The Importance of Sustainability in Fintech: Is There Demand for Green Payment Solutions?

Green fintech is more than a buzzword – the inclusion of sustainability policies and actions are gaining traction across the financial services sector as companies face increased accountability from investors and regulators. Adopting sustainable business practices not only benefits the environment, but it also bestows competitive advantage, so it’s an area which is likely to become even more important to the payments industry over the coming months and years.

What is green fintech?

Green fintech is the harnessing of technology by financial services companies to offer sustainable payment solutions and ESG-driven, climate-friendly ways of operating. Companies which embrace the movement are known as green fintechs or climate fintechs, and their sustainable activities can include:

• carbon offsetting and carbon tracking
• sustainable banking and payment transactions
• climate crypto
• climate risk assessment and emission planning
• impact investing for environmental benefit
• natural capital accounting using the SEEA framework
• ESG data intelligence and reporting

Sustainable finance is now a core driving factor, and green banking is a strategy that no fintech business can ignore. Environment accountability builds investor and customer trust, and the demand for transparency means that sustainability disclosure regulations are strengthening.

How climate-friendly finance works

There are a number of ways of incorporating fintech sustainability into your business practices:

• Carbon tracking – automated carbon reporting will make your carbon emissions measurable and actionable. Once you know the carbon cost of transactions and other operational processes, you can monitor your business’s environmental impact in real time. The result is the ability to include environmental factors in your decision-making for better green outcomes.
• Introducing sustainable financial products – for providers of financial products such as loans and bonds, linking them to sustainable performance goals is a way of motivating climate-friendly behavior.
• Embedding sustainability in business operations – green fintech means more than just introducing sustainability to customer-facing activities, such as getting paid by clients. Companies that are serious about green banking will audit all their operational processes to identify areas for sustainability integration. This might mean carbon-tracking dashboards, vendor emission considerations and analyzing the environmental impact of every business decision. It might also mean incentivizing customers by offering better terms for improved climate credentials.
• Digital rationalization to drive efficiency – digital focused businesses tend to be more sustainable by their very nature, but there’s always more that can be achieved. Reducing paper consumption and airmiles are the obvious ones, while AI-driven automation also brings sustainability benefits. However, the flipside of this is the amount of energy consumed by AI, so it’s not always a straightforward equation. Other options include things like renewable-powered hosting, introducing energy efficiencies, using differential fees to drive green behavior, and tracking digital emissions.

Discover the benefits of green fintech

Green fintech is being driven by the twin pressures coming from customer demand and regulatory imperatives. But businesses which embrace their environmental credentials are finding that it brings real benefits – ESG considerations in fintech are increasingly seen as important for long-term business strategy and customer trust. For digital payment platforms, increasing attention to sustainable solutions means improving access to real-time environmental data and introducing automated carbon accounting. ESG considerations are becoming a critical element in new product innovation and essential for building customer trust.

The benefits to companies embracing climate-friendly finance and sustainable business and ecommerce payment solutions include:

• Providing customers and consumers with green products that enable them to unlock global growth while reducing their own carbon footprint and support climate responsibility.
• Disclosure of environmental credentials ensures compliance with new ESG regulations and the ability to achieve alignment with green policies like the European Green Deal and other certification schemes.
• Green technology is leading the way with new initiatives such as using blockchain for carbon trading and verification.
• Investors are increasingly looking for environmentally friendly opportunities, so fintechs which demonstrate green credentials are attracting significantly more investment.