The largest and oldest fully-fledged Islamic bank in the UK recently closed its last retail banking branch and now maintains a single branch only for high net worth and high net worth customers.
London: Al Rayan closed its Edgware Road branch in the capital on August 3. The branch closure follows a gradual closure of other retail banking branches in recent years. The bank closed its London Whitechapel and Birmingham Small Heath branches in 2021. This came after its Manchester and Leicester branches closed in September 2020.
A spokesperson for Al Rayan Bank told Salaam Gateway that existing customers can continue doing business with Al Rayan Bank through their digital banking app and phone banking service. Individuals and businesses can also continue to deposit cash and checks at nearby Lloyds Bank branch counters.
“Like many banks in the UK, Al Rayan Bank is seeing more and more customers choosing to access their banking services digitally rather than through a branch,” the spokesperson said. . “As demand for in-branch services and customer footfall decline, some business decisions need to be made.”
Al Rayan now only maintains its Knightsbridge branch, which is only open to ‘prime’ bank customers. Premier Banking is for those who need home financing of £500,000 ($589,000) or more, are GCC customers or ultra-high net worth individuals.
Mohammed Amin, an Islamic finance consultant and former tax partner at PwC in the UK, said closing Al Rayan’s branch in Edgware Road, while retaining a branch in Knightsbridge for blue chip clients, would not is not surprising.
“I’ve long viewed branches as a way for retail banks to waste money,” he said. “This is why the UK’s leading conventional banks have been reducing their branch footprints for many years. When the Islamic Bank of Britain (as it then was) embarked on its branch strategy, I always thought that was a bad strategy and that it would be better if it or internet only.
Zahir Nayani, partner at Bristol-based law firm Foot Anstey, added that Al Rayan’s decision to reduce its branch footprint was primarily driven by the increasing digitalization of retail banking and the shrinking frequentation of shopping streets.
“It’s arguable that bolstering their online offering is a worthwhile long-term game given growing competition from stock-based fintech offerings such as Algbra and Nester,” he said.
New incoming charges
In addition to branch closures, Al Rayan is also expected to introduce fees for its checking accounts from January 2023, according to customers who spoke to Salaam Gateway.
A client of Al Rayan expressed dismay at the inbound charges on top of branch closures.
“Checking account fees are a ruse to entice retail customers to walk away,” he said. “Branch closures have been framed under the guise that digital banking is the future, but they still require manual processes to complete important tasks. It’s just another reason retail customers are frustrated and turning to a conventional bank.
In response, Al Rayan’s spokesperson said they regularly review their products and strive to offer customers a range of services that meet their needs.
“In our recent review, we found that most of our current account customers do not use Al Rayan Bank as their primary current account. When a current account is not used regularly, it can become inactive, which could pose a greater security risk to customers,” the spokesperson said.
“For our customers who wish to use their current account and subsequently maintain a fixed balance in their current account, the fee will not apply, allowing us to offer our services to our target market who actually use the product,” added the spokesperson.
Commitment to the UK sector
There are five Islamic banks in the UK, although each serves different market sectors such as retail, corporate, private and property finance.
Founded in 2004, then as Islamic Bank of Britain, Al Rayan provides Shariah-compliant savings, funding and current account services to over 90,000 retail, business and investment grade customers.
In 2014, Al Rayan became the British subsidiary of Masraf Al Rayan (MAR), an Islamic bank based in Qatar. Last year, MAR merged with Al Khaliji Commercial Bank, which created one of the largest Sharia-compliant banks in the region with over QAR 182 billion ($50 billion) in total assets. As part of the merger, Al Rayan Bank said it would take advantage of the opportunities of the MAR merger and focus on commercial real estate and prime banking services, according to the bank’s 2021 annual report.
However, branch closures and a pivot to high net worth customers have led some stakeholders to suggest that Al Rayan is slowly withdrawing from the retail market.
Ibrahim Khan, co-founder and CEO of IFG, a UK-based Islamic finance platform, believes Al Rayan’s gradual exit from branch banking is part of a steady withdrawal of the bank from consumer services. Sharia sensitive retail customers in the UK and focus more on commercial activities. and business lending business as well as serve more overseas wealthy clients.
“For Muslims in the UK, this is an unfortunate development as it reduces sources of Islamic property finance – Al Rayan was the biggest player for many years,” he said. “There is still hope with several well-funded new entrants to the market in recent years, such as Strideup, Wayhome and others, but it will be some time before we get the number of Islamic mortgages issued each year. year at the height of when Al Rayan was at his peak.
Al Rayan’s spokesperson reiterated the bank’s commitment to the retail banking market.
“Earlier this year, Al Rayan Bank announced that it will continue its transition to become a financial institution focused on prime banking and real estate services, primarily residential investments, to deliver a viable, resilient and GDP-compliant business. Sharia,” Al Rayan said. spokesperson. “As part of our commitment, we continue to offer very competitive loyalty rates to all of our retail customers, active and passive.”
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