While the fintech industry has exploded over the past decade, it now faces growing pressure to address sustainability, environmental impact, and social good. Several important environmental trends shaping fintech companies are getting popular. This will shape their operations in 2023 and beyond emerging from evolving consumer values, new regulations, and the threat of climate crisis.
Consumers, especially younger generations, increasingly demand that the companies they use have a clear and compelling mission beyond profits. For fintech players wanting to attract and retain these customers, prioritizing purpose over hype will be essential. Users want financial tools that empower them to support the issues and values they care about, from climate justice to financial inclusion. If fintech can’t demonstrate its environmental and social vision, it’ll lose relevance fast.
The Role of FinTech in achieving environmental sustainability
Fintech companies have the opportunity and responsibility to support environmental sustainability through their products, services, and business operations. With innovative design and committed action, fintech can help counter climate change, reduce pollution, and build equitable systems that benefit both people and the planet.
Several areas in particular highlight fintech’s potential role. First, fintech can develop new metrics, analysis tools, and disclosures enabling better monitoring and management of environmental risks across finance. As climate threats to communities, companies, and currencies emerge, fintech innovations will be crucial to gaining visibility and vulnerability transparency.
Second, fintech can drive the development of sustainable financial products like green bonds, environmental funds, non-profit donor platforms, and microfinance tools for community resilience projects. When paired with education, these products empower individuals’ ability to drive capital toward impact and opt out of harmful industries.
Third, fintech has the power to reshape business models into ones that are circular, sharing-based, and optimized for well-being rather than growth. Platforms that allow people to borrow, lend, trade, and share resources could reduce waste while strengthening local communities. Crowdfunding and peer-to-peer finance also make sustainability more accessible and support underrepresented groups.
Finally, through their own operations and leadership, fintech companies can model sustainability principles like renewable energy use, carbon neutrality, diversity, and inclusion. By “walking the talk,” fintech inspires trust in its environmental claims while demonstrating the viability of eco-friendly business practices. They can also advocate for policy changes and push broader finance toward eco-transformation.
5 Latest Environmental Trends Shaping Fintech in 2023
Employing the power of green cryptocurrencies
Cryptocurrencies have the potential to accelerate progress on sustainability if employed responsibly and ethically. Several blockchain-based currencies and tokens are being developed to fund green projects, incentivize eco-friendly behavior, and minimize the environmental impact of crypto itself. These “green cryptocurrencies” could help fintech harness the power of decentralization, transparency, and disintermediation to support environmental goals.
One approach is the use of cryptocurrency tokens to raise funding for important sustainability work. Non-profit organizations and community groups, especially in developing regions, can launch token sales or initial coin offerings (ICOs) to raise capital for initiatives like renewable energy deployment, pollution cleanup, and environmental education. Investors can support the impact by purchasing the tokens, while also benefiting if the value appreciates over time.
Other projects are creating cryptocurrencies designed to change consumer behaviors and support greener lifestyles. For example, “green loyalty” or “sustainability as a service” coins could be earned by reducing carbon footprint components like energy usage, transportation choices, and diet. These coins could then be redeemed for sustainable goods and experiences or donated to environmental charities. They make eco-friendly action more engaging and rewarding.
Protecting the environment with eco-friendly digital wallets
As society moves increasingly digital, fintech companies must consider the full environmental impact of products like mobile apps, cloud services, and cryptocurrency platforms. The energy consumption and hardware waste associated with software and services are substantial and growing. If left unaddressed, it threatens to undermine progress on sustainability.
One approach fintech can take is building “green digital wallets” – eco-friendly alternatives designed explicitly for sustainability. These wallets would optimize environmental footprint through renewable energy usage, low energy design, recycled and reusable materials, sustainable investments, education, and transparency.
Running the wallet on 100% renewable electricity generated from solar, wind, or geothermal power would make a substantial difference. Creating minimalist, lightweight software that requires less power to run the device, service, and associated internet connectivity through advanced engineering could significantly reduce energy per transaction or user.
Driving sustainable transportation with contactless payments
As contactless payments become increasingly common and convenient, fintech companies have an opportunity to influence transportation sustainability. By developing contactless systems that reward eco-friendly travel choices or fund public transit expansion, fintech can empower greener commutes at a massive scale.
One approach is using contactless payment cards and mobile wallets that offer cashback bonuses, rewards points, or other incentives when commuting via methods like walking, biking, ride-sharing, or public transit. The more people can drive less, the greater their rewards. These “green commuter cards” make sustainable travel more appealing and help shift behaviors over time through positive reinforcement.
Another approach is allowing users to set aside funds from each contactless transaction to be deposited into a special account for donating to the bus, train, bike lane, or pedestrian infrastructure. Every time a payment is made, a portion could be automatically allocated to improving mobility options at a local level. This “round-up for transit” mechanism makes it easy to support eco-friendly systems through everyday spending.
Contactless transit tickets and fare payment cards are other opportunities. By transitioning from paper tickets and magnetic stripe cards to tap-to-ride contactless options, waste is reduced while convenience and speed increase. The newest fare payment systems also allow for integrated regional transit networks, offering riders more options to complete their journey without driving.
Adopting carbon-neutral payment processing to fight harmful emissions
Payment processing requires substantial energy and infrastructure, resulting in significant carbon emissions that contribute to climate change. If left unaddressed, the environmental costs of global finance will only rise as more transactions move online. To mitigate this impact, fintech companies must adopt carbon-neutral payment processing and develop broader strategies for sustainable operations.
One approach is achieving carbon neutrality for all payment processing through offsetting remaining emissions or transitioning entirely to renewable energy. By quantifying emissions from data centers, servers, networking equipment, and business travel and then offsetting or transitioning them, fintech can ensure zero impact. Some offset by donating to emission reduction projects while others build their own renewable energy generation to meet increasing demands. Both approaches, when implemented rigorously and transparently, can make payment processing climate-positive.
Beyond neutrality, technology upgrades and optimization provide an opportunity to radically reduce emissions over time. Improvements like moving transactions off-chain, implementing eco-friendly consensus protocols, optimizing for high-volume/low-resource processing, and improving server utilization can significantly decrease energy per transaction. Open collaboration and sharing of best practices across the industry will accelerate progress.
Protecting Nature with carbon-offsetting mobile payment solutions
Mobile payments have achieved enormous scale, with billions of transactions now completed each day via smartphones and other devices. While convenience and access are tremendous benefits, the associated environmental impact is substantial and concerning. Data centers, networks, devices, and more require huge amounts of energy and resources, resulting in carbon emissions and waste that degrade natural ecosystems.
As mobile payments continue expanding into more areas of life, fintech companies must develop innovative solutions for sustainable operations. One approach is building “green payment” options that automatically offset the carbon footprint of each transaction through donations or investment in high-quality offset projects. By quantifying the emissions from each mobile payment and then allocating funds to offset them, fintech can neutralize impact at scale while giving users an easy way to support sustainability through everyday spending.
Offsetting payments alone may not substantially transform the system, however. Supplementary strategies are needed, including transitioning to 100% renewable energy to eliminate emissions at the source for zero-direct impact. Software, network, data center, and device upgrades can reduce total energy usage and emissions over time through optimizations that enable “doing more with less” for progressively greener operations.