DPD40143

ISLAMIC BANKING PRODUCTS AND SERVICES

LECTURERS NAME: MUHD FAKHRURRAZI B. AWANG @ GHAZALI

Service marketing refers to the application of a different set of tactics or strategies to anticipate
the consumer’s need for an intangible product. It involves integrating a focus on the customer
throughout the firm and across all functions. And thus, meet their requirements accordingly,
to create maximum value for them from their purchase. The marketing of services is different
from the marketing of products. Rather than the traditional marketing product that only focuses
on transactions and exchange, services marketing is focused on the customer, usage, and
relationships. While selling off services, convincing the consumers, and pricing the intangible
products is a challenging task.
B) MAJOR CHALLENGES OF FINANCIAL INSTITUTIONS IN MARKETING

There are four majors challenges faced by the financial institution in marketing for ensuring
that they remain relevant in the current technological developments. The first one is, the
financial institutions may face changing business models since financial institutions have to
adapt to a new system such as digital marketing. Digital marketing banks such as Boost e-
Wallet, RHBMyHomeapp, SME integrated eSolutions, Digital SME Financing App (the first AI-
enabled digital SME lending app in Malaysia), and eKYCon-boarding cashless payment are
the example of digital offering. It will be used by the traditional bank in the future as their goals
are to look at getting new technological specs and trying to understand how the business is
done. This climax of factors has led many institutions to create new competitive service
offerings, rationalize business lines, and seek sustainable improvements in operational
efficiencies to maintain profitability. Failure to adapt to changing demands is not an option.
Therefore, financial institutions must be structured for agility and be prepared to remodel when
necessary.

Next, the financial institution also faced rising expectations from the public and must ensure
to strengthen their customer’s retention. This is the important part because if they have
efficient and secure banking service, they will guarantee that their strategic plans will meet the
fast-evolving demands of segments of retail customers and helps others micro-SMEs
overlooked by traditional institutions. Evolving technology is at the heart of efforts to serve
customers better through customer experience management. Adopting new banking
technology is critical for financial services organizations to thrive.

Another challenge of financial institutions in marketing is, there are not so many customers
who know how to use digital banking. It is not a big problem for the new generation who was
born in the era of technology, but it might not an easy thing for the old generation. As we know,
digital banking relies heavily on technology and leading practices like big data, machine
learning, and a high degree of automation, analytics, and artificial intelligence (AI) to enhance
the customer's experience beyond just the typical banking transactions of credit and debt. It
is also difficult to get your issues resolved when problems arise when you are using digital
banking. Online banking sites have customer service departments. It might be useful when
you are facing some problem, but you often need to work your way through a phone tree and
wait on hold before speaking with someone who does not know your needs or banking history.

Besides, the financial institution also needs to find a partner with someone that has the
expertise in artificial intelligence that allows banks to use the large histories of data that they
capture to make much better decisions across various functions including back-office
operations, customer experience, marketing, product delivery risk management, and
compliance. For example, many SMEs can have their work organized or learn innovative ways
to expand their production, manage resources, sell, and manage products online, learn and
understand consumer behavior and react to the market efficiently. So, this is the best way to
partner with someone that has a lot of experience with the relevant specs to shorten the
learning curve of a new digital bank marketing.
C) STRATEGIC AND EFFECTIVE MARKETING STRATEGIES FOR ISLAMIC FINANCIAL
SERVICES

The first effective marketing strategy for Islamic Financial services is to offer a unique product
to the customer that is rare and has a high quality. The institution must lead by offering a
special new financial product that is not offered by the competition in the market. They need
to understand the preferences and behavior of their target group of customers to stay in the
game. Hence, a marketing strategy that is customized to customer acquisition and retention
should be properly addressed. Islamic institution needs to be innovative and creative if they
wish to establish a strong competitive position and gain competitive advantage. One of the
ways to make that happen is by searching and doing some analysis on a target market to
come up with the best product quality. So, they can present a consistent quality product to the
customer.

Islamic financial institutions should offer a lower price than the conventional institution or at
least in line with them for the price they offer to customers based on the product and services
provided. It is common knowledge that existing Islamic banks offer higher prices for each of
their products than conventional banking. So, it is very important to offer lower prices than
conventional institutions to increase higher customer demand in the future. If this can be done,
more Muslims will be interested in using the services of Islamic financial institutions because
it is in line with their obligation to use products that are Shariah-compliant and not illegal in
Islam. This method is also very effective in protecting the low-income group who want to use
financial services and prevent them influenced in illegal transactions on the Islamic side such
as mortgages, making personal loans, buying assets either cars or houses from conventional
institutions which contain elements of riba, gharar, and even maisir.

Furthermore, they need to make Islamic banking products more known to the consumer in the
rural areas and small towns. Islamic institution needs to use the strategy that will allow
consumers outside the urban area to know and have sufficient information about various of
Islamic banking product. This is because the efforts in marketing Islamic banking products are
still low, despite experiencing an increased amount of money deposited in the system.
Therefore, the institution should exploit the advantages and differences of Islamic banking and
conventional banking products to those consumers. If it properly carries out, it can speed up
the consumers to know and learn about various Islamic products. At the same time, it can also
attract new potential segments.

Next, the effective marketing strategies for Islamic Financial are doing promotions for their
product and services. Promotions are very important aspects as they will spread awareness
about the Islamic banking products of how these products and services are different from
conventional banks and how it is in line with the Shariah. For example, the promotion can be
on products and services offered such as their banking product, Takaful, Sukuk, and others.
Moreover, countries such as Malaysia whose majority population are Muslim will be more
concerned about the promotions offered because of the advantages provided and the product
is Shariah-compliant which is very important for them to use. In addition, non-Muslim also will
be attracted to use the services offered by Islamic financial institutions that will increase
demand as well as provide positive and best returns to Islamic institutions in the long run.
Lastly, an effective strategy that might be useful to expand more about Islamic finance is
Banks and financial services firms must stand out in the crowd by offering customers
something extra to attract and retain consumers. There is nothing that can differentiate one
bank from another bank except building a strong customer relationship to make them
comfortable with the services provided. An employee can make a deep connection with a
customer and make them aware that you understand their financial needs and comes with
solution-based thinking, not product pushing. In addition, financial services providers must be
aware of customer's situations and finances. The best providers engage customers and learn
how their needs are evolving. You will not understand the customers unless if you have been
in their shoes. Now financial advisers are called on to provide factual evidence to customers
that the economy is getting stronger to make sure customers believe with the services.
D) CONCLUSION

In conclusion, the Islamic financial institution is the most important institution for every Muslim
because the concept is based on the balance between well-being and prosperity. therefore,
Islamic financial institution focusses not only on quantity but also on the quality that will also
be shown as equality, risk-sharing, and ethical conduct, in particular preventing infringement
of the rights of others which is safeguarding the welfare between the financial institution and
its customers. In addition, Islamic financial institutions also can be promoting the social
development and financial well-being of the entire community by offering this alternative form
of financing, services and expand their product range in the future.
E) REFERENCE

Summerfield, R. (2017, April). Innovation in Islamic finance. Financier Worldwide.

https://www.financierworldwide.com/innovation-in-islamic-finance#.YM3u0mgzZPb

I.A.P.S. (2020). Marketing Islamic Financial Services: A Review, Critique, and Agenda for

Future Research. Risk And Financial Management, 1–19.

https://ideas.repec.org/a/gam/jjrfmx/v13y2020i1p12-d305133.html

Trustbank Amanah. (2017). WHY ISLAMIC BANKING?

https://www.trustbankamanah.com/why-islamic-banking/

Turchetti, C. (2012, March). 5 Ways to Overcome Today’s Challenges in the Financial

Industry. Https://Www.Americanexpress.Com/En-Us/Business/Trends-and-

https://www.americanexpress.com/en-us/business/trends-and-insights/articles/5-

ways-to-overcome-todays-challenges-in-the-financial-industry/

I.S.R.K.I.S.C. (2019). Fintech and Islamic Finance-challenges and Opportunities. Fintech

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