Malaysia continues to assert its dominance as a global leader in Islamic finance, with Islamic banking comprising 43 percent of the country’s total banking assets as of early 2025. Meanwhile Indonesia’s Islamic fintech market is on a meteoric rise, projected to reach US$306 billion by 2027, growing at an impressive 17.9 percent.

However, the global banking industry faces a stark reality – return on equity (ROE) is expected to decline from 9.5 percent in 2021 to below 7.2 percent by 2030, as legacy infrastructure and outdated technology stifle product innovation and scalability. For incumbent banks, the pressure from digital challengers is intensifying, leading to stagnant revenue growth and shrinking profitability.

By combining the scale and trust of legacy institutions with the agility of fintech disruptors, Southeast Asia has the unique opportunity to accelerate financial inclusion and deliver sharia-compliant solutions at scale.

By leveraging cloud-native platforms and partnerships with fintech companies that understand complex regulatory environments, banks can rapidly innovate, enhance customer experience and future-proof their business models.

Digital banking has become the primary gateway to financial services for millions across the region. The rise of mobile-first and cloud-driven banking solutions is making sharia-compliant financial products more efficient, accessible and tailored to evolving consumer needs.

This digital shift presents a massive market opportunity. Indonesia’s digital banking sector is projected to generate $8.6 billion in revenue by 2025, with 78 percent of Indonesians actively using digital banking at least once a month.