After a volatile geopolitical year, marked by several key elections, we’re starting the year with a global economy that is underpinned by a new set of market dynamics.

However, sustainability remains a constant opportunity in this landscape.

Sustainability has shifted from being a regulatory burden to a strategic opportunity across industries – and financial services is no exception – writes Andrew Stewart, UK and Ireland Managing Partner at Kearney and Hanno van der Zwan, Partner at Kearney.

Banks and financial institutions, long regarded as market bellwethers, are at the forefront of this transformation.

But while strides have been made in green mortgages and sustainable investment products, payments still remain an underexplored lever for driving sustainability.

This missed opportunity makes it all the more important that we rethink the role of payments, especially if banks want to differentiate themselves and stay competitive in a rapidly evolving market.

From compliance to competitive edge

Globally, the financial services industry has already begun its sustainability transition, driven by regulatory demands and growing consumer scrutiny.

Banks are not just expected to integrate climate risk into the operations, but are also tasked with providing transparent reporting to avoid accusations of greenwashing.

However, the main difference now is that the conversation is evolving and the industry is no longer taking a reactive approach.

Leadings banks, (despite recent moves by some large US institutions) are moving beyond seeing sustainability as just a compliance issue and positioning it as a key competitive advantage.

Instead of merely protecting value, they are creating it by launching innovative products and services that appeal to eco-conscious customers, enhance loyalty, and tap into new revenue streams.

They are enhancing customer loyalty by making tangible commitments to green values, and diversifying their offering with new products like green mortgages and sustainable investment funds.

On the flipside, payments – an integral touchpoint of everyday consumer behaviour – remains overlooked despite their potential to influence sustainability outcomes on a global scale.

Payments – a catalyst for sustainable transformation

The use of payments to provide valuable insight on and to customers has varied widely across banks and countries.

With every purchase, payments reflect choices and directly, carbon emissions. They hold the potential to inform, incentivise and enable more sustainable behaviours.

Fintechs, greentechs and neobanks are starting to realise this potential through innovations like carbon footprint trackers, rewards for eco-friendly purchases and seamless donation mechanisms for environmental causes that are making sustainability actionable for consumers.

Visa and ecolytiq, for example, offer tools that track carbon emissions tied to purchases, empowering consumers with real-time data about their carbon footprint.

Additionally, by integrating sustainability into the payments ecosystem, banks are unlocking a dynamic feedback loop.

Payments data becomes a powerful tool, guiding the development of other green offerings like sustainable investments and eco-friendly loans.

This interconnected strategy provides a clearer window into consumer behaviours and preferences, allowing banks to deliver more personalised and impactful green financial solutions.

From strategy to execution

Firstly, banks must build the right internal capabilities to craft compelling propositions.

By investing in skilled resources and leveraging Open Banking technologies, they can create seamless, consumer-centric digital experiences that make sustainable payments an attractive and functional option.

Popular tools like digital wallets and payment links are already laying the foundation for this, but financial institutions must go further by combining ready-made and bespoke payment solutions.

However, innovation and collaboration alone aren’t enough.

A strategic go-to-market approach is pivotal, and financial institutions must drive this progress while remaining sensitive to regional expectations and concerns about greenwashing.

For example, ING Bank’s carbon-tracking feature launched within its mobile app in the Netherlands enabled the bank to gather customer feedback and refine the tool before expanding to similar markets.

Likewise, Swedish fintech Doconomy linked consumer purchases to a carbon offset program, initially partnering with Nordic banks to ensure cultural alignment and avoid potential backlash.

By prioritising regions where sustainability is a priority, these institutions could tailor solutions to meet customer expectations and refine their messaging before responsibly scaling their initiatives into new regions.

Unlocking value through payments

Its well-known that payments are central to the global flow of money, yet their potential as a driver of sustainable transformation is often overlooked.

Rather than treating payments as a routine transaction service, financial institutions should recognise their strategic value in achieving net-zero goals.

Some-forward thinking market leaders are already paving the way.

For instance, BBVA offers a real-time carbon footprint tracker within its app.

Similarly, Visa, through its Eco Benefits program, enables card issuers to incorporate features like carbon footprint calculators and options for carbon offsets, helping customers understand and reduce the environmental impact of their purchases.

By reframing payments as a powerful lever for sustainability, banks can accelerate their progress towards efficiency and environmental goals, unlocking untapped potential in the journey to a greener future.

 

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