A confluence of factors is driving the requirement for a credit card model that serves the Islamic population. These factors include global wealth redistribution, electronic commerce, and population development. TowerGroup estimates that the addressable portion of the global Islamic population for credit card offerings is 250 million consumers. It expects that adoption of these products will grow rapidly from its current base of less 1 million accounts to as many as 6 million accounts by 2012.
The current business model is highly selective in soliciting prospective customers and does not resemble the traditional global model of mass-market credit card solicitation or bank branch cross-selling. Although Islamic credit cards are similar to traditional cards as payment instruments, as lending instruments they must not violate Shariah â the written and interpreted code of Islam, which among other tenets rejects levying interest earned on debt, prohibits speculation, and excludes certain activities. comply with certain prohibitions of Islam according to Shariah. Therefore, Islamic credit cards require a pricing alternative to interest and require scrutiny of transactions to ensure purchases are not prohibited.
Three types of credit card issuers now operate in the Islamic card space: major global banks that set up separate Islamic banking companies; traditional banks converting to the Islamic model; and Islamic startups. As the market emerges, entrants must foster both a sustainable business model and the ability deal with such core issues as interoperability with global card companies, product design, and processing venues.