Digital Transformation of Islamic Banking in Indonesia: Opportunities and Challenges in the Modern Islamic Economy in the New World Order

Abstract

Digital transformation has become a major force in shaping the global financial industry, including the Islamic banking sector in Indonesia. This study looks at the main opportunities and challenges of digital transformation in Indonesia's Islamic banking system and suggests strategies that follow the principles of Makasid Sharia. Using a descriptive qualitative method, the study examined libraries and analyzed content from academic articles, policy documents, and Islamic financial data. It found that digitization improves service efficiency, increases customer access, helps manage digital decline and waqfs more effectively, and speeds up the growth of microfinance. However, there are several challenges, such as limited technology infrastructure, low levels of digital and Islamic financial knowledge, a shortage of professionals who understand both technology and Islamic law, and a lack of full digital Sharia regulations. Also, there is a risk of violating Sharia rules, especially when using blockchain and smart contracts, which needs careful attention. The study suggests incorporating Islamic values into technology design, building a strong digital Sharia ecosystem, and promoting collaboration and knowledge among all involved parties. Therefore, digital transformation in Islamic banking is not just about new technology, but also about values that help create a more inclusive, fair, and sustainable Islamic financial system.