Islamic fintech startup Wahed has opened its first brick-and-mortar branch on London’s Baker Street. The glossy retail outlet is designed to look like an Apple store.
An investment platform backed by the likes of oil giant Saudi Aramco and French footballer Paul Pogba is launching a new offering in the UK: a branch and bank accounts backed by gold.
New York-based Wahed, which describes itself as a “halal investment platform”, has opened a branch in the UK in a bid to bring Sharia-compliant investment management and advisory services to the country’s 3.9 million Muslims.
The glossy outlet has an Apple store-like design, with digital displays inside and a bright logo sign outside. It is located on Baker Street in central London, opposite a branch of the British banking giant HSBC.
Khabib Nurmagomedov, a former Russian professional mixed martial artist, is a promoter of the firm and will be among those attending the opening of the branch on Tuesday.
Wahed is also debuting a debit card that allows users to deposit funds using exchange-traded products that track the price of gold, meaning they can effectively pay for everyday goods using gold.
Investors will be able to exchange the gold in their accounts for physical bullion. Junaid Wahedna, CEO and co-founder of Wahed, said this is a way for Muslim consumers, as well as non-Muslims, to overcome currency fluctuations and the rising cost of living.
“[Muslims are] the community as a whole is underserved,” Vahedna told CNBC, referring to the market opportunity for digital Islamic finance. “It’s a minority community, it lacks financial literacy.”
Banking startups such as Monzo and Revolut have thrived in the UK without physical bank branches, offering smartphone apps that help users manage all of their finances. But Vahedna warned that this risks leaving Muslim consumers behind.
“In the United Kingdom, [the Muslim community is] actually one of the lowest socio-economic segments of the country,” said boss Wajeda, with “low incomes 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 teachings regarding financial services: Sharia law prohibits its followers from charging or earning interest on loans or 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 offer interest on savings and does not advertise crazy returns on risky crypto-tokens. Instead, the value of user deposits tracks the price of gold, with the value of the precious metal fluctuating based on supply and demand.
“I think it really fits the Muslim community and their needs,” Vahedna said. “Because what happens otherwise is the Muslim community, because they’re underserved, they keep their money in cash under the mattress or in something very dangerous, and they lose their money every few years because there’s a scam in the community or somebody’s taking advantage of it. And this cycle of poverty continues.”
CEO criticizes fintech companies focused on lending
Junaid decried the state of fintech companies today, 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’ll start as a new bank, but then eventually I’ll get a banking license,” Vahedna said.
Wahed debuts with a debit card linked to a cash account backed by gold. The startup is backed by French soccer star Paul Pogba.
He said Wahed focused on making money by charging a wealth management fee, which charges users a percentage of their total assets. The startup, which was founded in 2017, remains unprofitable but has achieved operational break-even in Malaysia and the US, he added.
“I feel that fintech, like most of the financial industry, is very much focused on lending,” Vahedna said. “In fact, I would say it’s exacerbating the cost of living crisis, the debt crisis, with a lot of products.”
“If you look at the ‘buy now pay later’ campaigns, people struggle – that’s the worst type of innovation, you’re putting people into debt,” he added.
Vahedna stressed that the campaign is not only for Muslims and aims to serve followers of other Abrahamic faiths, including Judaism and Christianity.
Staff in the London office will help clients open accounts, make investments and advise on wills and estate planning.
The firm targets high-net-worth individuals as well as less affluent consumers, Vahedna said.
To date, Wahed has raised $75 million in total funding from investors including Saudi Aramco Entrepreneurship Capital, the venture capital arm of Saudi state oil company Saudi Aramco, as well as French soccer player Paul Pogba, who is Muslim.
Islamic finance has seen significant growth over the past decade and is expected to reach $4.9 trillion by 2025, according to Refinitiv’s Islamic Finance Development Index. A number of other fintech players, including Zoya and Nia, are looking to enter the halal money space.