and are increasingly geographically mobile. Take that one step further with the ‘new’ global Muslim consumer – a generation of educated, savvy young Muslims across the world who are quantifiably different in attitudes and expectations from previous generations. With Muslim youth now accounting for 11% of the world’s population, they are the voice of the future, demanding innovation that fintechs and banks cannot afford to ignore,” he added.
Innovation is key as consumers today are demanding new payment products and solutions which make their lives easier. Innovation also enables a company to differentiate itself from the competition.“Consumers using halal products are seeking products that help them stay true to their core Islamic values while satisfying their need for innovation. As a technology company in the payments industry, we are always looking at ways to provide best-in-class technology when it comes to our suite of products and services. As a result, we have collaborated with various Islamic financial institutions to offer innovative Syariah-compliant payments solutions across the Middle East and Southeast Asia regions,” added Safdar.
Understanding consumer insights is integral to staying relevant to consumers – there is a need to first know your market and keep up-to-date on the ever evolving needs that come with it. MasterCard remains relevant to our cardholders because we are strongly focused on innovation and can quickly identify and understand new consumer trends. According to MasterCard, it has conducted research across markets including Malaysia, Indonesia and Saudi Arabia, which has provided rich insights into consumer needs and desires when it comes to Syariah-compliant payment products and services and what kind of innovative solutions they seek. For example, consumers want more flexibility and control in determining when and where their card payments can be used.
“Our research also recognises the need for digitisation in Islamic banking as addressing consumer needs in an increasingly digital world is required for a fresh consumer experience. Technology and innovation serve as enablers for this transformation.”
Banks and financial institutions have also kept their finger on the pulse of technology and launched more innovative solutions whilst being more active in the development of quality payment solutions. The convergence of the physical and digital ecosystem has also evolved and banks remain uniquely positioned to offer a compelling digital payment solution.“We continue to work with financial institutions and central banks to drive the digital agenda through innovation and to capture the unique opportunities in this region, and regulators in many markets have been strong partners in helping to develop digital banking in a secure way.“Our innovative platforms such as MasterCard SecureCode, inControl and Pay with Rewards can also be used to create a compelling and relevant value proposition,” informed Safdar.In line with advancing MasterCard’s vision of a world beyond cash, the company believes in making Islamic payments more readily available and accessible by working closely with governments and relevant stakeholders, in meeting the increasing demand in the region. “We believe that in order to advance our leadership in Islamic payments, we need to invest in research and development and focus on collaborative efforts with industry partners, leveraging our expertise in key markets such as Indonesia, Malaysia and Brunei to cater to the needs of our customers. In utilising this, we can better provide payment products that are safe, secure, efficient and seamless,” he said.
In this aspect, MasterCard is also collaborating with industry leaders who are experts in this field to develop and offer products and services to the Muslim segment. This includes a partnership with the leading authority in halal travel, CrescentRating, in developing the MasterCard-CrescentRating Global Muslim Travel Index (GMTI), which was launched last year. Recently, the GMTI 2016 was released, representing the most comprehensive index that has ever been published on the Muslim travel sector. This is also the first time such thorough insights have been provided into one of the fastest-growing tourism sectors in the world today.MasterCard also recognises the importance for talent development towards enhancing the Islamic finance sector. Last year, the company started a three-year collaboration with the International Centre for Education in Islamic Finance (INCEIF) to offer scholarships to female students pursuing Master’s degrees.
With the scholarship programme, the company intends not only to nurture talent that will contribute to the Islamic finance sector, but also, to redress the gender imbalance in this sector through its support in developing women who want to work in the industry. The scholarship also offers recipients a one-year contract to work at MasterCard’s offices in Malaysia, Singapore or Indonesia – markets with a vibrant Islamic finance landscape – to gain industry experience.
Safdar’s own career journey in MasterCard began in Dubai a decade ago when he joined the company as vice-president, global accounts for the South Asia, Middle East and Africa (SAMEA) region. In 2010, he took on the responsibility as the area head for the Southern Gulf, managing Qatar, Oman and Kuwait.In mid-2013, he relocated to Southeast Asia as the country head for Malaysia and Brunei, with the task of overseeing and growing the business across the markets, which included strengthening partnerships with customers, merchant partners and regulatory bodies. A year later, his role expanded to include overseeing Indonesia, a key growth market. It also entailed a new position as group head, Islamic payments, Southeast Asia, to drive the uptake of MasterCard’s Syariah-compliant payments solutions at an exciting time when Islamic finance was increasingly building its presence in those markets and throughout the region.According to Safdar, the card space is much more competitive now, and this can be attributed to the changing demands of the industry today. Among the requirements are for more contact less options, allowing consumers to make payments easily and securely with a simple tap at any contactless-enabled payment terminal.
“In Malaysia, we already offer contact less payment products for consumers. We have rolled out MasterCard contactless cards with various local banks including the RHB Islamic World MasterCard, Public Bank World MasterCard Credit Card, Public Bank MasterCard Lifestyle Debit Card and the CIMB Tesco MasterCard Platinum Credit Card. We have seen a positive response from customers and we are actively encouraging greater adoption among more and more Malaysians.” “Moreover, all debit cards which are being rolled out as part of the new Chip and Pin mandate have introduced the contactless functionality and we are working closely with our partners to introduce contactless as a feature on all credit cards.” “As con tactless technology evolves in the market over the next 18 months, it will be a gradual progression to add wearable payments on the contactless platform in Malaysia. We firmly believe there is great potential for such technology to change how we behave in our daily lives and we are already starting to see this potential play out in markets such as Singapore, Australia and the United Kingdom,” said Safdar.
Another sector that offers growth opportunities is the lifestyle market. Malaysian and Indonesian Muslims are increasingly looking holistically at ways to better address their faith-based needs – including their consumption habits – across halal food, modest clothing, Muslim-friendly travel and more. Malaysia and Indonesia show great potential in the lifestyle segment. For two consecutive years, Malaysia has been the number one destination in the global Muslim travel market, and Indonesia was the fourth most Muslim-friendly destination, having climbed two places from the previous year, according to the GMTI 2016. This signifies dynamic growth in the markets, in adapting to accommodate Muslim travellers’ needs. In Indonesia, the recently-launched Muslim visitor guide by the Ministry of Tourism and HalalTrip is a great example of an initiative that benefits multiple stakeholders, including the hospitality and tourism sector and Muslim tourists from abroad.
“Beyond Malaysia and Indonesia, we also see great potential for Asia to become a hub for Muslim travel. Thirty seven Asian destinations are featured in the Global Muslim Travel Index 2016, representing nearly 30% of the destinations in the Index and nine are ASEAN member states. It is clear that ASEAN is a key growth region for the Muslim travel segment and with the establishment of the ASEAN Economic Community (AEC) to foster greater economic integration and harmony among member states, travel and tourism will be an important component. We can already see how ASEAN countries have put a stake in the ground in this segment, demonstrating their commitment to boost tourism by implementing new policies and significant investment in marketing campaigns and infrastructure,” added Safdar. Not left out from the lifestyle market are the non-banked Muslims. In Malaysia, MasterCard’s partnership with Tabung Haji will entail the launching of the Tabung Haji Debit-i MasterCard, which provides opportunities for Malaysian Muslims and rural customers to own a debit card. For the Indonesian market, there is the BNI Hajj and Umra Saving Debit Card which provides Indonesian Muslims who have BNI accounts to conveniently access these as they travel for Hajj and Umrah. To ensure pilgrims from the rural areas of Indonesia are more comfortable using the ATM, Bahasa Indonesia has been added to ATM screens in Saudi Arabia.
Additionally, MasterCard supports the interests of Islamic migrant workers by working with a number of Islamic financial organisations to offer payroll cards to these workers. This not only gives them greater control over their finances, but provides access to lower cost remittance services through MasterCard’s MoneySend platform. This reduces the cost of sending money home, and has a direct and material impact on the quality of life of the family they are supporting. There are exciting times ahead for the Islamic finance industry and the halal economy. Future Islamic payments solutions offered by MasterCard would depend in part, on the local market landscapes it operates in and the current trends that are prevalent in those markets.
“In Malaysia, for example, we are actively encouraging greater adoption of contactless payments and this would be an area we would also explore for Islamic payments, beyond the traditional credit card, as well as debit and prepaid cards.” “We also see consumers in Asia Pacific becoming more open to mobile payments as it provides an improved transaction experience. Technology is changing the way we interact and we have seen greater adoption of digital wallets, biometric payments and even smart watches which are defining the future of payments. This would be an exciting space to look into, as Islamic payment solutions will benefit, as technology continues to advance,” concluded Safdar.