Sound Businesses: Profiles of companies and business models we are keeping an eye on.

Andrei Cherny is not your typical banker.

He had written speeches for President Bill Clinton, helped Elizabeth Warren launch the fight for what became the Consumer Financial Protection Bureau, advised Bank of America and other Fortune 100 companies, and prosecuted financial fraud and corporate crime.

“I saw firsthand that big banks too often put their profits ahead of what is best for people and the planet,” Cherny, founder and chief executive officer of Aspirationbank, told Karma. “We started Aspiration with the idea of building a financial partner that works for customers’ best interests and shares their values.”

And thus was born a self-described bank “with a conscience” that offers fossil fuel-free accounts, allows customers to pay what they think is fair and rewards them for shopping at do-good companies. Based in Marina del Rey, California, Aspiration has signed over a million customers and attracted celebrity investors, including actors Leonardo DiCaprio and Orlando Bloom, former eBay president Jeff Skoll and Los Angeles Clippers coach Doc Rivers.

High fees and low interest rates of traditional banks have spurred the growth of a new type of banking that reaches consumers on mobile apps and personal computers, bypassing the expense of building physical branches. Aspiration, as well as so-called neobanks like Empower, Chime, Varo Money and Simple, have joined smaller community lenders and fintech startups, seeking to reinvent and simplify the traditional banking practices.

Socially conscious Aspiration competes with lenders like Amalgamated Bank and Beneficial State Bank, who are also offering products with commitment to sustainability and community development.

With the internet leading to more transparency, younger consumers are seeking investments that align with their values and routinely inquire about the social and environmental practices of the companies they support, says Ibrahim AlHusseini, founder of FullCycle, an investment firm that finances climate-restoring technologies. He estimates that socially responsible fintech now speaks to more than 30% of the consumer market.

“Aspiration is working because it’s authentic and the people behind it are genuine,” AlHusseini, one of the investors in Aspiration, told Karma. “Who wants to do business with an institution that takes your money and lends it to industries that you fundamentally disagree with? Especially, when we finally have an alternative.”

This year Aspiration is seeking to raise $200 million, which would value it at more than $1 billion, Reuters reported in April. Cherny declined to comment on the valuation, adding that the company is focused on “growing the business and attracting more customers.”

Aspiration says clients’ deposits don’t go toward Capitol Hill lobbying or funding oil pipelines and drilling and the bank offers extra rewards for shopping at companies with strong environmental and employment practices. The bank also commits to giving 10% of its earnings to charities.

Aspiration’s new offering, the “Spend and Save” account, offers a 2% annual percentage yield on deposits and unlimited cash back on every dollar spent with its debit card. Each account is insured by the Federal Deposit Insurance Corporation to $250,000. The bank estimates that all the extra perks can save customers on average $545 per year.

Aspiration also provides clients with insights into how the businesses where they regularly shop treat their employees and affect the environment. The bank’s impact measurement scores, which are embedded into transactions data, are calculated using a “rigorous process of collecting and analyzing over 75,000 environmental, social, and governance (ESG) data points across thousands of businesses”, according to the company’s website.

“Our goal is to help consumers understand the power of their dollars and help them make a difference in the climate crisis by making sure they’re banking, investing and shopping in ways that are ethical and sustainable,” said Cherny. “We know that Americans care about climate change but they might not realize there are ways they can help in addition to voting, protesting, volunteering and donating.”

The Top 10 largest banks may lose up to 11% of their customers, or $344 billion in retail deposits, in the next year, amid growing frustrations over unethical practices, high fees and a lack of competitive pricing, according to a 2018 reportby a consulting firm CG42. Almost one in 10 of those customers would consider switching to an online bank with no branches.

While financial institutions are struggling to match the disruptive power of financial technology, fintech companies have been spearheading the effort to shape the future of business around a socially conscious consumer, said Naomi Rosenblum, a fintech analyst at Equitech Financial Consulting in Tel Aviv, Israel.

“We live in a time where millennials are prioritizing social responsibility and sustainability,” Rosenblum told Karma. “The banks who will survive in the digital revolution are the ones that are receptive of these new needs, and willing to adapt these ethos.”

The global neobank and challenger bank market is expected to reach $394.6 million by 2026, up from $18.6 million in 2018, according to a new report by Zion Market Research.

Aspiration’s Cherny predicts that socially-responsible fintech will go mainstream. “One challenge is educating Americans about the fact that their money in big bank accounts and investments is actually being used to fund projects that harm the planet, like the Dakota Access Pipeline — most people don’t even realize this is happening,” he said.

So far Aspiration is succeeding in getting the word out. More than 370,000 people pledged to move their deposits into sustainable accounts after the bank launched its Move To Green campaign earlier this year.

“The campaign creates a better future for our planet while simultaneously giving consumers the tools they need to learn about how individual money decisions impact the environment,” Cherny said.

The DiCaprio Factor
Aspiration has raised more than $100 million through venture capital and individual investors, including Leonardo DiCaprio, who added the bank to his portfolio of investments aimed at combating climate change and joined the advisory board in March.

“Each year, $100 billion worth of pipelines, drilling and other fossil fuel-extraction projects are funded with money deposited at traditional banks,” DiCaprio said in a statement. “To bring about long-term solutions for our planet, we need alternatives that empower everyday consumers to take action against climate change.”

Anastasia Ustinova is a freelance business writer based in Seattle with more than 10 years of experience reporting around the world. Her stories were featured in Bloomberg News, Businessweek, the San Francisco Chronicle and the Houston Chronicle.