Exclusive: ‘Paying it forward’ – Joe Sanberg, Aspiration in “The Paytech Magazine”

Joe Sanberg didn’t want to co-found another fintech that promised change while relying on a broken financial system that was bad for the planet and for society. In that sense, Aspiration isn’t one.

“Where you choose to receive your payroll, and what you use to buy your groceries, is more than just a choice of financial services – it’s a choice of social values.”

That’s Joe Sanberg, entrepreneur and outspoken critic of fintechs, which he believes are in a uniquely powerful position to change the world… but, for the most part, don’t. Which is why, when he launched what looks suspiciously like a fintech with Andrei Cherny in 2013 – both men from the wrong side of the social tracks who’d clawed their way up the professional ladder – the ambition was for Aspiration to be in a sector of its own.

A platform that pays people to be good by closing the ethical loop between spending and saving, Aspiration is a fully-automated vehicle for environmental, social and governance (ESG) impact services, which offers guaranteed fossil fuel-free investments, a payment card providing cash incentives to steer users towards more conscious consumerism, and a carbon-offsetting credit card that sees a tree planted somewhere every time it’s used.

“It’s a category that’s never existed before. Aspiration has defined it and, having created it, is growing it,” says Sanberg. “We happen to use financial products as one of the ways we deliver automated social impact services, but I have zero interest in being a fintech company.”

Aspiration has, of course, (as with most challengers in the States) had to get close to a licensed bank – in this case Coastal Community Bank – to issue its debit cards and look after its cash, while Aspiration itself is registered as a broker/dealer managing the $124million Redwood Fund, which has consistently outperformed Morningstar-rated funds as well as the S&P 500 over the past five years, including through the pandemic. Named after the tallest trees on Earth, the fund uses rigorous analysis of a companies’ sustainable ESG practices to find impact investment targets that it believes are poised for growth.

It makes no secret of the fact it despises most mainstream banks’ investment policies, declaring on its homepage: “There’s a good chance your bank is using your money to fund oil projects that destroy the climate.” It goes on to state that the four biggest banks in the US lend more than $240billion of ‘dirty money’ to fossil fuel projects every year, asking ‘did you know that’s what your money was going towards?’.

“The uncomfortable truth is that most people don’t,” says Sanberg. “When they do find out that their money is being used for loans to fossil fuel projects, or to private imprisonment companies that perpetuate institutionalised racism, or gun companies – they are shocked. And as more people awaken to that reality, Aspiration can offer them a home for their financial services as well as their social impact.”

Informed Investing

What drives Aspiration is the idea that we can all, through more considerate investment and spending decisions, ‘make money while making the world a better place’. The problem is, most consumers don’t have time to do the research to balance those decisions – hence, Aspiration’s automated model.

Account features include receiving up to 10 per cent cashback on socially-conscious spending from mission-based merchants such as TOMS shoes, whose tag line is ‘we’re in business to improve lives’ and which donates one third of its profits to good causes. Users can also help plant trees with every purchase by rounding up to the nearest whole dollar. Meanwhile, the handy Aspiration Impact Measurement tool acts as a ‘personal Fitbit for your social impact’.

“It’s an algorithm that shows you a people score and a planet score for the places where you spend money on your Aspiration card,” explains Sanberg, “so that you have the tools at your fingertips to choose merchants that are most aligned with your social values.” Premium customers can also use the Aspiration Plus Planet Protection feature, which tallies up the carbon output of all their fuel stops, then automatically buys offsets to help counter the climate change impact – although, for all its good intentions, it is perhaps worth noting that environmental campaigners such as Greenpeace argue that planting trees and offsetting your carbon footprint is still nowhere near as effective as reducing emissions in the first place by cutting out journeys altogether. But, in a world where we’re often shamed by our choices, automatic offsetting is at least a step in the right direction.

All of these features require technology, but Sanberg’s insistence that Aspiration is categorically not a fintech company is perhaps more to do with the ideology behind it rather than the mechanics. He particularly takes issue with fintechs across the financial sector who help perpetuate the myth of no-fee banking or no-fee trading.

“Nothing is free,” he says. “If a company tells you that something is free, that means one of two things. Either you are the product – your data is the product – or they’re going to find some way to charge a fee that is disguised as something else.” It’s a cruel myth, he claims, because it plays into a deceit that the poorest can participate. “Our customer base is primarily middle- and upper-middle-income people,” says Sanberg. “We don’t have a feature set that’s built for low-income people, because – here’s the truth that venture capitalists won’t tell you – you need government to help low-income people. “I believe in the power of business to solve some things, but I think, for the hardest problems, we need government action. We need big, bold FDR (Franklin D Roosevelt with his New Deal)-style government action.”

That’s a view borne of personal experience. Sanberg was raised by his single mum and the pair lost their home to foreclosure when he was a teenager – forcing them to live pay cheque to pay cheque, ‘like so many Americans’, he says.

“It’s different from the story of so many founders. Unfortunately, a lot of innovation capital has funded people who grew up with wealth and privilege and, as a result, a lot of companies that are more or less built to serve other rich people,” he says.

Both he and Cherny worked their way through college, after which Sanberg wound up in financial services, while Cherny eventually walked through the doors of The White House, working for both President Clinton and Vice President Gore, and supporting Senator Elizabeth Warren in her campaign to launch the Consumer Financial Protection Bureau. He was also a financial fraud prosecutor.

“Having spent time in both the public and private sectors, I saw first hand that big banks and Wall Street too often put profits ahead of what is best for people and the planet,” Cherny has said. “We both saw this need for a financial company that could help people move their money in a way aligned with their values,” explains Sanberg. Aspiration itself operates a freemium fee structure, but its ethics dictate that users should come to their own judgement on what its services are worth.

Its Pay What Is Fair policy on its basic account enables customers to pay what they can afford – but that still gets them five per cent cashback on socially conscious spending and the plant-a-tree cash round-up option. “To be clear, we don’t communicate that as a no-fee offering,” says Sandberg. “We say ‘we hope we’re going to do a good enough job so that you want to voluntarily pay. And if you don’t think we’ve done a good enough job, you have the right to pay us zero and we’ll try and do better’.  Think about the distinction, in terms of integrity, between that, and saying something is free but then hiding fees somewhere else.”

Customers can, of course, opt for the $15-a-month Aspiration Plus account, which includes carbon-offsetting their fuel and up to 1.00 annual percentage yield on their savings. But, whatever the spread of those users, in line with its ethos of paying forward to protect the planet, Aspiration commits to contribute 10 per cent of its earnings to charity. It’s built tools to enable customers to automatically support causes aligned with their beliefs, too, because,
as Sanberg says:  “Part of aligning your values and your money is knowing you have to service other people with your money, to the extent you can.”

Aspiration’s positioning has struck a chord, particularly as societal values shifted during the pandemic. Two million ‘fans’ are now signed up – including several activist Hollywood A-listers. Most recently, Aspiration announced an investment from actor/producer Robert Downey Jr.’s Footprint Coalition Ventures, part of an additional $50million raised from institutions including Deep Field Asset Management and AGO Partners, as well as individuals including Cindy Crawford and Kaia Gerber, which takes its total fundraising to more than $250million.

“I think people are craving more tools to do good in the world,” says Sanberg. “In the private sector, Aspiration is the leading deliverer of those kinds of tools – and we’ve only just scratched the surface.”

This article was published in The Paytech Magazine #08, Page 68-69