Optimizing E-Wallet Transactions: A Shariah-Compliant Approach for Malaysia

Abstract

This study aims to propose a framework and parameters for Islamic e-wallet transactions that can be implemented in Malaysia. The proposal was developed through a documentary review, comparing Shariah rulings on e-money issued in Malaysia and Indonesia. The framework was then validated by Shariah advisors from the banking industry through semi-structured interviews. The study emphasizes that key elements such as Shariah contracts, the management of users' funds, rewards, fee structures, provisions for e-wallet usage, and the Shariah committee are critical to ensuring compliance with Shariah principles in e-wallet transactions. By creating a systematic framework for Islamic e-wallet transactions, this study seeks to fill the gap for issuers and promote by greater engagement of service providers within the digital economy. Furthermore, a precise distinction exists between e-money, which represents stored electronic value used for transactions, and e-wallets, which are digital applications that manage and facilitate transactions involving e-money, debit cards, and credit cards. Consequently, the study’s findings and recommendations are useful for banks and non-bank service providers, including regulators, in structuring Shariah-compliant e-wallet transactions.