Aspiration Wants to Manage Cash for Socially-Conscious Consumers
Can the startup take on major banks and save the planet?
Aspiration, the U.S. digital bank that markets itself to socially-conscious consumers based on its refusal to fund fossil fuel projects, has launched a “cash management” account as it looks to rival major banks.
The new “Open & Save” account offers unlimited cash back rewards on every dollar, extra rewards for shopping at businesses with strong employee and environmental practices, zero fees, and a 2 percent interest yield on deposits.
Aspiration also promises that unlike bigger and older banks, customer deposits will just sit in its vault instead of being lent out to finance fossil fuel infrastructure.
Aspiration makes money by charging users a monthly fee they think is fair, even if it’s zero. “The vast majority” of its nearly one million users choose to pay a fee, typically between zero and 2 percent, CEO Andrei Cherny said in an interview with Cheddar on Tuesday. He said the company adds 100,000 registered users each month.
“We’re in a world right now where the banking industry is facing a massive crisis of distrust,” he said. “The vast majority of customers choose to pay … They see us as financial firm that has our back, is working for them, shares their values. They’re not getting that with the rest of the financial industry.”
Aspiration has been digging at banks for years, riding the post-crisis, break-up-the-banks rhetoric and comparing itself in marketing to industry heavyweights rather than other fintech apps and digital bank peers. Last year, for example, it launched a Valentine’s Day campaign urging customers to break up with Bank of America and join Aspiration — even offering $12 to make up for the $12 fee that Bank of America recently introduced to its only free checking accounts.
“We’re in a world right now where the banking industry is facing a massive crisis of distrust.”
But 10 years after the financial crisis, mobile and online banking experiences have improved at many major banks. Most legacy financial institutions have helped further cultivate a boom in U.S. credit card use, creating cards with highly competitive rewards schemes that customers love using. In an age when Big Tech companies like Facebook are seen as “digital gangsters,” there’s less anti-bank sentiment in the U.S. than there used to be.
Still, Cherny said that Aspiration’s message isn’t about depicting banks as villains.
“Banks have a fundamentally broken business model,” he said. “The truth is the banks out there make money when their customers do worse. The fundamental incentives are misaligned between the customers and their financial partner.”
That may be, but Aspiration is bound to face economic challenges if it continues to grow but acquires users that are less generous. And to truly be a bank and take on the largest U.S. lenders, Aspiration eventually has to be able to lend money to consumers. Perhaps collecting deposits from them in the new Spend & Save accounts will further that goal.
“That’s definitely something in the cards as we move forward,” said Cherny. “Expect us to look at credit and lending and all the different types of services people are looking for.”
