A growing emphasis on sustainability and the need to address environmental issues has necessitated the development of sustainable solutions. This trend has extended to the FinTech sector, which demands using tech, innovation, and data to revolutionize finance and tackle sustainability challenges.
Why Sustainability is Essential for Modern FinTech Firms?
With the ongoing climate crisis and increasing awareness of the damage- customers have become conscious of eco-friendly ways. They also want their banks to align with their values. Moreover, they prefer to deal with socially responsible businesses.
Another reason FinTech firms must start adopting financially sustainable policies is because of the area’s rising compliances and regulations. For instance, all banks in the EU must have ESG analytics to reduce greenwashing.
In the future, there are chances of rising global warming, pollution, and loss of biodiversity. This is why FinTechs must understand and voluntarily contribute to fighting climate change, making sustainability mainstream in the financial sector.
The Challenges FinTechs Will Face in Implementing Sustainability
1. Lack of Global Involvement
FinTechs will need international cooperation and the involvement of public authorities for sustainability initiatives. This is essential for sharing data, transferring tech, and learning from successful experiences.
Greenwashing is a tactic to deceive consumers into believing that a company is eco-friendly. For instance, firms may declare that they make their products from recycled materials. The reality may be far from this claim.
It attempts to capitalize on the growing demand for environmentally sound products. This will have a very negative fallout. Once the truth is known, customers will stop trusting other green brands, and even genuine companies will lose credibility.
3. Lack of Funds
Many FinTech firms are focusing efforts to combat the environmental crisis. However, only a few get funds to realize their projects and significantly influence the climate change issue.
Here are seven sustainable trends contributing to FinTech sustainability in 2024 and beyond.
1. Open Banking
Open banking allows customers to share their banking data securely with third-party providers. This enables innovative services and tailored experiences. Also, open banking promotes transparency and customer control over their financial data. It helps foster a more efficient financial ecosystem.
The entire process is digital, so there is almost no environmental impact.
2. Contactless Payments and Digital Wallets
Contactless payments do not require cash, reducing paper usage and impacting the ecosystem. Digital wallets offer an eco-friendly payment option, lowering paper and plastic waste.
In 2024, customers will adopt mobile wallets that often prioritize renewable energy sources, backing environmental causes.
3. Carbon Neutral Payment Processing
Processes like these involve offsetting carbon emissions via renewable energy projects or carbon offset programs. This helps achieve a net zero carbon footprint.
In 2024, FinTech firms must make payment processors adopt energy-efficient tech, support carbon offset initiatives, and use renewable energy sources to mitigate adverse effects on the ecosystem.
4. Green Investments
A report by the UNCTAD, “World Investment Report 2023,” states that-
In 2024, FinTech firms must develop better digital solutions to address environmental issues and invest in sustainable initiatives.
5. Green Loans
Banks can design loan products that incentivize customers to prioritize sustainability. In 2024, these loans may provide benefits such as lower interest rates or other incentives for investing in energy-efficient tech, encouraging more sustainable practices.
6. Carbon Tracking
Carbon tracking helps assess carbon emissions. Digital solutions, like Blockchain, enable real-time monitoring of CO2 emissions. This will allow firms to manage their carbon footprint effectively. These initiatives will also help them implement proactive measures to reduce environmental impact.
7. Mobile Payment Solutions to Support Carbon Offsetting
These solutions allow users to offset transaction carbon emissions by supporting renewable energy projects. For instance- apps like TreeCard and Doconomy enable customers to track their carbon footprint. These apps also help them make eco-friendly financial decisions and contribute to climate change efforts.
Here are Three FinTech Firms and their Sustainable Financial Solutions.
TreeCard is a FinTech startup that strives to reduce plastic and to reforest the Earth.
This startup focused on European clients who make cards from recycled plastic bottles and sustainably sourced cherry wood.
2. Starling Bank
Starling Bank encourages customers to go green and choose more planet-friendly options. Interestingly, the bank is branchless and paperless and operates on renewable energy.
Stripe, an online payment processing for internet companies, launched Stripe Climate. It lets businesses contribute to making the planet more climate-neutral, boosting FinTech sustainability and financial inclusion.
Firms can contribute a part of their revenue to tech to remove carbon in the air. In return, they get a green badge that shows their involvement in numerous green projects.
Also Read: Top Fintech Trends for 2024
By harnessing these trends and addressing the challenges, FinTech firms can be pivotal in advancing sustainable development goals in 2024 and beyond.
As these trends will help create long-term value, it is essential for stakeholders, like government bodies, financial institutions, and FinTech firms, to partner with and explore this landscape to build a sustainable and inclusive financial future.
FinTech can pave the way for a more sustainable world via innovation, collaboration, and a purpose-driven approach.