A Floundering Fintech’s Risky Reboot

Published 1 year ago
A smartphone displays the S&P 500 market value on the stock

With star backers like Leonardo DiCaprio and a planet-friendly mission, neobank Aspiration reached a valuation of $2.3 billion in 2021. Then growth stalled and its SPAC deal was delayed. Now it’s hawking its services in the dubious carbon credits business.

Ona Thursday in mid-October 2022, employees at Marina Del Rey, California-based Aspiration gathered virtually for a company-wide meeting. The nine-year-old business, which offered everything from a debit card for consumers to environmental sustainability services, had an important announcement to make. Of the 400 employees summoned, there was one glaring absence from the invitation list: its chief executive and cofounder, Andrei Cherny.

Cherny’s cofounder, Joe Sanberg, took the virtual floor, declaring that the startup’s chief sustainability officer, Olivia Albrecht, was now its chief executive officer. Sanberg, an unfamiliar face to many employees, failed to make any mention of Cherny, who had led the startup since its inception and had been well-liked. Not only wasn’t Cherny invited to the meeting, but his email and Slack access had been terminated. Many raised their hands to ask the obvious questions, yet the leadership team ended the call without taking a single inquiry.


“Everyone was shocked,” says a former Aspiration employee. “People are still uncertain and concerned about what their future looks like.” In successive meetings over the next few months, the startup, whose website states it’s “committed to transparency,” never addressed Cherny’s abrupt departure.

“Aspiration remains grateful for the achievements of our founding leadership team,” an Aspiration spokesperson said in a statement. “They built a leading climate action platform that uses the tools of finance to tackle our planet’s biggest problems.”

Based on conversations with nearly a dozen former Aspiration employees, Forbes learned that a rift developed between CEO Cherny, 47, who owns 10% of the startup, and cofounder Sanberg, 43, who owns roughly 35%. By October, the market for tech stocks had already collapsed, and Cherny had failed in his efforts to take the once-promising fintech public. Although Cherny had been discussing his resignation with Sanberg and the rest of the board for months, the board decided to exclude him from the announcement. They promoted Albrecht, who previously led ESG (Environmental, Societal and Governance) strategy at asset manager PIMCO, and embarked on a restructuring, deemphasizing its consumer-banking focus and shifting toward a company selling carbon credits to corporations.

Aspiration’s upheaval is a stark departure from the situation just ten months prior, when Cherny and the company were riding the euphoria that helped fintech rake in a record $140 billion in investments in 2021, according to CB Insights. Aspiration had raised nearly $600 million from a dazzling list of investors that included Leonardo DiCaprio, Drake, Cindy Crawford, Iron Man Robert Downey Jr. and billionaire Steve Ballmer. After all, fintech was red-hot, and the unicorn’s tree-hugging mission promised to plant a tree with Aspiration debit card purchases.


In mid-2021, Cherny had struck a deal to go public via a special purpose acquisition company (SPAC) that would bring in more than $400 million in fresh capital and value Aspiration at $2.3 billion, creating a tidy gain for its backers.

But as the stock market tanked in 2022, SPACs fell swiftly out of favor. Eventually 180 of them were canceled, says Julian Klymochko, who runs asset management firm Accelerate, which invests in SPACs. Meanwhile, growth at Aspiration’s digital bank stalled. Monthly downloads of its app shrunk from 300,000 in August 2021 to 30,000 a year later, according to mobile analytics firm Apptopia (see chart, below).


Aspiration’s app downloads plummeted as the fintech market cratered and the company shifted focus from consumer banking to selling carbon credits to businesses.

Under Cherny’s leadership, Aspiration had begun to shift its business model toward a niche of the environmental sustainability industry called carbon credits, or carbon offsets. The basic idea: Any company can mitigate the damage its business does to the environment by funding initiatives that will remove carbon from the atmosphere, such as planting trees. Since early 2020, one of the trademark features of Aspiration’s digital bank has been that you can round up purchases to the nearest dollar and donate to tree-planting organizations. Aspiration apparently decided that planting trees could be the basis for its new business model of selling carbon credits to large companies.

“We are very much focused on delivering profitable, scalable businesses to our shareholders,” says CEO Albrecht, 40. “As we’ve looked at our ability to have an impact and create value for shareholders, the carbon business and carbon assets are very attractive for us.” Aspiration’s website has been revamped—it now leads with “Empowering business to change climate change” and advertises a mission to plant one billion trees by 2030.


In 2021, Aspiration’s carbon credits sales brought in $56 million in revenue compared with $29 million from digital banking (another $14 million came from “consumer sustainability services” like the roundup feature for planting trees). But just as the California fintech is doubling down on this new mission, the future of carbon credits is in question, with experts saying carbon credits’ environmental impact has been grossly overestimated. There’s a “crisis in quality” in carbon offsets, says Barbara Haya, director of the Berkeley Carbon Trading Project, who has been studying offsets for over two decades. “The market is in a huge amount of flux, and anyone who enters has to weather this sense that we don’t know what direction things are going.”

Andrei Cherny’s path to becoming a tech entrepreneur defies convention. He majored in government at Harvard and got a law degree from the University of California at Berkeley in 2003. He then served as White House aide to President Bill Clinton and wrote speeches for Al Gore and John Kerry. Cherny’s next stop was the U.S. Navy as a reserve intelligence officer for eight years until 2011. He also was part of the team that helped Elizabeth Warren launch the Consumer Financial Protection Bureau (CFPB) in 2010.

In 2013, he cofounded Aspiration with Joe Sanberg, who has said he worked on Wall Street for seven years at Tiger Global and Blackstone but who left finance “to pursue what really speaks to my heart, which is to change the world.”

Aspiration took a novel approach to creating a digital-first, branchless bank by appealing to environmentally conscious consumers. It offered features like a “sustainability score” that shows customers how climate-friendly their purchases are. With help from subadvisor UBS, it created its own mutual fund for climate-conscious consumers called Aspiration Redwood, though the fund, which has accumulated only $132 million in assets, has high fees and lackluster performance, according to Morningstar. Like other neobanks, Aspiration is not a licensed bank. But it registered as a broker-dealer so it could earn interest income on customers’ deposits, as opposed to relying only on interchange, the fees merchants pay when consumers swipe their debit and credit cards. Many neobanks have found they can’t survive on interchange alone.


After the pandemic hit and fintech startups saw a surge in adoption from Americans stuck at home, Aspiration grew from roughly 1.5 million customers in early 2020 to five million “purpose-driven members” in the summer of 2021. But those user numbers weren’t quite what they appeared to be. Like other tech startups eager to tout growth above all, Aspiration was referring to the total number of registered emails it had, regardless of whether the customers ever used the product. As of June 2021, it had just 592,148 funded accounts.

Meanwhile, the startup spent extravagantly on marketing to hit aggressive growth targets. In its pitch to go public, Aspiration planned to spend $149 million on marketing in 2021, even though it expected to take in just $98 million in revenue.

Questions arose around its environmental impact claims. Though Cherny had said Aspiration’s partners had planted over 35 million trees, a Pro-Publica article revealed that only about 16 million had been put in the ground. The other 19 million had been funded but not yet planted. “The Aspiration community has supported the planting of more than 35 million trees, an amazing accomplishment we’re really proud of,” Cherny said in response to the criticism. (Today, Aspiration says it has planted more than 100 million trees.)

In October 2021, just as fintech stock valuations were peaking, the company launched Aspiration Zero, a credit card claiming it could “offset the average person’s entire carbon footprint just by using it once a day.” Two months later, it announced that meal delivery service Blue Apron would launch a Blue Apron Aspiration Zero card.


In early 2022, Aspiration started seeing declines in the number of transactions customers were making and the amount of money they were keeping in their accounts, says a former employee. New-user growth slowed dramatically as interest rates rose and the company pulled back on marketing. To make matters worse, the Aspiration Zero card was plagued by technical issues and problems with its partner bank. By December 2022, the card had fewer than 10,000 users, says a former employee. The deal with Blue Apron was called off completely, and today Aspiration Zero is no longer accepting new applications. Asked whether it will come back online, Albrecht says, “We are taking a deep dive and taking a look at the underlying profitability and the underlying quality of all products.”

In December 2022, Aspiration laid off roughly 100 employees, and shortly afterward, Albrecht announced that the company would be focusing on selling carbon credits to corporations. All consumer marketing would be paused, and new features that had been planned for Aspiration’s digital banking business were put on hold, according to a former employee.

Given the intense competition and rising costs that digital bank startups face–plus the dormant market for funding these ventures–it’s no wonder Aspiration has chosen carbon credits as its new raison d’être. According to McKinsey and environmental research organization Ecosystem Marketplace, the voluntary carbon credits market could grow to $50 billion in 2030, up from nearly $2 billion in 2021. Over 30% of the world’s largest publicly traded companies have net zero targets–goals to balance their emissions with an equal set of carbon-absorbing initiatives–up from only 20% in 2020.

Most of Aspiration’s credits come from tree-planting reforestation projects. It has contracted with nonprofit partners like Eden Reforestation to plant trees in countries like Kenya, Madagascar, Mozambique and Indonesia. New trees can take from five to seven years to grow and start absorbing carbon, and they can’t be sold as credits until then. To bridge that gap, Aspiration also buys and sells access to mature projects that are already sucking up greenhouse gasses, including reforestation offsets, ocean-kelp offsets and soil-transformation offsets. In terms of competitive moats around Aspiration’s tree-planting business model, it’s difficult to determine if one exists.


Albrecht says that Aspiration only deals in “high-quality, high-impact carbon credits,” though their quality is hard to assess, given limited transparency into their projects. She also says Aspiration transacts only in credits that are registered under one of the major independent carbon standards agencies, such as Verra and Gold Standard. Aspiration also created its own “Aspiration Standard” that involves independent reviews, and it says only 20% of registry-issued credits meet that hurdle.

Despite rosy long-term forecasts, success in the carbon credits business will be challenging for Aspiration. Carbon offsets are a nascent market—it’s a Wild West with many projects of dubious legitimacy.

Some credits, for example, are based on “avoidance,” where someone pays a government or landowner to promise not to cut a forest down. New Hampshire-based Lyme Timber once sold carbon credits from land that was already protected by the state of Tennessee, Bloomberg reported last year. Some of these credits were then purchased by Chevron, letting the oil giant write off emissions based on trees that would have never been cut down in the first place. (Lyme Timber later wrote that the rules for carbon credits have changed such that this would no longer be possible.)

“We’re all coming to the same conclusion that the majority of offsets on the market are not genuine,” says Elias Ayrey, head scientist at carbon-credit ratings agency Renoster. Amy Francetic, cofounder of climate solutions investment firm Buoyant Ventures, won’t invest in carbon-credit startups until there’s more certainty in the market. “The rush of capital–especially from big polluters–into the space as a means of satisfying shareholder, customer and employee concerns about their emissions and polluting activities, and looking at that as kind of a Band-Aid on their situation is really troubling,” she says.

According to Quantum Commodity Intelligence, the uncertainty surrounding the quality of offsets and negative media attention have recently caused monthly trading volume for voluntary carbon credits to plummet, down 78% in the last two months on CBL Markets, a global trading platform for environmental commodities.

While Aspiration’s enterprise carbon-offsets business doesn’t involve secondary market trading, it’s unclear if its business has been affected by the recent downturn. According to its most recent financial disclosures, Aspiration had accumulated more than $300 million in net losses for 2019, 2020 and the nine months ending September 30, 2021. A former employee says Aspiration had more than $200 million in revenues in 2022, with 75% or more coming from its sustainability business, though it remains unprofitable.

It’s difficult to assess the staying power and profitability of Aspiration’s carbon-credits revenue. In the fall of 2021, for example, Aspiration landed a multiyear deal with the L.A. Clippers for them to buy carbon credits from the startup. There were major strings attached: Aspiration simultaneously agreed to buy a big sponsorship from the Clippers to display its brand in the arena. People familiar with the deal say Aspiration either broke even or lost money on it.

Among startups, perhaps especially those in which planting trees is a core competency, hope springs eternal. Aspiration has not yet given up on the SPAC merger it first promised investors in August 2021. The IPO deal deadline has been delayed twice, first to December 31, 2022, and more recently to March 31, 2023. Stay tuned.

By Jeff Kauflin and Emily Mason, Forbes Staff