Digital Disruption in Islamic Finance: A Comparative Study of FinTech in Islamic and Conventional Financial Systems (2020–2025)

Purpose: This study investigates the transformative impact of financial technology (FinTech) on Islamic finance and compares its adoption and implications with conventional financial systems. It focuses on to understand how digital instruments are restructuring Islamic financial operations, education, and ethical practices, while emphasizing both the benefits and challenges of FinTech integration.Design/Methodology/Approach: The research is based on a Systematic Literature Review (SLR) integrated with contextualized case studies from publications between 2020 and 2025. It analyses the contribution of digital technologies such as blockchain, mobile banking, and digital platforms in the evolution of Islamic financial digitalized systems, particularly focusing on the ideologies of Shariah compliance.Findings: The findings show that FinTech elevates transparency, efficiency, and fraud reduction, but its acceptance in Islamic finance is gradual due to strict Shariah compliance requirements. In comparison, conventional finance adopts FinTech more qucikly due to fewer ethical and regulatory constraints. Key challenges in Islamic finance include regulatory gaps, limited infrastructure, and lack of practical implementation.Practical Implications: This research contributes valuable insights for policymakers, financial institutions, and educators by emphasizing the requirement for regulatory development, technological infrastructure, and ethical alignment in the Islamic FinTech landscape. It motivates proactive strategies to support innovation while maintaining Shariah compliance.Originality and Value: This study participates a comparative and interdisciplinary perspective on FinTech’s impact in Islamic finance. By connecting theoretical literature with practical case studies, it finds critical gaps and offers recommendations for ethical digital transformation, making it a strategic resource for stakeholders maneuvering Islamic financial modernization.