How Payments Can Help Save The Planet
Technology can help businesses and consumers be more sustainable
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A World Struggling for 1.5°C
In March, the UN published the Climate Change 2023: Synthesis Report. The report was the output of the Intergovernmental Panel on Climate Change (IPCC). The last such report having been published back in 2014.
The report stated that temperatures have now risen 1.1°C above pre-industrial levels. In 2015 at the Climate Change Conference (COP21) in Paris, world leaders agreed to try and limit the rise in global temperatures to 1.5°C.
The Synthesis Report concluded :
The 1.5°C limit is still achievable and [this report] outlines the critical action required across sectors and by everyone at all levels.
But, despite the efforts of civil society and - some - politicians, it will take a lot of work to meet this target. Meeting this target requires a considerable reduction in emissions. Also meeting the target means significant growth in technologies such as carbon capture.
To hit 1.5°C will be very difficult, as this will need emissions to reduce by 69% from 2019 levels by 2040.
Experts in this field, such as author Gaia Vince, writing in her book Nomad Century, see 1.5°C as a lost cause:
To keep below 1.5°C of heating, we’d have to halve global emissions by 2025, and reach net zero by 2050. Instead our greenhouse gas emissions are growing, temperatures are rising, ice-melt is accelerating, and climate change is, as scientists predicted, getting worse.
Given current policies implemented since the COP26 climate conference in 2021, we are charting a pathway somewhere between 4.5°C and 6.0°C, with the former now slightly more likely… Indeed, we may well reach 4°C earlier than 2100, perhaps by 2075.
As the global temperature rises, so do the stakes. Everyone will be asked to do more.
The world has recently been through a tough period with the COVID-19 pandemic. During this time, sustainability took a back seat to public health concerns.
Related to this - a personal anecdote. Before the pandemic, it was common in the UK to see cafés offering discounts if customers used a reusable coffee cup.
Many people were doing this, saving money and helping the environment by using reusable coffee cups. Before the pandemic, some companies provided their employees with branded reusable cups.
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But during the pandemic, there was concern that re-useable cups could assist in spreading the virus. Nearly everywhere stopped accepting reusable cups. Now that pandemic-era restrictions have gone, fewer reusable cups are being used.
This anecdote is a small example. But as climate change's impact becomes more visible to everyone, we all will need to take more action.
What about Payments?
When it comes to card payments, transaction volumes grow year-on-year. I asked FinChat for the growth rates for card payments. The answer was unsurprising:
Based on the Payments Transaction Volume data for Visa Inc. and Transaction Processing Revenue data for Mastercard Incorporated, the growth in card payment transactions has been consistently positive over the past ten years.
Visa's Payments Transaction Volume grew from $3.94 trillion in 2012 to $11.61 trillion in 2022, with an average annual growth rate of 10.54%.
Mastercard's Transaction Processing Revenue grew from $3.20 billion in 2012 to $12.60 billion in 2022, with an average annual growth rate of 14.54%.
In a world of increased digitisation, these growth rates will continue. Let's consider the environmental impact of payments.
In the world of payments, there is an environmental impact in several areas. For instance, manufacturing plastic cards and card payment devices (Point of Sale terminals) has an ecological impact. Other factors could also be considered, such as the footprint of data centres facilitating transaction processing.
We can highlight some key developments that are making payments more sustainable. These solutions are from two perspectives, Making Payments and Taking Payments.
Making Payments is consumers utilising payment technology to pay businesses (merchants). Taking Payments refers to how businesses (merchants) may receive payments from consumers.
Making Payments - Solutions for Consumers
Let’s look at three examples of how Making Payments can become more sustainable:
The manufacture of physical credit and debit cards themselves has an environmental impact. The card manufacturer Thales has estimated that the impact of a standard PVC (plastic) bank card is as follows:
60g CO2 coming from cardbody material
50g coming from manufacturing.
40g coming from others areas such as transport and packaging
This total of 150g CO2eq (carbon dioxide equivalent) is for an average bank card. This equates to the environmental impact of five plastic carrier bags.
Some companies have taken steps to make their physical cards more sustainable. Wise has released an Eco Card, which is biodegradable (made from bioplastic). Also, it has minimised the information on the front of the card - usually, the ink used on a card isn't biodegradable.
The design is a plain white-looking card with a faint logo on the top left of the card. If every card looked like this, it would be hard to tell them apart, but the card stands out as few others look like this.
As well as the card itself, the packaging is also sustainable:
The pursuit of eco doesn’t end with the card. It’s also in the packaging for the card's journey to you.
The paper envelope is made with Incada Silk, which is FSC-certified. That means we’re supporting responsible, renewable forestry.
So far, these Wise eco cards are limited edition. But the trend to make cards environmentally friendly has been set in motion.
Another example is Tietoevry's partnership with Handelsbanken. This collaboration in Finland provides cards made of recycled ocean plastic. These cards can be made with up to 70% recycled materials but still maintain the feel of a traditional PVC card.
Production and postage of physical cards have an environmental impact. So how can cards be more sustainable? The answer, in part, may be virtual cards. Many banks, particularly neo-banks, have started offering virtual cards to their customers.
Virtual cards are non-physical cards that only exist within a mobile banking app or mobile wallet. Virtual cards can be used to make payments via Apple Pay and Google Pay, and in some cases, a user can copy and paste the card number directly onto a payment page.
Technology such as Apple's Face ID has made it safer to show a whole virtual card number and the CVV 2 code in-app. The secure biometric of face ID, or an extra password, can be requested before a virtual card shows in-app.
Cardholders concerned about security when paying online can utilise a single-use virtual card - this generates a unique card number for each payment and increases safety for the bank and the cardholder.
Additionally, banks benefit from virtual cards, as they can allow immediate spending. There's now no need to wait to receive a card by post. Cardholders can spend money from a virtual card immediately upon activating their account.
Finally, I've noted EV Charging under the heading of Making Payments. EV Charging isn't a payment technology in itself, but it's an essential sector for sustainability. It's a sector where payment technology is making a difference in the success of the industry.
Electric vehicles are becoming increasingly popular. Some estimates suggest they could make up half of all new car sales in the US by 2030. For electric vehicles to truly succeed, they need the ability to accept payments at the charging point. The digitalisation of payments is making this much more straightforward.
If we relied on cash for payments, would the rollout of electric vehicles go more slowly? Staff would need to be on hand at each charging facility to take cash and enable charging.
Cashless payments make charging seamless. Modern payment technology can enable drivers to pay for their charging and continue their journey without delay.
Companies such as Nayax and Ingenico offer payment terminals specifically for EV charging. Here contactless payments have been vital. Drivers can tap their card or phone on the payment device embedded in the charging facility.
Taking Payments - Solutions for Businesses
Let’s look at how businesses may accept payments more sustainably:
SoftPOS is an emerging payment technology. The "Soft" stands for software, and "POS" for Point of Sale. SoftPOS technology replaces a standard card payment terminal (such as the one below). Instead of a typical payment terminal, an Android or iOS phone or tablet can be utilised.
Now small business owners can convert their phones into payment terminals. Simply download the necessary software from the app store and complete the onboarding process.
With SoftPOS, customers can make a contactless payment by tapping their card against the phone. This solution is convenient for handypersons, small sports organisations, market traders, and more.
Its applications extend beyond just small businesses. Large organisations are now adopting SoftPOS to transform some of their existing hardware. Devices previously used just for tasks such as stock-taking can now add payment capability - this means staff can accept customer payments while walking around the store.
SoftPOS is enabling businesses to operate with no hardware specifically for accepting payments. From a sustainability perspective, this is important as it reduces electronic waste. The image from Statista shows that electronic waste is due to grow in the coming years. From 53.6 metric tonnes to 74.7 metric tonnes in 2030.
We can reduce electronic waste by moving away from hardware specifically for payments. Of course, moving to SoftPOS alone won't be enough to save the planet. But every small behaviour change can help the environment. Every small change aggregated together can have a clear positive impact.
Mobile device manufacturers realise today's consumers' expectations, meaning that sustainability must be at the forefront of their thinking. A recent McKinsey study found that 78% of US consumers say that a sustainable lifestyle is essential to them.
Consumers have become increasingly conscious of the environmental impact of their purchases. Thus companies such as Samsung are taking sustainability seriously.
As explained on their corporate website:
To protect an environment in crisis and use resources more efficiently, Samsung Electronics is engaged in efforts to focus on a circular economy. Going beyond the conventional practice of using resources once and discarding them, Samsung is working to ensure that products can remain in use longer, and that resources can be optimized at end of life by recovering, recycling and reusing them after the product’s lifespan.
Moving away from SoftPOS, there is also Recycled POS. This has been pioneered in Brazil by Getnet, a Santander company. Getnet is working with the manufacturer to reuse components of faulty card payment devices. With these components, new devices can be manufactured:
Using a recycling process, they use the waste components to make the parts needed to make a new POS of the same quality and efficiency as devices not made from recycled material.
So far, more than 235,000 devices have gone through this process, meaning ten tonnes of electronic waste have been saved. This reuse is a great result for the planet and for business, as recycled POS devices may be cheaper to manufacture.
Under the heading of Taking Payments (accepting payments), it's worth mentioning QR Codes. Although QR Codes were invented in 1994, they have gained significant popularity in the past decade.
QR Codes are not a payment technology per se. But scanning a QR code with a mobile phone enables something else to take place. In a store, a customer may scan a QR Code at the checkout to launch an app on their phone which connects directly to a payment system. The user can then confirm the payment on their device.
In developing economies, QR Code initiated payments have become standard. In many places, QR Code payments have overtaken card payments. Some examples of QR Code payment schemes would be UPI in India, PIX in Brazil, and in Indonesia, there is a wide array of QR-based payment options.
China is the market which has seen QR Codes become ubiquitous as a way to accept payments. WeChat Pay and Alipay are the two major payment schemes most people use.
The video below shows this ubiquity in action. It's a documentary of a Japanese filmmaker in rural China. He explores a so-called cliff village which is 800 metres above the ground. Once the presenter has completed the climb to the village, he finds an elderly lady ready to sell him a bottle of water. This sale is via an Alipay QR Code printed on a lanyard. The whole documentary is fascinating, with the QR code section starting at 8.10 into the video.
Like SoftPOS, QR Codes are a means of taking payment without needing a card payment device. All that's required is a phone to scan the QR Code, which can be shown on the phone (belonging to the seller). Or it can even be printed out and displayed on a lanyard (as in the example in the video).
Will Payments Become More Sustainable?
In short, yes. It’s a time of fast-paced innovation in the world of payments. Payments technology is becoming more sustainable, and this will continue. The impact of payment technology is not enough to save the planet itself, and everyone will need to do more. Everyone will need to lessen their environmental impact.
The world of business is taking notice. A recent Deloitte report highlighted that many in the C-Suite see a focus on sustainability as something which may:
Enhance brand recognition and reputation (49% of Execs surveyed agreed)
Improve customer satisfaction (46%)
Improve employee morale and well-being (42%)
Yet, only 32% viewed sustainability as something which may drive revenue.
There will always be winners and losers when technological change takes place. But digital payments will continue to grow in importance - new revenue streams will open up. Mobile payment technology can help financial inclusion, and sustainability will grow in importance.
More sustainable payment technology means the environmental impact of each merchant will lessen. Payment innovation will be good for business and the planet.
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