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What Does Your FI “Aspire” To Be?

Finextra reported that Aspiration--which calls itself a "financial firm with a conscience" and vows to make a "positive difference in the world"--raised $47 million in a Series B funding round, bringing its total funding to $67 million. According to the article, Aspiration:

"Offers standard banking, investing and retirement products...and operates on a 'pay what is fair' basis that trusts customers to choose the fee that they pay. The vast majority pay something, knowing that Aspiration donates 10 cents of every dollar it earns to charity. This model has proved a hit, with the company adding thousands of new customers every week who transact over $2 billion a year on the Aspiration platform. In fact, the startup claims to have added 20,000 former Wells Fargo customers to its base since the big bank's recent scandals broke."

The press just loves to run stories on these micro-niche startups that make unverifiable claims of customer adoption, don't they? "Thousands of new customers every week"? "Transact over $2 billion a year"? What, exactly, is being "transacted"? Do they mean "invested"?

Speaking of unverifiable claims, Aspiration offers a 100% fossil fuel-free and firearm-free sustainable investment strategy, and claims that its customers have reduced greenhouse gas emissions by the equivalent of three million fewer miles driven by American cars. Oh come on.

I spoke to one Aspiration customer (sorry, I know that's not a representative sample), who said he invests with Aspiration, but doesn't use its banking capabilities. He said he does pay a fee, based on the return he actually earns on his investment. My contact (who works for a big Silicon Valley tech firm that you might have heard of) said some of his colleagues have asked him about Aspiration, so, as he said, "they're not flying under the radar."

I would venture to bet that every credit union I've ever met thinks it has a "conscience" and wants to "make a positive difference in the world." And maybe every community bank, too, although they tend to be less vocal about it.

While the press wants to make stories like Aspiration's look like impending disruptive threats to the existing industry, senior execs at banks and credit unions should look at these micro-niche startups and ask themselves: 1) Can we do what they're doing? 2) Should we do that? and 3) Why aren't we doing that?

Ron Shevlin
Director of Research
Cornerstone Advisors

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