The third article in our series about the new phygital payments landscape, powered by leading PayTech specialists G +D, looks at the importance of sustainability to phygital payments, the progress we’ve made – and how phygital will enable further progress …
No longer just a buzzword, sustainability is now well-established as a vital part of how any business conducts its operations – including banks and fintechs.
While a great deal of progress has been made, the emerging phygital world creates new opportunities for further direct action by payment firms, as well as enabling collaborative activities that will reduce the environmental impact of payments on our planet.
To start with the progress: many card issuers have already reduced the use of paper in their customer communications, preferring to allow customers to communicate and control their cards via app, as we explained in an earlier article.
Other steps, such as switching to renewable energy sources and localized card production to reduce carbon footprint, are also underway.
Well-known Nordic financial infrastructure company Tietoevry Banking, for instance, has cut the environmental impact of its operations by more than 56% since 2016[1], while banks all over Europe are now offering payment cards made from recycled and ocean-recovered plastics, wood and other sustainable materials.
Taking the action consumers want
According to a 2022 study in The Fintech Times,[2] 67% of bank customers globally want their bank to deliver sustainable payment solutions.
And from a revenue perspective, research from McKinsey and NielsenIQ confirms[3] that sustainable products of all kinds – from payment cards to homeware – experience 40% faster growth than standard alternatives because they give consumers comfort that they are protecting the planet through their choices.
The great news, then, is that both customers and financial services firms recognize the importance of sustainability, and that being sustainable helps grow your business.
The challenge thereafter, though, is that achieving sustainability is far from simple. Dutch bank DNB reports[4] that the majority of the environmental impact in payments comes from point-of-sale terminals, data centers and payment cards themselves.
For instance, terminal hardware is the biggest contributor to the environmental impact of payments, accounting for approximately 75% of all direct impact on the environment given its use of rare earth metals (mining), silicon microchips and other materials to create the terminals.
Simple steps: but collaboration is key
There are some simple steps that can be taken to reduce the environmental impact of payments operations – but deeper improvements are going to require expertise, commitment and collaboration.
In terms of first steps, most of today’s card issuers manufacture payment cards using sustainable materials.
They also increasingly choose to make cards closer to population centres in Europe, reducing the carbon footprint of their products and seeking out renewable energy sources among other initiatives.
The advent of phygital payments, which sees consumers and banks combining digital and physical technologies, has created further opportunities – including app-based card management and PIN management, both of which significantly reduce paper use and communications via surface mail, also known as “snail mail.”
While great steps have been taken towards sustainability so far, the payments industry’s journey is far from over.
New phygital initiatives such as virtual cards, in which a payment card is represented in transactions using a one-time, randomly-generated card number, can help to reduce the time and energy used in online transactions, while “soft POS” systems that use merchant cell phones as POS terminals will cut the use of rare earth metals, plastics and other materials employed in the manufacture of static POS terminals.
Going further with phygital
Looking ahead, the phygital era is going to enable closer collaboration between banks and their customers on sustainability.
For instance, phygital has enabled banks to turn card recycling into a new customer touchpoint, where customers can earn rewards and collaborate with their banking providers to build a more sustainable future.
As a further step, imagine a future in which a card management app tells you it’s time to recycle your card, where to drop it off securely and pick up your new card.
Such is the power of a phygital future – and banks and fintechs should embrace this future, working with expert partners who can advise on the right sustainability approach, and assist in its implementation.
Find out more about how G+D is enabling phygital payments with an innovative, tailored suite of products and services: Convego® Service Market – The Future of Card Issuance | G+D
[1] Tietoevry, 24 June 2022: “Modern payments use too much energy”
[2] The Fintech Times, 3 June 2022: “67% of consumers want their bank to be more sustainable”
[3] McKinsey & Co, 6 February 2023: “Consumers care about sustainability – and back it up with their wallets”
[4] MyBank.eu: “Payments and the environment: are greener choices possible?”
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