Digital Banking

Banking On Socially Conscious Consumers

Spend smartly and carry a big social impact. For the June Digital Banking Tracker™, PYMNTS speaks with Andrei Cherny, CEO of digital financial firm Aspiration, about the company’s new AIM scoring tool and helping customers realize their own purchasing power. Plus, the latest financial management apps, Open Banking developments and a directory of over 180 providers, including 10 new additions.

When it comes to helping their community and the planet, consumers appear to be ready to put their money where their values are.

From volunteering with a local charity to donating money to a worthwhile cause, there is a wide range of opportunities for everyday citizens to work toward the goals they believe will make a positive impact on their community. New digital banking solutions are creating new options for these citizens to make a difference in the world through their consumer purchases.

Nearly a third of consumers today make purchases from brands that reflect their social and environmental values, according to a recent survey. Financial institutions (FIs), for one, are taking consumers’ changing attitudes on social and environmental responsibility seriously.

Some FIs are now offering customers opportunities to make socially responsibility investments (SRI) in companies that are working toward addressing environmental issues, such as investing in clean energy solutions, or reducing emissions and social issues, such as hiring a diverse workforce. As of early 2016, SRIs had spiked a third to $8.72 trillion, representing about one-fifth of all managed investments.

Recognizing a market for socially responsible financial tools, digital-first financial firm Aspiration recently launched a new service to help conscious consumers better understand the social impact of their everyday purchases. PYMNTS spoke with Aspiration’s Co-Founder and CEO, Andrei Cherny, about helping consumers realize the power of their everyday spending.

Finding Conscious in Finance Industry

Aspiration markets itself as a digital-first financial firm that helps socially minded customers make a positive impact through products that make money and a difference at the same time.

And to help consumers invest in companies that they believe bring a positive change, the California-based bank recently launched its Aspiration Impact Measurement (AIM) service in its mobile app that allows consumers to gauge the impact of purchases made with their debit cards through a sustainability score.

The feature assigns merchants and companies a two-part People and Planet score that can be viewed from the app based on over 75,000 data points gathered from environmental, social and governance (ESG) research.

The People score is based on a company’s metrics, such as workforce diversity, employee compensation and access to health care, whereas the Planet score awards points based on their business’ greenhouse gas emissions, energy efficiency and renewable energy usage.

A consumer’s AIM score is calculated based on an average of their interactions with businesses in relation to their People and Planet scores. For example, if they make a purchase with a business that has a lower Planet score, their own AIM score will drop slightly. Or if they make a string of purchases at businesses with strong People and Planet scores, the user’s AIM score will go up.

“With every purchase you make through your Aspiration debit card, your score changes,” Cherny said.

For consumers wanting to make a positive social impact, he said, providing this information through their banking app helps “empower” them through their purchasing decisions.

“The AIM score really is the first time you’re able to see the impact you’re making on a daily basis as an individual when it comes to the environment or when it comes to employees of companies where you’re spending your dollars,” Cherny said.

Shining a Light on Sustainable Opportunity

According to the most recent Conscious Consumer Spending Index (CCSI), 60 percent of 1,012 Americans surveyed said that making purchases from “socially responsible companies” was important to them.

While this latest figure reflects a slight drop from the previous year, the trend is largely unchanged and indicates that consumers are considering social responsibility very carefully when making purchasing decisions.

However, the CCSI report also found one of the bigger obstacles for consumers who want to spend their money responsibly is not knowing where to find socially responsible products.

Helping socially conscious consumers wanting to spend money on products and services that reflect their values is something that the bank is trying to resolve with its AIM feature.

“As [consumers] are doing their daily shopping and thinking about where they’re going to buy a cup of coffee or where they’re going to buy clothes, [they] are thinking about the ethics and values of the businesses of where they’re spending their money,” said Cherny.

While the service helps socially conscious shoppers find businesses that meet their values, its Sustainability Score helps such shoppers align their purchases with their social responsibility goals.

“They’ve never had the ability to actually see what their score is, never had really any data around that,” said Cherny. “We think it’s part of our mission, certainly, as a financial firm to do that.”

The Right Tool for Millennial Shoppers?

Ultimately, offering customers insights on their shopping habits is not so much about encouraging them to change their shopping habits, but helping them make informed choices, Cherny said.

This is especially true of millennial consumers who are more likely to consider a store’s values when making a purchase than other generations.

“This generation in general is looking to factor in the ethics of a business into their purchasing decision but have never really had tools to do so before,” Cherny said. “It’s about helping our customers and arming them with the kind of data they’re looking for.”

The good news for companies is millennials already understand the role businesses can play in making a difference in the world. A recent survey found about 76 percent of millennials believe businesses can make a positive social impact. With more millennials poised to enter the workforce and gain more purchasing power, businesses might want to take the views of this generation seriously.

Cherny thinks that consumers will consider FIs that share their personal values carefully and believes Aspiration had some early success in tapping into that mindset. He noted the firm has grown to approximately 100,000 customers nationwide with a growth rate of 3,000 new customers per week. The rise of millennial influence, he said, should encourage more FIs to consider their own investments in sustainable banking products.

“I think [socially sustainable banking] will continue to gain steam,” Cherny said.

Cherny also sees the rise of sustainable banking as an opportunity for banks to win back public trust. He noted the financial services industry has been dogged by a variety of problems — ranging from high ATM fees and account balance requirements to scandals related to unauthorized credit cards (we’re looking at you, Wells Fargo) — that have harmed consumer trust.

If left unaddressed, this breakdown in trust could prompt many millennials to ditch their old banks. A survey released by FICO last year found millennial consumers are two to three times more likely to switch banks than other age groups.

FIs that invest in sustainable banking solutions are making smart investments to win over an influential group of consumers, Cherny said. But he worries that the industry is moving too slowly.

“My fear is the financial industry will not change fast enough and will continue to offer products and take approaches that cause people to distrust the industry even more,” he said.

. . . . . . . . . . . . . . . .


About the Tracker

The PYMNTS Digital Banking Tracker™ brings you the latest news, research and expert commentary from the FinTech and consumer banking space, along with the rankings of over 180 companies serving or powering the digital banking sector.


Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. In the November 2019 Mobile Order-Ahead Report, PYMNTS talks with Dan Wheeler, Wahlburgers’ SVP, on how the QSR balances security and seamlessness to secure its recently launched WahlClub loyalty program.

Click to comment