This article is produced and sponsored by DDCAP Group. It was first published in the Global Islamic Fintech Report 2021 produced by DinarStandard and Elipses. The report can be downloaded from here.
As a consequence of the Covid-19 global pandemic Islamic financial markets participants, like their global counterparts, have rapidly elevated their awareness of the advantages of existing and evolving financial technology. Phase one of the pandemic, not surprisingly, brought an immediate focus to ensuring access to technology that brought significant efficiencies to daily operating procedures. As market participants grappled with the sudden imposition of remote working practices, and the unwelcome necessity of rotating employees between remote and physical offices, being able to place full reliance on sustained, automated processes that assured business continuity was of paramount importance. DDCAP Group’s own ETHOS AFP™ automated trading and post trade services platform has been widely available to the marketplace for over a decade and was a pathfinder in delivering automated services, with various straight-through processing capabilities, to Islamic market participants. Any lingering reticence on the part of institutions in adopting full automation has seemingly been swiftly addressed and resolved during the past 12 months.
We are very pleased to have been positioned to play our part in delivering dependable, technology-based efficiencies that have eased some of our clients’ burden during an extremely challenging time for all of us, irrespective of size or scale. DDCAP has always moved to innovate and push boundaries with its offering. By example we were first to move beyond embedding Sharia’a based contractual and screening tools within our platform to include governance considerations ranging from regular compliance protocols to sustainable and responsible asset preferences in inventory allocation. However, partnership and co-operation has always been a cornerstone of DDCAP’s technology development strategy, as previously illustrated by our ground breaking collaboration with Refinitiv to provide a fully integrated treasury trading workflow for Sharia’a compliant transactions. Co-operation between leading brands is compelling, but we have come to recognise the impetus that is being created across our core markets by new businesses creating technologies of their own but whose ambition, direction and product is very complementary to DDCAP’s. We look forward, in our capacity of service and technology provider to a specialised and expanding market, to announcing further joint value propositions that will continue to bring to our clients the efficiencies that they seek.
Having enjoyed such a constant presence within this industry for more than 20 years has ensured our connection to the developing requirements of the market and its participants, but our relationships with the newer technology enabled companies has resulted in an expansion of DDCAP’s own business interests. DDCAP’s majority shareholder, IPGL, has identified with technology focused, global financial services for more than four decades, having built and divested of major financial sector businesses that include ICAP plc and NEX Group plc. IPGL’s own investment strategy is now wholly focused on new technologies. With our shareholder’s proactive support, DDCAP has recently started to invest in early stage companies with exceptional fintech strategies, whose alignment to Sharia’a compliant, sustainable and responsible business principles is equally important to us. The first of our strategic investments was with IslamicMarkets.com, a leading financial intelligence and learning platform for the global Islamic economy. We increased that investment last summer and we are currently considering a number of others.
Early stage investment is of particular interest to us as we are patient investors with an established operating infrastructure conducive to early stage business requirement. Our founder partners are better able to focus on growth when other potentially time consuming matters are addressed. In our experience, aside from a lack of early stage capital, perhaps the most significant contributor to start-up companies’ failure is the cost and distraction of ensuring appropriate business and operational support. There are additional aspects of strategic guidance that we bring to our investees. As a business that was initially funded and incubated by an early stage VC, we offer our entrepreneurial CEOs the benefit of shared experience, the resources and skillsets of our shareholders and senior executive and, essentially, the wisdom of our internationally diverse Sharia’a Supervisory Board.
We are excited by the Islamic fintech ecosystem we see developing in the UK and overseas. Early technology developments for Islamic financial purpose have prioritised enablement, but now a full range of disruptors are emerging. The advent of Open Banking is creating significant opportunities for new technology first players and there are exciting UK Islamic start-ups proactively competing. Peer- to-peer and crowd funding platforms for SME requirement and smaller ticket investment in property and infrastructure related projects are also at the forefront. In terms of first mover developments, last year we also saw the world’s first primary sukuk delivered on blockchain and there is keen competition to develop the first fully functioning Islamic crypto exchange.
Access to capital will continue to be a challenge for the foreseeable future, but interesting to observe the gradual emergence of Angels and VCs with Sharia’a compliant sector focus. Current, difficult economic conditions prevail and are compounded by the aftershock of the global pandemic but emerging, new players with first mover advantage present enormous potential. That potential is not only attractive to investors but to market participants seeking to adjust fully to an operating environment that could be the beginning of ‘new normal’, whilst evolving business development strategies that will take advantage of the vast opportunities ahead.
Copyright Global Islamic Fintech Report 2021