This makes it a clarion call for all industries to redouble their efforts to ‘act, not react’ to positively impact the environment – especially the banking and finance sector, which plays a crucial role in influencing global consumption and production patterns, and will finance the transition to climate-resilient economies.
The 2020 launch of the Australian Sustainable Finance Roadmap demonstrated the sector’s understanding of its influence on environmental impact, and it has targeted a goal of net-zero emissions by 2050. However, many long-term strategies will not be implemented till 2030, resulting in a gap in consumer understanding of financial products and their sustainable impact in the interim. To bridge this short-term gap, industry players can collaborate with partners that produce sustainable products, as well as adopt greener practices, programmes, and initiatives that create a visibly positive environmental impact. Among the key programmes, we can cite the global campaign with UNEP (United Nations Environment Programme) which urges everyone to eliminate the use of microplastics and stop the excessive, wasteful use of single-use plastic to combat plastic pollution.
Fintech and digital payments areas for growth, innovation, and collaboration
Digitalisation and e-commerce have experienced surges in the ANZ region, which has prompted the widespread adoption of digital payment solutions. With Australia projected to be 98 percent cashless by 2024, this is an opportunity for the sector to embrace sustainable financial technology (FinTech) and innovate customer-centric products that also reduce climate impact.
For example, although 47 percent of Australians already use some form of contactless payments, debit card use remains popular. This leaves room for new, innovative card services that incorporate novel payment technologies while using sustainable materials such as recycled PVC for smarter yet greener solutions. In fact, we are seeing the ecosystem shift in favour of this trajectory; after Visa, recently in August 2021, Mastercard recognised IDEMIA’s end-to-end sustainable approach to the entire payment card lifecycle by certifying GREENPAY cards made from recycled plastic materials.
In addition to eco-friendly cards, fully digital cards also offer new payment possibilities to consumers while providing more opportunities for service providers to deliver flexible yet environmentally-friendly payment experiences. They are almost functionally identical to regular physical cards – save for being digitally displayed on mobile apps, websites, or digital wallets – and can be generated to easily make one-shot or multiple payments. By eliminating the need for physical card manufacturing and related logistics, these cards support service providers in achieving their sustainability goals and reduce the industry’s overall environmental impact as they gain traction worldwide.
Other innovations such as improved customer onboarding experiences can also contribute to both resource conservation and customer engagement. A fully digitalised onboarding process for activating a credit card might incorporate a biometric security verification process or a simple card tap on the phone. Not only is this more convenient for the consumer, but the turnaround time is also shortened for both them and the financial service provider, resulting in better efficiency without compromising security. Without the need to travel, the paperless process also helps reduce their environmental footprint.
Innovation aside, banks and FinTechs can further maximise positive environmental and social impact by participating in and collaborating on initiatives such as carbon offset programmes. They can also extend their carbon commitment beyond product life cycles by working with suppliers that have dedicated carbon commitments in place. Investing in carbon projects and partnering with social organisations is also the opportunity to create a positive social impact that goes beyond sustainability, and actively support other Sustainable Development Goals (SDGs).
Adopting a holistic ‘green mindset’ is compatible with industry goals
Whilst the financial industry has typically taken the investing route in coming up with green products to satisfy Environmental, Social, and Governance (ESG) goals, there have been reservations that pursuing deeper ESG commitments could be incompatible with profitability. However, there is a growing recognition that this is not so, especially given that 92 percent of consumers expect their financial institutions to pursue ecological goals.
Further, the intersection of the modern customer’s desires for convenience as well as sustainability means that the industry can also achieve Corporate Social Responsibility (CSR) outcomes if they place ESG goals at the center of their agenda. This is because they will remain accountable to both internal and external stakeholders who increasingly prioritise the climate. In doing so, they can also help drive the sector towards achieving SDGs.
Given growing public sentiment and customer awareness and attention to climate issues, Australian businesses who fail to step up to the plate risk being perceived as being environmentally indifferent, thus potentially losing out to competitors in the long term. The impetus is therefore not only to innovate with new products but to form symbiotic partnerships and collaborations which have a holistic impact.
In the long run, finding ways to collaborate and re-invest in the environment should be the sector’s top priority. Not only can they mitigate climate risk and attract a wider customer base, but they can also have a positive effect on the entire nation’s financial and economic ecosystems by creating a healthy and sustainable economy for the future.