The ‘elephant in the room’ for Islamic banks in general is the core systems on which they operate. Despite explosive demand for Shari’ah-compliant financial services, many banks are stuck with outdated legacy infrastructure no longer fit for purpose.

“Legacy core banking systems are a significant obstacle to progress. Many of these systems were built decades ago for a very different era of banking and are not equipped to handle the agility and scalability required today.

In a region like the Middle East, where governments and regulators are investing heavily in digital transformation through initiatives like Vision 2030 and the UAE’s fintech sandbox, banks still operating on outdated technology risk being left behind.

These systems not only hamper customer experience but also prevent Islamic banks from launching competitive, Shari’ah-compliant digital products that meet modern consumer expectations.” - Harjit Kang

With the Middle East and Africa (MEA) representing the largest market for Islamic banking, the pressure to innovate is reaching a critical point, and a failure to do so could have deep consequences. However, this challenge isn’t confined to one region. In the Asia-Pacific (APAC), the fastest-growing Islamic banking market, Muhammad Irfan echoes similar concerns.

“Islamic banks are undergoing a fundamental shift in their customer engagement models. The traditional "branch-first" approach is no longer sufficient. We're seeing a clear pivot towards "mobile-first," where the mobile app becomes the central hub for all customer interactions.

Failing to innovate puts banks at risk of obsolescence, leading to significant consequences. In APAC, where digital lending demand spiked 45%, time-to-market and product personalisation are non-negotiable.

Banks that can’t keep up will lose relevance, especially among younger, digitally-savvy customers. This results in a loss of market share as competitors with more agile and customer-centric offerings capture a larger portion of the market.” - Muhammad Irfan

This need for rapid innovation becomes increasingly urgent when considering the shifting expectations of the next generation of digitally-native customers, as Muhammad rightly asserts.

Gen Z and millennials now account for the majority of Islamic banking revenue. Their expectations are sky-high. They want ethical and compliant products, yes, but they also want speed, simplicity, and 24/7 digital access.

“Today, customers don’t differentiate between digital banking and digital lifestyle. They expect intuitive, personalised, and frictionless experiences. Without these, banks risk becoming irrelevant to a generation that expects digital convenience as standard. Banks that stop at “digital access” risk being disintermediated by fintechs and neobanks offering innovative mobile-first Sharia-based alternatives.” - Muhammad Irfan

Research from our latest Islamic banking report reveals that 53% of young Muslims in APAC say they’d switch providers for better access, indicating that this generation has a high likelihood of simply migrating services when their expectations are not met.

Harjit mirrors this, emphasising that even the perception of a poor digital experience can be enough for younger users to consider alternative services.

“Gen Z and millennials equate poor digital experiences with poor service. A clunky app or delayed transaction is often a deal-breaker. These users expect onboarding in minutes, 24/7 access, instant support, and ethical alignment. Without mobile-first strategies, banks risk alienating their most valuable growth segment.

Many Islamic banks do understand this, and while the desire to adapt is there, many face internal resistance due to rigid legacy systems, compliance complexity, and outdated customer engagement models. We do see that the shift is happening, but for many it's not fast enough.” - Harjit Kang

To stay relevant, Islamic banks must rethink how they engage, not only through mobile apps, but through digital lifestyle-integrated experiences. What they need is a future-proof solution that provides them with the foundational capabilities to meet modern market demands, the agility to respond to dynamic market shifts on the fly, and with automated compliance integrated into the system to ensure that the principles guiding Islamic banking products are uncompromised, transparent, and embedded from the ground up.

The solution is not to patch legacy systems, but to transform them into something that is built to handle every modern challenge and adapt to future requirements.

Words like, ‘transform’ and ‘solution’ are easy give-aways to the result a product can give you, but how are these results achieved in practice? Our knowledgeable Islamic banking product lead, Ingrida Tarbūné, lends her voice to how Mambu’s product capabilities deliver on these results through a technical lens.

“Mambu's composable core directly replaces rigid legacy systems with a flexible, ‘Lego-like’ foundation. This allows Islamic banks to easily design and launch truly Sharia-compliant products, ensuring every step of an ethical contract is transparently built into the system from the start.

Being cloud-native gives them the speed and agility to deliver these products through the seamless, 24/7 mobile experience that modern customers demand. Through APIs, they can also rapidly connect with other fintechs to create innovative, customer-first journeys.

Our platform acts as a flexible product factory. Instead of offering rigid, pre-built products, we provide the financial building blocks. A bank can use our system to design a Wadiah account by disabling interest features, and then configure a Murabahah product by creating a specific fee and repayment structure. This design-and-launch capability is what allows them to build out a full spectrum of compliant products on a single core.” - Ingrida Tarbūné

This means that banks can compose their products with unprecedented freedom and agility. With the ability to plug into an expansive network of integrated partners and highly configurable flexibility, they can tailor their offerings to meet the diverse and evolving needs of their customers and adjust rapidly to align with changing regulations.

“If Shari'ah interpretation evolves, a bank can isolate the specific rule within our system - like a profit distribution matrix. They can then reconfigure that element through our user interface and deploy it, without touching any other part of the live system. This is a targeted adjustment that takes days, not a full-scale system migration that would have been the only option with legacy technology.” - Ingrida Tarbūné

The limitations of legacy technology are becoming increasingly exposed through their rigidity, and flexibility is a game-changer in a market where speed is survival.

“Our core differentiator is flexibility. Mambu doesn’t offer a one-size-fits-all solution; we empower banks to pick the right components for their specific needs. This supports a faster time-to-market, cloud-native scalability, and seamless integration with a growing ecosystem of fintechs. We help banks become more agile, more responsive, and more competitive in a rapidly changing market.

A composable approach gives banks the flexibility to adapt to market demands and regulatory changes without re-architecting their entire tech stack. Cloud-native platforms also deliver scalability, enhanced security, and faster innovation cycles—factors that are no longer optional in today’s fast-moving environment.” - Harjit Kang

Mambu’s cloud-native, modular architecture gives control back to Islamic banks for the modern era, from product logic all the way to user experience.

“Cloud-native platforms offer the agility to scale rapidly, adapt to local regulations, and experiment with new models like embedded finance or hybrid Sharia offerings. Composability ensures that banks can innovate their UX without being locked into rigid architectures. It’s the only way to stay competitive in a fast-changing regulatory and consumer environment.” - Muhammad Irfan

One of the biggest issues facing modern Islamic banks is ensuring compliance with Shari’ah principles. In our report, we explored how manual processes and legacy restrictions are making it increasingly challenging for banks to ensure Shari’ah-compliance, with 54% of digital complaints in Islamic banking tied to billing errors.

The intent to deliver is there; however, the ability to do so is falling under greater scrutiny and affecting customer perception. So how does Mambu’s modern, composable approach ensure that potential compliance red flags aren't a concern?

“From our perspective, this is crucial in modern Islamic banking technology. Using our composable approach, a bank doesn't start with a generic product. Instead, they construct Islamic products from the ground up, embedding the rules, such as the requirement of Nisbah, fixed profit margins, balance eligibility etc., directly into its core engine. The system is therefore structurally incapable of charging interest or acting outside of these pre-defined, automated Shari'ah rules. A complex, high-risk, multi-day manual process is transformed into a fully automated, auditable workflow. The system's transaction logs and reports provide an immutable record, proving to Shari'ah boards and regulators that the profit was distributed exactly according to the pre-agreed rules. This is the practical meaning of ‘compliance by design’, the governance is not a checklist, but an automated, inseparable part of the system's operation.” - Ingrida Tarbūne

This level of built-in compliance not only reduces operational risk but also builds confidence with customers and Shari’ah boards alike.

A further example of this can be demonstrated more clearly with Mambu’s recently expanded Islamic Profit Sharing (IPS) module, as Ingrida elaborates, banks are now empowered to manage the intricacies of profit sharing models more efficiently and with ensured compliance.

“The Islamic Profit Sharing (IPS) service empowers banks by providing a dedicated configuration interface to design and automate the end-to-end profit distribution lifecycle for main funding contracts Mudarabah, Wakala, Wadiah, Qarda Hassan and later for Tawarruq.

Within this module, banks can define shari’ah-based deposits with needed parameters, investment pools and configure the accounting rules for complex mechanisms. At the end of a financial period, the module's orchestration engine automatically calculates each depositor's weighted contribution and distributes the variable profit according to these pre-configured rules.

This process generates an immutable, granular audit trail for every calculation and transaction, providing transparent proof of compliance for Shari'ah boards and regulators. By abstracting this complex business logic into a single configurable module, it eliminates custom development and risky manual processes, dramatically increasing operational efficiency.” - Ingrida Tarbūné

With the foundations to build automated Shari’ah-compliant products, Islamic banks no longer have to worry that their limited legacy systems are at risk of running afoul of the values and principles at the core of their offerings. Both they and their customers can rest assured knowing that beyond the configured agreement, the process is entirely automated, eliminating manual risk.

The major concern going forward for existing banks operating on legacy systems is that they will ultimately be left behind. And the stark reality is that they will be. The future landscape is evolving, and banks are already having to compete with modern challengers equipped to meet modern demand.

With an established reputation and customer base, these banks still hold considerable weight and standing, but their standing is diminishing the longer they wait to take action.

Some final words of advice from our regional experts;

“From my conversations with customers, several common themes emerge. A primary concern is often the speed and cost of innovation. The cost of inaction will only increase further the more the scales tilt in favour of modern capabilities.

With 68% of IT budgets in APAC going towards simply maintaining legacy systems, those funds could be reinvested into innovative solutions like the one offered at Mambu, ultimately freeing up budgets for further innovation. Our fast time-to-market is a notable advantage for which we have a proven track record.” - Muhammad Irfan

“Start small, but crucially, start now. The most successful banks don’t try to change everything at once. They begin by identifying high-impact use cases, such as launching a new Shari’ah-compliant digital savings product or improving mobile onboarding, and build from there. Choose a partner that allows for iterative, modular transformation rather than a complete overhaul.

With Mambu, banks can launch products in weeks, not months, because our platform is built around a modular, plug-and-play structure. Whether it’s launching a new type of Islamic lending product or a youth-focused digital wallet, banks can design, test, and iterate products quickly without writing custom code or overhauling existing systems.” - Harjit Kang

For more valuable insights into the current challenges and solutions in the Islamic banking world, download our report.

For more information on our Islamic banking products, read our Product Brochure.

Want to reach out to us to explore more possibilities? Contact us here.