Wall Street banks are big, rich, powerful and successful--not to detract from the fact that they are also known to be pretty scandalous, too. Somehow, America’s fourth largest bank, Wells Fargo & Co (NYSE :WFC), has managed to rise to the top of the pile by earning itself the dubious distinction as the worst of the lot-- constantly conniving and applying a host of quasi-legal tools to extract an extra dollar from hapless customers.
As such, it was just a matter of time before somebody decided they could do a better job than the 167-year old bank.
Aspiration, a California-based online bank backed by Hollywood actor Leonardo DiCaprio of the Titanic fame, has fashioned itself as a Wells Fargo alternative, targeting the bank’s disillusioned customers.
Aspiration is urging customers to switch allegiances to a bank that can save them money and a lender they can trust.
A major attraction: Aspiration allows customers to pay what they feel is fair on services rendered—including zero fees. In sharp contrast, a few years ago, Wells Fargo was fined billions of dollars by the U.S. trade watchdog for charging overdraft fees on millions of unauthorized customer accounts.
Flawed business model
Founded in 2015, Aspiration has been doing quite well, managing to grow its customer base to 1.5 million people.
Quite naturally, more than a few of Wells Fargo’s 70 million customers have been looking to jump ship following the bank’s abysmal track record-- more than 200,000 of Aspiration’s customers trace their roots to the older bank.
As Aspiration founder and CEO Andrei Cherny has told CNN Business, the growing popularity of the new bank stems from widespread dissatisfaction by customers of traditional banks’ business models, adding that more modern banks with transparent models are proving to be hit especially with younger generations:
"Wells Fargo went over the line of what was legally allowed, but a lot of banks everyday tiptoe up to that line and sell products that customers may not need or want.People of all ages — and especially young people — are fed up with big banks. There is this massive distrust of financial institutions."
Cherny has pointed to how banks make lots of money through hidden fees that range from monthly service fees to overdraft fees and ATM fees. Aspiration’s philosophy on fees is radical yet pretty effective—it offers such a superlative service that many customers simply feel obliged to pay: "It's up to us to do such a great job that they pay us even though they don't have to. The great majority has chosen to pay. "
Related: Wells Fargo Accused Of “Ongoing Lawlessness”
So, in what other ways does Aspiration make money off its customer deposits?
After all, few if any, not-for-profit organizations that are not on the freemium model can survive for long while giving away services for free. Aspiration says that rather than charge fees, it makes most of its money off the spread around interchange and interest rates or the charge retailers pay banks when their shoppers pay with a card.
Another important distinction: Aspiration offers fossil fuel and firearms-free accounts thus distancing itself from Wells Fargo, which has been criticized for financing controversial oil pipelines.
Fintech revolution
There’s a clear banking trend emerging across the globe whereby cheaper and highly affordable financial service providers are frequently upstaging their much larger brethren.
In the UK, app-only banks like Revolut have attracted millions of customers over the past few years courtesy of their branchless models and low fees.
Newly launched World Coin Network (WCN) is positioning itself as the future of Middle East Cryptocurrencies in one of the world’s most financially excluded regions.
In China, AliPay has rapidly become the largest player in the country’s massive money-market fund.
In the U.S., fintech startup Chime has taken advantage of the backlash against fees and does not charge service, overdraft, transaction or minimum balance fees. Meanwhile. Robinhood, the popular zero-fees stock trading app, has garnered 5 million customers in a relatively short period of time.
To be sure, these highly specialized fintech companies are not for everyone.
Cherny concedes that the very values that Aspiration stands for risk alienating large swathes of workers in the huge oil and gas industries. Nevertheless, millions who do identify with these values will continue to find them a ready alternative to the likes of Wells Fargo.
By Alex Kimani for SafeHaven.com
