Aspiring to change the world is a lofty goal. Aspiring to change the world by changing the financial services industry may be even loftier. And yet that is the goal of Joseph Sanberg, Co-Founder & Chair of the Board of Advisors of Aspiration that set out a little over a year ago to reimagine the financial services industry. You might remember Simple.Innovative.Change covered the story last year, when most were calling the idea to build a financial services company that let you decide what to pay for its services a little whacky.
Well with over 100K customers and over $300M in managed assets captured in one year perhaps this whacky idea is just crazy enough to work. Joseph and his team were out in front of a consumer that is growing more and more wary of social constructs that have lost all sense of positive direction. With more consumers seeking out more sustainable businesses and organizations, Aspiration is well positioned to support Americans in their individual lofty pursuit of helping to change the world.
A financial organization with a conscience sounds like a joke waiting for a punchline, but it happens to be a mission that is gaining ridiculous traction with Aspiration consumers. Check out all the exciting happenings below as Joseph and I chat the future of Americans and their financial lives...
CL: Since we last spoke Aspiration has been immensely active. Can you speak a bit about the developments Aspiration has experienced over the past year?
JS: I think we have really consolidated our leadership of the socially conscious space in financial services and that’s a space that is growing faster than any other space because the number one driver of the consuming decisions of millennials is the values of the companies they support. And if you look at the totality of what we are doing at Aspiration, we are enabling consumers to match their values with their banking, investing and now their spending. The launch of Aspiration Impact Measurement means we can enable our customers to see how their spending impacts people and the planet by the scoring we give to the merchants that they patronize.
We were early to recognize that the world was heading in this direction and now we have an ability to really lead in this space by launching all the services people want and the services people didn’t even know existed. And I think that’s the hallmark of great companies; Delivering on what customers need and delivering offerings that people didn’t even know could exist like Aspiration Impact Measurement.
CL: The growth of Aspiration has really been unprecedented in a space that has seen players like Moven and Tandem really struggle despite delivering some of the most innovative tech ever seen in the banking arena. So what is it about Aspiration that has enabled it to eclipse rather effortlessly over $300M in assets under management and over 100K customers in just a years’ time?
JS; First and foremost people want to match their values and their money. Second people want to bank at a place that has a business model that puts their interest alongside the interest of the company. To be really clear what’s broken in the financial industry is not that the Wells Fargo app isn’t any good. That’s a symptom.
The reason I think Aspiration’s growth has broken out from the pack is because our business is focused on fixing what’s essentially broken with the system, which is the relationship between financial companies and people.
If you want to be one of the next leading financial companies you need to fix that relationship. If you do that everything falls into place, but if you ignore what is centrally broken and just nibble around the edges with that better feature you are missing the real pain point. I think why our growth is breaking away from the pack is that our business is built around solving the central pain point that consumers face. Pay what’s fair rectifies that distrust. And we deepen that relationship by providing a place where people go to match their banking, spending, investing and values.
CL: What is the current customer acquisition strategy that is enabling over 10% growth week-over-week, which equates to over 4,000 new customers per week signing up for Aspiration?
JS: And growing at an accelerating pace. I’d suspect that number to reach and surpass 5,000 new customers per week very soon. There has been no ceiling to the growth acceleration. I think that what’s driving this is that there is a cultural phenomenon that has emerged over the last nine months amongst tens of millions of consumers that want to make their choices more conscious-based and more aligned with their beliefs.
I think we are in the very early innings of what’s going to be a secular and generational trend towards people demanding that their consumption matches their beliefs and values. And there is no industry that touches on your personal beliefs more than the financial industry. In a free market economy money is a part of so much and that emanates from the financial industry, which is funded by the individual deposits of customers.
You will see as this trend of people becoming more conscious of the impact their money has on the world deepen, millions more people signing up for Aspiration from millennials to Gen Xers and Baby Boomers because we enable them to match their finances with their beliefs.
CL: Have there been any specific drivers that you think have driven this socially-conscious secular shift in consumer behavior to be accelerated?
JS: You know, I think the election of Trump and the Wells Fargo scandal probably accelerated this trend. I think we will see this trend unfold several years faster than it would have otherwise unfolded, but it was already deep seated in the belief system of millennials. So now you have this combination with every passing month of millennials representing a larger portion of consumption, accelerated by the rocket fuel that is the current political environment and that of the financial industries brokenness.
The Well Fargo scandal of last autumn really moved a lot of people. It clarified for the 92% of American consumers that distrust financial institutions what they had felt on hunch but couldn’t quite describe. This provided a reference point to say, “Yeah that’s what I thought. Wells Fargo doesn’t have my best interest in mind.”
And so again you are starting to piece together why Aspiration has been able to break away from the pack. It’s because the whole business model from the beginning was based on fixing what’s centrally broken and that’s the relationship people have with their financial institution. I have been saying from the beginning the problem in the financial industry cannot be solved just through tech, this is about business model innovation that makes people fundamentally experience the financial institution being on their side. We live in a world right now where people perceive that the worse you do as a customer the better your financial institution does.
By enabling to pay what they think is fair we help solve for that misalignment in the business model and make people feel that they can trust us and that we are on their side. Right now over 85% of our customers pay us because they feel that it’s the right thing to do. That really tells you something.
CL: How is the Aspiration RedWood Fund performing that focuses on investing in businesses that undertake sustainable best practices from hiring diverse teams to being conscious of their impact on the environment?
JS: It’s been performing very well. It is in the top 1% of all large cap funds in America over the last 12 months and it is literally the number one performing sustainable investment fund over that time period as well so it authenticates that this kind of investing isn’t just the feel good approach but also the smart, profitable approach.
CL: What do you see as the long term vision for Aspiration as a business?
JS: I said this in the beginning and I hope with every passing year this will become more believable. But I do believe that we are going to be the largest consumer financial company in America one day. And the reason that will happen is because with every passing year a higher percentage of consumers care about the values of the companies they support.
And with every passing year it’s becoming clearer that there is one obvious socially conscious financial company. If you were to extrapolate where our growth takes us a year from now, and two years from now, soon enough it will become obvious to the broader market that if you care about the values of your financial company there’s only one choice and that’s Aspiration.
As that occurs in conjunction with generational shifts that moves consumers towards values based consumption, I actually think you develop an analysis that leads you to a similar conclusion, which is the next huge leading consumer financial company is the one that is built with socially conscious products in a model that puts people and company on the same side of the table. If you look around and ask who the likely leaders of that movement will be over the next five to ten years are going to have dramatically more market share than they have today, I think your analysis would lead you to put Aspiration at the top of that list.
CL: What are some of the financial products that people want right away?
JS: We are getting thousands of request a week for products that people want that we don’t have and it runs the gamete across the full spectrum of financial services. There is not a financial service that our customers haven’t asked us for.
That speaks to the opportunity we have with our customers and the relationship we have with them that they want all their financial services from Aspiration from banking, investing and retirement which we currently offer, to everything else. Be it mortgages, student loans and life insurance we see consumers wanting all of these features, which is a great opportunity for us and a great responsibility that we have to fulfill.
CL: Based on individuals signing up are there any learnings you have gathered around what we need to educate Americans on when it comes to personal finance?
JS: It begins by empowering customers with confidence. So many customers have been talked down to by the financial industry and been told things like they aren’t smart enough. One of the things we do at Aspiration is we treat people like adults. And treat them like intelligent adults. I think that’s a big part of our relationship. We have a human relationship with every one of our customers. And the power of the internet allows us to scale those human relationships at a low cost very fast, but we are fundamentally in a human relationship with each person.
CL: What is the typical consumer profile of customers signing up for Aspiration?
JS: It’s an important question because the answer is very different for other Fintech companies. Half of our customers are women, which is different than most Fintech companies. Our customers live where Americans live. 94% of our customers live outside of New York, the Bay area and LA.
Now 94% of Americans live inside those places and we have our fair share in those three places, but our customers are distributed across the country. Our customers also run the spectrum in income. A lot of our customers earn a lot and a lot earn a little and a lot earn in the middle. And while most of our consumers are under the age of 35, 40% of our customers are over the age of 35. What it means is that we are connecting with people on a level of universal human values.
It’s what I think is causing our growth to really break out from the pack because if you want to build a company that serves 50 million or more people than you have to build a company on the values that resonate with 50 million people, not with the 5,000 most elite consumers in Beverly Hills or other wealthy parts of America. And we have our fair share of customers in Beverly Hills customers just to be clear. That’s because these universal values connect with people with high income and low income, who are men and women, who live in St. Louis and Los Angeles and Boise.
Our founding premise was that there are common beliefs and senses of fairness that bind us together as humans and that if can authentically engage those beliefs, we can build a community that is bigger than a company and in the process build a company that is transformational of the industry. I think those premises is what is unlocking the growth that is astounding observers.
CL: What do you think some of the challenges are that Aspiration will face in taking this from a company with $300M in assets under management and growing it into a multi-billion dollar organization?
JS: I’d underline that we really think about the individual customer relationships as opposed to assets because we already have sources of revenue that are not asset based. Remember that the voluntary fees that the customers choose to pay for our bank accounts has nothing to do with the amount of assets they have with us. And as we go into a lot of new services there will be new lines of revenue that don’t have to do with assets.
The much more meaningful metric for us is the number of relationships we have with people that want to do all of their financial services with us. And the biggest challenge for us in the years ahead is that moving your whole financial life is hard. Our customers aren’t just downloading an app and putting in a dollar as a leisure transaction. They are moving their whole financial lives, their banking and bill pay, which is challenging and takes time. It’s also what makes the relationships we have with people so deep and durable. Literally almost nobody leaves Aspiration. Our turn rate is so low you can describe it as nobody leaves once they sign up for an account with us.
CL: Can you tell us a bit more about the Aspiration Impact Measurement tool?
JS: The Aspiration Impact Measurement or AIM for short helps you see the social impact of your daily spending. We score merchants for their impact on people and the planet. So when you use your Aspiration debit card for your daily purchases connected to your Aspiration banking account you see a people and a planet score for the merchant you just patronized.
Then all of the merchants you patronized roll up into your people and planet score for your account so you can understand the impact on the world you are having from the spending choices that you make.
CL: How are you determining that score and how are you able to cover the vast majority of stores in the US so that people can get a fairly accurate representation of their people and planet impact?
JS: Well we already cover the 5,000 largest retailers, which includes a very large portion of consumer spending. And our scores are built upon algorithms that incorporate 75,000 different proprietary metrics that are dynamic. We are always evaluating new metrics that we are collecting. So the scores are not set in stone. As companies change behavior for better or for worse their score changes.
CL: How much has the team expanded over the past year to support this vast growth, and has the team reached profitability yet?
JS: A lot, we are almost at 50 people. I think when we last spoke we were at 25 so it’s about doubled in the last year. And every one of our customer relationships is profitable and that is powering the rapid growth of the movement.
The Minute Rundown with Joseph Sanberg
CL: You’ve been really active with CalEITC4Me and what you are hoping to accomplish in this space?
JS: Well about two and a half years ago I led an effort to get California to launch an earned income tax credit, which is a cash back tax credit for working families who earn a low income. The idea is that if you work you should enjoy financial security. Yet so many people work full time or more than full time and don’t earn enough from their wages to provide financial security for their families. The earned income tax credit helps to give those working people more financial security.
Out of the income tax credit, I started a statewide organization called CalEITC4Me, which organizes around the state of California free tax preparation services for working families so that they can claim their earned income tax credit.
This year I traveled to other states including Nevada, Colorado, Michigan and Nebraska to talk about how the earned income tax credit is such an effective tool to bring financial security to more families. In the coming year I think you will hear more about what we can do in states around the country and at the federal level to make the earned income tax credit or EITC really the tip of the spirit to bring more financial security to working people.
That’s because I believe the basic social contract of America should be if you work you enjoy financial security. Yet there are nearly 100 million people in this country who work full time and in many cases more than full time a broken wrist, a busted pipe, or blown tire away from a financial crisis. Three out of four people couldn’t weather a $700 financial shock and if we want our future to be what our kids deserve we have to restore the social contract that if you work you enjoy financial security.
EITC has been one of the most effective tools in bringing financial security to people so my question is, “Why don’t we do it a whole heck of a lot more and more widespread?” That is what we have tried to lead in California and we are trying to spread to other parts of the country this idea of if you work you enjoy financial security.
CL: What inspired you to want to pursue this? With so much going on in your life, why lead this movement to?
JS: I think it’s the great calling of our generation to restore the social contract between our society and those who work so hard to raise our society’s next generation of kids. I was raised by my mom in a low income household and our earned income tax credits were really helpful in my mom being able to provide for our family. And unfortunately, in the 30 years since I was a kid the biggest thing that has changed is that it has become harder for working families to be able to provide for their kids.
As we think 30 years ahead I don’t want someone to think back and say similarly that the biggest thing that changed in the 30 years forward is that it just got harder for working people. I think we are at a point where we actually have to fix things. And the things that we have to fix most of all is restoring the social contract that if you work you enjoy financial security and dignity.
CL: It’s 2017, Blue Apron one of your other major investments is doing extremely well so what other areas of investment are exciting you these days?
JS: I think any investment that is going to open access to more people for great services merits a lot of consideration. I think the four sectors where there needs to be much broader access is financial services, food, healthcare and education.
I think in all four of those areas there is just an abundance of opportunities, and new companies growing fast that are opening the doors of access to more people.
If you didn’t feel like this was a story worth following before I hope I have your attention. Big things are happening at Aspiration and even bigger things are coming. It’s exciting to see the financial services leader of the future proving out its model through tremendous growth, honest consumers and profitability.
If you are a betting man or women I wouldn’t bet against Aspiration. In fact I’d invest those gambling dollars and put them in the most successful sustainable investment fund of 2016, the Redwood Fund. I’d start thinking about where I’m spending my dollars and realize that we all have the opportunity to change the world.
Aspiration isn’t going it alone. They are signing up almost 5,000 new members a week to join them in the journey of rebuilding consumer spending, saving, investing and buying habits. Money just took a turn for the better.
Thank you Joseph and the whole Aspiration team for inspiring true Simple.Innovative.Change