06 Dec 2021

Thoughtworks: Sustainability in digital payments: a model for the green future of finance?

The increasingly evident impacts of climate change should be enough to convince people of the importance of sustainability. But in finance, it’s not the only driver pushing institutions to embrace higher Environmental, Social, and Governance (ESG) standards.

Environmentally-conscious customers want access to sustainably-delivered financial services and the power to directly improve sustainability through their financial decisions. Investors want to see strong ESG commitments from institutions, with a rising number of firms offering products that employ ESG criteria. And governments are taking more stringent steps to ensure that operators in the finance industry are doing all they can to act sustainably.

It’s a long list of demands, but for the institutions facing them, the message is clear: get this right and you can not only survive, but actively drive growth, while ultimately safeguarding the future of the world we live in.

A three-pronged approach to transformation in digital payments

From the 29 billion plastic payment cards expected to be in circulation by 2023, to the widely publicised environmental impacts of cryptocurrencies, the multi-faceted world of digital payments faces many sustainability challenges. But, thanks to a handful of key innovations in this space, it’s also an area of immense opportunity for those that want to lead the green future of finance.

The Åland Index, for example, provides a simple way to calculate the CO2 impact of purchases and transactions. It’s available through Amazon Web Services as a simple API that institutions can build into digital payment and banking services, delivering that insight directly to customers.

Carbon offsetting isn’t a replacement for direct emissions reduction. But, when it’s utilised alongside actions that cut emissions, it can help us tackle the long-term impacts of climate change.  Now, Sustainability-as-a-Service platform Cloverly is giving customers and banks the ability to automatically purchase offsets to help remove carbon from the atmosphere.

Alone, innovations like these are powerful. But applied alongside one another, you have a digital payments process that gives customers full visibility of how their transactions impact the environment, empowers them to change that behaviour and automatically offsets what they can’t eliminate.

Removing friction, changing behaviours and helping our planet

Together, those innovations are creating something more than a payment service. They’re embedding visibility of environmental impacts into low-friction payment processes, enabling institutions and customers alike to become enablers and drivers of positive environmental change.

Similar to green energy purchasing, where consumers appear to value information and make the switch to more sustainable suppliers, this visibility of environmental costs has the potential to kickstart a huge shift in thinking and behaviour. And it isn’t limited to consumers either. The same kind of visibility is already impacting investor behaviour, with ESG exchange-traded funds attracting a record $97bn inflow in the first seven months of 2021.

It’s a shift to visualising the true cost of transactions, in financial and environmental terms, that helps put tech at the core of our society’s most pressing challenge. It’s a small change on paper, but one that has the potential to completely transform purchasing habits and challenge how we view capitalism in its current form – the kinds of immense global shifts that we know are needed if we’re going to end the ongoing climate crisis.

To find out more about how Thoughtworks is leading collective action for a more sustainable future across the finance sector and the cloud, visit https://www.thoughtworks.com/about-us/sustainability

This article was written by Prashant Gandhi, Principal, Financial Services at Thoughtworks. To learn more about this author, please visit their LinkedIN page.

To learn more about Thouhtworks, please visit their LinkedIN and Twitter page.

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techUK is organising an event on Wednesday 8 December with industry experts and policy makers on the next steps for the technology and financial sectors to drive the green finance agenda. Find out more and join us on Wednesday!