Is fintech ‘green’? The environmental credentials of any industry should come under scrutiny in an age where we know the depths of humanity’s impact on the earth. A recent Nielson survey revealed a huge 81% of respondents felt strongly that companies should help improve the environment. How does fintech rank in terms of sustainability? There’s a few moving parts to answer the question – including what that question even means – and our Features Editor Sophie Camp tries to make sense of them.
What even is an environmentally friendly industry?
It depends what you mean exactly by environmentally friendly. It essentially means that the less impact one has on the environment, the better. But ‘less’ has to be in relation to something else. Is Coca Cola less environmentally friendly than McDonalds? It would take a long time to tease out the answer, but we can all agree that neither are hardly squeaky clean environmentally wise.
In fintech, we need to look at this question in two ways:
- The impact fintech companies and innovation can have in promoting sustainability and a greener planet
- How green fintech itself is. Is the technology we use to drive fintech green, how does the industry contribute to a carbon footprint, and what kind of green initiatives does it take?
The green fintech offering
This relates to the first side of this question: how many fintechs are there out there with environmental sustainability at the heart of their business? And the answer is simple: plenty.
There’s the bunq SuperGreen card, a premium offering from the Dutch bank that guarantees a tree planted for every €100 spent on the card.
The Ant Forest initiative from Ant – the Alibaba fintech affiliate – won a top award from the United Nations Environment Programme (UNEP) in the ‘Inspiration and Action’ category of the 2019 Champions of the Earth award. Ant Forest users receive ‘green energy’ points for taking public transport, paying utility bills online, and eventually enough points are accumulate to trigger a tree being planted. The trees can then be watched by the person who inspired its planting by a real-time satellite image.
Philippine fintech GCash launched GCash Forest, helping to balance the loss of trees in the Philippines. Once green energy points are collected, users can choose their own kind of native tree to plant.
With all of these examples coming up in just the last year, there’s plenty of inspiration throughout the industry on how to have a green focus. Whether it’s in currencies (such as the solar energy based coin created by SolarCoin), industry initiatives (such as the Banking Environment Initiative inclusion of fintech in their group plans), or utilising customer sentiment to plant trees, there’s plenty of ways in which fintechs have shown their desire to promote green ideals directly.
The Blockchain Problem
So this is where the second part of the question needs to be covered, and here the answer becomes a little trickier. Fintech and blockchain belong in a relatively symbiotic relationship, but blockchain is a known user of mass amounts of energy. A 2018 study looking at Bitcoin revealed that “The Bitcoin network can be estimated to consume at least 2.55 gigawatts of electricity currently, and potentially 7.67 gigawatts in the future, making it comparable with countries such as Ireland (3.1 gigawatts) and Austria (8.2 gigawatts”. And then there’s this stat: “Per transaction, Bitcoin is thought to be 5,033 times more energy intensive than VISA.”
The world doesn’t need to add another country’s worth of energy added to the mix. And that is only a drop in the ocean with just bitcoin. The larger blockchain and cryptocurrency industry are using huge amounts of electricity. They depend on data servers, and they require a building, electricity – and leave a big environmental footprint.
Whilst developments have been made to try to reduce that energy consumption, it’s not there yet. So whilst blockchain at the heart of the industry solves many problems that could help the environment, it’s not really the most energy efficient thing itself. Is it a similar situation to the creation of electric cars: the production requires a lot of energy, but on balance it seems better in the long run to put that energy into the creation of energy efficient cars, rather than ones relying on petrol or diesel. Still, blockchain could try a lot better to use up less energy, no matter its intentions.
Fintech as an industry
How environmentally sustainable is fintech as an industry? There are a few ways we can see how the industry already, or has the potential to, come out on top above others.
- Work from home and coworking
Even without the impact of coronavirus on the world, large office spaces are becoming a thing of the past. It’s been one reason why fintech has ridden the rocky waves of COVID-19 so well: workers across the globe are used to working from home, used to managing remote teams, and used to the technology that facilitates all of this. Zoom meetings and the sound of a Slack message alert aren’t new to fintechs whose dev teams have been on one continent, marketing on another, and product on another. Large office blocks are huge consumers of energy. It takes a lot to power one office of workers – and a building dedicated to that consumes even more. Coworking spaces and home working could be a great breakthrough needed in the working world, and fintech are already steps ahead.
- Travel and events
This aspect of the industry isn’t quite so glowing. How many global fintech events take place every day? This feature is originally written at the peak of COVID-19, so the answer right now is ‘none at all’. But generally, the fintech event scene is incredibly active and very global. That leads to a lot of flights, a lot of travel – none of which is very environmentally friendly. The carbon footprint of fintech companies is always something we should be reaching to reduce, in an effort to become a greener industry. Especially now that many events have turned to an online platform in a time of global pandemic, could they become more of an industry standard than in-person events and thereby save some earth criss-crossing?
- The better solution
Of course if you compare fintech to banking, fintech is leagues ahead. Without the need for physical branches, there is a smaller physical carbon footprint. Fintech also offers a paperless option compared to banking. Cards are usually the only thing that need to be sent to customers, rather than endless paper statements and terms of use documents. Fintech by its very nature is already miles ahead of banking in the march to environmental sustainability.
- A climate change solution
There’s no doubt that COVID-19 is one of the biggest challenges we currently face: but climate change is another, and it isn’t going to go away. Understanding that gives fintech a chance to encourage climate change solutions from their talent pool. The Monetary Authority of Singapore FinTech Awards was recently launched, created to recognise innovative fintech solutions that have been implemented to address the two global challenges of coronavirus and climate change. There’s a total of $1.2 million to be won. By putting money on the table to encourage innovative solutions, fintech could promote some serious solutions to the most serious of problems. Think of how many Appathons and Hackathons could result in an innovative sustainability creation.
No easy answer
From what we’ve seen, there is plenty of evidence for and against whether fintech is environmentally friendly. But with customers wanting to get behind companies that make their best efforts in sustainability, and a changing world showing us how to utilise environmentally friendly tech and practices for the better, there aren’t many excuses for fintech to not be trying its best in all ways. How many more neobanks could add green initiatives to their card accounts? Couldn’t more companies that depend on blockchain look into the energy impact they create every day? Can’t CEOs be more responsible for their carbon footprint, despite having the budgets to fly across the world.
Whatever our current green status there is still plenty of work to be done. And whilst coronavirus is the most pressing issue, the environment is one that is guaranteed to not go away any time soon.
