More and more payments providers globally are gaining a competitive advantage by rolling out products that mitigate the climate impact of customers’ purchases so they can meet the needs of consumers who are concerned about the effects of their purchases on climate change.

Consumers Care about Climate

Around the world, consumers care more about their climate change than ever and are looking for ways to mitigate their impact.

54 percent of global consumers consider reducing their carbon footprint as more important now than pre-pandemic, according to security firm Idemia, and 58 percent have become more conscious about how their actions impact the environment. A global independent poll conducted by Dentsu, referenced in the same article, found that 92 percent of consumers worldwide think their bank should actively contribute to preserving the planet, while 87 percent think their bank should offer eco-friendly payment cards. Idemia concluded that conscious consumers expect environmentally friendly banks and favour payment providers that accommodate their values by advancing sustainable banking practices. Klarna similarly found in its 2023 Shopping Pulse that 57 percent of global shoppers are looking for ways to track their carbon footprint while shopping online.

In Southeast Asia, the UOB ASEAN Consumer Sentiment Study showed that consumers are more mindful of the impact of their consumption habits on the environment. Nearly 90 percent of consumers from emerging markets in Asia Pacific want to practice more sustainable lifestyles and a significant number, driven by environmental concerns as well as by sustainability making financial sense, are starting to do their part in sustainable consumption. More than half of consumers were more likely to spend on sustainable products and services that relate to their daily needs so they can protect the planet for future generations.

Insights about Climate Drive Customer Engagement and Loyalty

While sentiment is nice, financial returns and consumer engagement are what really matter to many payments’ companies. It turns out that giving consumers the ability to track their carbon footprint and reduce climate change gives payments providers a competitive advantage.

Bank innovators have woken up to the fact that helping customers manage their carbon footprint can reengage unengaged customers and cement customer loyalty, Finextra opined. 37 percent of users of carbon footprint trackers from banks commit to climate actions suggested for them and a third of engaged users are Gen Z or millennials. Finextra’s analysis also suggests that users of innovative carbon measurement and reduction tools are more likely to recommend their bank to family and friends.

Deloitte noted that carbon offsets will increasingly be embedded in purchasing decisions that retail consumers make and predicts that consumer purchases of carbon offsets will grow into almost a US$100 billion market in developed economies by 2030. An international survey conducted by Shopify found that two-fifths of consumers would pay more for climate-focused products. Some tech companies are leveraging those insights and partnering with payment platforms. Ascenda and Patch, for instance, are collaborating to enable consumers to reduce their carbon footprint by using rewards for carbon offsets and estimate global card customers could offset a year of US emissions by turning 10 percent of their rewards into carbon credits.

More Banks are Rolling out Climate-Friendly Payments Products

To enable consumers to take climate-friendly actions and to achieve a competitive advantage, payments providers and financial institutions around the world are rolling out new products.

Financial analytics firm Personetics, for instance, says its solution offers data-driven personalised insights to analyse a customer’s spending and suggest they reduce their spend on carbon-intensive categories such as dining to reduce their carbon footprint. Its Sustainability Insights helps banks identify situations when customers are spending more than average on utility bills so the bank can reach out to show customers that their utility spending is high and offer personalised goals such as using their excess cash for solar panels. It also offers Carbon Footprint Tracking, which analyses transaction data to determine the total carbon footprint of each bank customer’s complete activity based on granular analysis of merchants, categories, utility providers and other public data sources so that banks can provide a picture of the estimated carbon emissions for each transaction.

BNPL (Buy Now, Pay Later) provider Klarna has developed tools such as top-up donations and CO₂e emissions tracking insights that enable consumers to make more informed purchasing decisions. Its CO₂e tracker gives consumers access to real-time emissions data for more than 94 million products and provides a breakdown of a product’s emissions throughout the product’s lifecycle, from raw material extraction and processing to product assembly and delivery. It encourages shoppers to make more conscious purchases and offers tips on prolonging the life of products, such as following care labels and repairing worn items. The top-up feature in the Give One Planet Health initiative enables individuals to make donations to charities.

In the Middle East, Qatar Islamic Bank (QIB) has integrated a Carbon Emission Tracker feature into its products in order to inform customers about the carbon emissions from every card transaction and encourage them to embrace eco-friendly activities. Key features include environment-friendly card spending tips, tracking of a cumulative monthly carbon footprint, and options for customers to refine specific transactions or their profile based on their lifestyle. QIB itself will also be able to calculate its carbon footprint from its retail banking customer card spend.

The Climate Credit Card from Cornèrcard in Switzerland has a climate-carbon footprint calculator that aims to influence climate-neutral shopping by monitoring a customer’s purchases and calculating the carbon emissions. It also offsets the climate impacts by investing in projects that support emission reduction.

In the US, Aspiration offers a carbon-neutral credit card that allows cardholders to offset carbon emissions from their spending. It offers cashback of 1 percent on purchases for customers who achieve a zero-carbon footprint with their purchases, tracks the carbon offset on things they purchase and plants trees when they make purchases. Aspiration and Clarity AI’s climate solution works in the background to analyse spending data to measure an individual’s carbon footprint and use emissions data coverage for more than 40,000 companies to provide insights, so customers better understand which retailers fit their lifestyle values.

Also in the US, FutureCard customers earn 5 percent or more cashback on climate-friendly purchases and can earn FutureCoins by completing Missions. Customers earn one FutureCoin for each tonne of carbon they save by completing Missions, such as switching to an electric vehicle or opting for public transit, and they can use FutureCoins at a starting value of $90 per coin to buy refurbished tech, switch to electric or save on energy bills.

In Southeast Asia, Maybank’s myimpact card has a built-in carbon calculator that tracks customers’ carbon footprint based on their spending and enables them to offset their carbon footprint by supporting reforestation. Customers also receive 1 percent cash back when spending at ESG-friendly categories such as EV charging stations or taking a bus or train.

Climate-Friendly Payments Benefit Climate Change and Spending

Globally, the number of payments providers that have implemented climate-friendly cards and programmes is small. With consumers demanding that financial institutions do more, leaders will gain competitive advantage and laggards will fall further behind. Firms without climate-friendly payments products can benefit tremendously starting a program that satisfies customers, mitigates climate change, and benefits the company, all at the same time.

Author: Richard Hartung, Associate, Singapore, Payments Consulting Network

An experienced professional with over 20 years of expertise in the payments and consumer financial services industry, specifically in the Asia Pacific region. He has held various key roles in organizations such as Citibank, Mastercard, and OCBC Bank, and has established consultancy firm Transcarta to assist financial services companies with strategy, operations improvement, and market research.

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