DIGITAL PAYMENT SYSTEMS AND CASHLESS ECONOMY: ISLAMIC PERSPECTIVE ON FINANCIAL INNOVATION

Abstract

This study examines digital payment systems and cashless economy development from an Islamic perspective on financial innovation. The purpose is to analyze how digital payment technologies align with Islamic financial principles and how Muslim users perceive their use in daily transactions. Using a qualitative approach, this research conducted in-depth interviews with Muslim consumers, Islamic finance practitioners, and academics, complemented by literature analysis on digital finance and Islamic economics. Findings indicate that digital payment systems offer significant benefits including transaction efficiency, convenience, transparency, and financial inclusion. From an Islamic perspective, digital payments are permissible when complying with Sharia principles such as avoiding riba, gharar, and unlawful transactions. Users perceive cashless systems as helpful tools simplifying financial activities while supporting ethical and accountable behavior. However, concerns remain regarding data security, consumer protection, and potential platform misuse. The study concludes that digital payment systems can support cashless economy growth within Islamic framework when supported by appropriate regulation, Sharia compliance, and financial literacy. Strengthening collaboration between regulators, Islamic financial institutions, and technology providers is essential for sustainable and ethical financial innovation. This research provides insights for policymakers and stakeholders in developing inclusive digital financial systems aligned with Islamic values.