This article is provided by BRC Associate Member, HELPFUL.
With diverse card payment options, from Google and Apple Pay, PayPal, and debit and credit cards, retailers can choose to offer one or several payment choices for their customers at checkout, but how sustainable are payments and what does the future hold for retail and consumer journeys to net-zero?
Accessibility drives innovation
Following the 2017 mandate for banks to allow businesses access to financial products and services, known as Open Banking, retail banking has become more accessible, innovative and disruptive. Open Banking champions transparency and this has led to increased competition, fintech innovation and has pushed the big banks to provide new offerings.
Last year the Competition and Markets Authority (CMA) ruled in favour of the Open Banking Implementation Entity's (OBIE) recommendation to mandate Variable Recurring Payments (VRPs). Coming into effect in July this year, this means that customers will be able to safely connect authorised payments providers to their bank account so that they can make payments on the customer's behalf within agreed parameters that offer more control and transparency than existing alternatives.1 Fast and secure payment transactions for the consumer and the merchant, saving time and money and without the use of cards.
Transparency is the key
Transparency means that financial data can be used to empower positive change, for both businesses and consumers. Open Banking means more available information which can inform decision making.
A large amount of information can be gleaned from a single transaction, regarding the amount spent on energy, travel or shopping. Transactions can be analysed in their billions to look at behavioural patterns which can then be used to help change behaviour for the better, such as linking carbon emissions and carbon footprints to spending habits and promoting a change to spending, to benefit the environment.
A greener financial future
To date, the sustainability narrative for Open Banking is about using financial data to change spending behaviour to facilitate more sustainably conscious purchasing.
What's missing in the narrative is the lack of data on the carbon footprint of the payment process itself, both for traditional card payments and Open Banking payments.
The available data calculates that on average, every card payment produces 3.78grams of CO2.2 With over 25 billion card payments every year in the UK, this means that an estimated 1 million tonnes of CO2 is produced annually from debit and credit card payments. With a lack of data in this area we cannot yet understand the full impact of debit and credit card payment processing but we can evaluate Open Banking payments as more planet-friendly, emitting lower carbon emissions. With fewer data stops, middlemen and the speed of Open Banking, less than a few seconds for a transfer to take place,3 it is estimated that an instant payment can produce up to 80% less CO2.
Payments no longer have to be a transactional add-on but can become part of the fight against climate change, part of the supply chain where CO2 reductions can be made. Although still in its infancy in terms of development, it is estimated that by September 2023, 60% of the UK population will be using Open Banking,4 an exciting prospect in terms of environmental impact.
A seamless digital journey
For both the merchant and the consumer the digital journey is seamless. From faster payment processing and a higher completion rate [10-15% of card payments fail vs. Open Banking's completion rate of 98.3%],5 to consumers not having to input card details and being able to see how much CO2 they are saving with each payment they make.
The value of global Open Banking payments is estimated to reach $116b by 2024 and by 2026 75% of all payment transactions globally will be done by Open Banking direct payments.6 Two of the top three trends, predicted by Finextra for the banking and financial services sector are sustainable financial products and Open Banking.
At HELPFUL we are disrupting the existing payment model, with the introduction of our branded wallets. Businesses use our wallets at their checkouts, as a sustainable payment option, to get green, secure and instant settlements and support their journeys to net zero.
The HELPFUL wallet pilot will go live in February. If you would like to find out more and join us, please contact CEO and Co-founder, Evan Michaels.
Author: Evan Michaels CEO and Co-founder Evan@helpful.world
2) Calculated using the IPCC Methodology for Greenhouse Gas Inventories, the climate change impact per debit card transaction is 3.78 grams of CO2-equivalent. (Working paper: Evaluating the environmental impact of debit card payments - De Nederlandsche Bank NV - October 2017)
3) Open banking + real-time payments: A match made in heaven for Europe
4) The Future of e-commerce payments
6) Open Banking: Key Opportunities, Vendor Strategies & Market Forecasts 2021-2026