Big Data analytics and applications have transformed traditional banking processes, enabling digital banks to optimize operations, enhance customer engagement, streamline risk management, and support data-driven decision-making. As digital banks strive to maintain competitiveness and meet the evolving expectations of tech-savvy customers, the role of Big Data becomes even more essential, offering banks the ability to analyse vast amounts of customer and transactional data, improve predictive modelling, and foster real-time responsiveness. The study aims to provide a comprehensive analysis of Big Data’s role within digital banking, recognizing its emergence as a pivotal resource in the banking industry, particularly in today’s digital era. This study presents a systematic literature review (SLR) to explore the current state, applications, and future potential of Big Data in digital banking, with an emphasis on its adaptation for Islamic financial institutions. Through this review, the study seeks to offer a well-rounded understanding of the potential avenues for Islamic banks to adopt Big Data technologies, ensuring that these innovations align with Shariah principles and regulatory requirements. The study adopts a qualitative approach to draw conclusions based on an extensive review of related literature. Specifically, the review incorporates a systematic examination of 71 articles from Scopus, a primary academic database, covering the period from January 2020 to November 2024. By concentrating on recent literature, the study reflects on the latest advancements, challenges, and debates surrounding Big Data’s role in digital banking, with particular focus on how these developments can be adapted to support the ethical and operational frameworks of Islamic financial institutions. There are four main themes from the findings based on the SLR which as follows: first, application of big data analytics; second, implementation of Artificial Intelligence (AI) and Machine Learning (ML); third, application of the blockchain system; and fourth, other topic of big data in the financial sector. The findings emphasize big data’s potential in improving decision-making, risk management, and customer targeting while underscoring challenges such as data privacy concerns and regulatory compliance in the Islamic financial institutions. The study contributes to industry best practices, helping Islamic banks harness Big Data responsibly and strategically, while adhering to Shariah principles and strengthening their competitive position in the digital finance landscape.