An Islamic neobank is a bank or banking service accessed only through an app, which opens accounts, issues cards and sometimes offers financing using Sharia-compliant contracts, overseen by a Sharia board and by a financial regulator.
Its own licence or a digital front for another bank?
Some neobanks hold their own banking licence. Others are technology companies that build the app while a licensed institution keeps the accounts. In the second case, the partner bank holds your funds and answers to the supervisor for them.
Malaysia's Islamic digital bank licences
In April 2022, Bank Negara Malaysia awarded five digital bank licences, two of them under the Islamic Financial Services Act. AEON Bank began operating in 2024 as the country's first Islamic digital bank, aimed mainly at retail customers.
A start-up phase under closer supervision
New digital licences often come with an initial period subject to an asset cap and capital targets. The regulator checks that the bank controls its risks before letting it grow freely, which can limit the range of financing offered at first.
Opening an account and remote identity checks
Identity is verified using a photo of an official document and facial recognition. Anti-money-laundering obligations are the same as in a physical branch, so a refusal or a request for extra documents is nothing unusual for new customers.
The non-paying balance, simple safekeeping of funds
The basic account often works as a Qard or Wadia deposit: the bank guarantees the balance but pays no contractual return. Any reward, such as a hiba gift, stays discretionary and cannot be promised when the account is opened.
Savings pockets and automated goals
Apps offer themed sub-accounts funded by round-ups or scheduled transfers. When they pay a return, the underlying structure is usually Mudaraba, Wakala or Tawarruq; the product sheet should state which one applies and whether capital is guaranteed.
Debit card and merchant filtering
The card draws on the available balance, with no interest-bearing overdraft. Some banks block payments at merchants classed under gambling or alcohol using merchant category codes. This filtering is imperfect and depends on the classification supplied by the card network.
Instalment payments recast as Murabaha or Ujrah
To spread a purchase, the neobank may buy the item and resell it at a mark-up, or charge a fixed service fee. Late fees cannot become a source of profit: they are capped or donated to charity under Sharia board supervision.
Sharia board, audit and algorithms
A Sharia board must approve each product and also the rules coded into the software: margin calculations, fee triggers and investment screening. A periodic Sharia audit checks that the app actually applies what was approved on paper.
Cybersecurity and service continuity
Without branches, an IT outage or a phishing fraud can leave the customer with no access at all. Check for strong authentication, instant card freezing, a reachable human support team and the complaints route to the relevant ombudsman.
Deposit protection: a status to confirm
An account held at a licensed bank is normally covered by the national deposit guarantee scheme, within its limits. An e-wallet run by a payment institution relies on safeguarding of funds, which is narrower. Investment accounts are generally excluded from deposit protection.
Checklist before downloading the app
Identify the entity holding the licence, the country of supervision, the members of the Sharia board, the contracts used for each product and the full fee schedule. Be wary of any app calling itself halal without publishing a fatwa or an audit report.
Specialist external source
IFSB standards provide the principles on Sharia governance, risk management and customer protection that supervisors also apply to digital Islamic banks.