Islamic fintech Wahed opens physical bank branch in London

An investment platform backed by oil giant Saudi Aramco and French footballer Paul Pogba is launching a new proposition in Britain: a physical branch and bank accounts backed by gold.

New York-based Wahed, which describes itself as a “halal investment platform”, has opened a UK branch in a bid to target the country’s 3.9 million Muslims with a Sharia-compliant investment management and advisory service.

The glossy retail space has a similar design to an Apple store, with digital screens inside and a bright sign displaying the logo outside. It is located on Baker Street in central London, opposite a branch of the British banking giant HSBC.

Khabib Nurmagomedov, the Russian former professional mixed martial artist, is a promoter of the firm and will be among those attending the branch opening on Tuesday.

Wahed is also launching a debit card that allows users to deposit money with an exchange-traded commodity that tracks the price of gold, meaning they can effectively pay for everyday goods via gold.

Investors will be able to redeem the gold in their accounts for physical bars. Junaid Wahedna, CEO and co-founder of Wahed, said it’s a way for Muslim — as well as non-Muslim — consumers to beat currency fluctuations and the rising cost of living.

“[Muslims are] an underserved community as a whole,” Wahedna said in an interview with CNBC, referring to the market opportunity for digital Islamic finance. “It’s a minority community, there’s a lack of financial literacy.”

Banking startups such as Monzo and Revolut have flourished in the UK without physical bank branches, offering smartphone apps that help users manage all their finances. But Wahedna warned that this risks leaving Muslim consumers behind.

“In Great Britain, [the Muslim community is] actually one of the lowest socio-economic segments in the country,” the Wahed chief said, with “low income or financial literacy.”

“They have trust issues,” he added. “And so they want to see a physical presence before they trust you with money.”

Wahed’s service aims to help clients adhere to the Islamic faith’s strict doctrines on financial services: Sharia law forbids its followers from charging or earning interest on loans, or from investing in firms that make most of their money from selling things like alcohol and gambling. .

Wahed prohibits investments in companies that make money from lending, gambling, alcohol and tobacco. An account with Wahed also does not give interest on savings, nor does it give wild returns on risky crypto-tokens. Instead, the value of users’ deposits tracks the value of gold, with the precious metal fluctuating in price depending on supply and demand.

“I think it really fits with the Muslim community and what their needs are,” Wahedna said. “Because otherwise, what happens is the Muslim community, because they’re underserved, they keep their money in cash under the mattress, or in something very unsafe, and they lose their money every few years because it’s a scam in the community or someone exploits them. And that cycle of poverty just continues.”

Junaid criticized the state of modern fintech companies, suggesting the industry is too focused on consumer lending with the rise of Klarna and other hyped “buy now, pay later” services.

“All their business plans are built around lending revenue, right? Even digital banks, it’s like, okay, I’m starting to be a new bank, but eventually I’ll get a banking license,” Wahedna said.

He said Wahed is focused on making money by charging wealth management fees, which charge users a percentage of their total assets. The startup, which was founded in 2017, is still loss-making but has broken even in Malaysia and the US, he added.

“I feel like fintech, like most of the financial industry, is very heavily geared toward lending,” Wahedna said. “In fact, I would say it makes the cost of living crisis, a debt crisis, worse with a lot of the products.”

“If you look at buy now later companies pay, people struggle – that’s the worst kind of innovation, you make it easier to get people into debt,” he added.

Wahedna emphasized that the company is not just for Muslims and aims to serve followers of other Abrahamic faiths as well, including Judaism and Christianity.

Staff at the London branch will help clients open accounts, make investments and provide guidance on wills and estate planning.

The firm targets high-net-worth individuals as well as less affluent consumers, Wahedna said.

Wahed has raised $75 million to date from investors including Saudi Aramco Entrepreneurship Capital, the venture capital arm of Saudi Arabia’s state-backed oil company Saudi Aramco, as well as French soccer player Paul Pogba, who is a practicing Muslim.

Islamic finance has achieved significant growth over the past decade and is expected to reach $4.9 trillion in value by 2025, according to Refinitiv’s Islamic Finance Development Indicator. A number of other fintech players are seeking to tap into the halal money space, including Zoya and Niyah.