The days of treating sustainable payments as a “nice-to-have” for payment providers are over.
Decision-makers know that green payment systems are now a non-negotiable for building brand trust and meeting fast-changing ESG regulatory demands.
Yet sustainable payment trends are equally fast-changing.
Staying informed with the latest green developments can feel like a full-time job, especially for those already tasked with juggling the pressure of day-to-day operations and outpacing competitors.
In this article, we aim to make this task a little easier by looking closely at the sustainability trends affecting payment providers right now.
So, what are the latest events in sustainable payments that we should care about? Which sustainable development goals should businesses target in the battle against climate change?
Read on to find out more.
Looking for a more sustainable way to issue payments? Sign up with Berkeley Payments to find out how you can integrate our ESG-compliant smart platform into your business in just minutes.
What is a sustainable payment solution?
We’ve all heard of the term, but to refresh our memories: a sustainable payment option is one that attempts to minimize its environmental impact during its operations.
This means reducing carbon emissions from production, payment processing, and consumer use. Think digital payments over plastic cards and paper receipts.
Fintechs and payment providers are leading the charge here. Many choose to invest in renewable energy initiatives and explore sustainable materials for payment terminals and Mastercard- or Visa-branded cards.
With 75% of organizations increasing their sustainability investment since 2023, staying up-to-date with the latest sustainability in payments trends looks increasingly important.
Businesses are upping their investments in sustainability
Source: Deloitte
6 sustainable payment trends to look out for in 2024
Sustainable practices within the payments industry are on the up, but how are current trends reflecting this development?
1. A shift toward SoftPOS
Not many people know that magnetic strips will completely disappear from credit cards over the next decade.
Instead, terminals will rely on more energy-efficient payment technologies like EMV chips and contactless payments. This means that point-of-sale (POS) terminals will need less raw material and less energy consumption, which is a boon for businesses that seek to reduce their carbon footprint. POS terminal casings can also be recycled once their useful life is over.
This transition is part of a shift away from physical payment infrastructure and we’re heading toward a point where all in-person payments are digital.
SoftPOS is one example of a technology that does away with card readers.
“With SoftPOS, you can take payment on an existing Android or iPhone via NFC, with no need for payment-specific hardware”, says Matt Jones, financial services expert and author of popular finance blog Payments Culture. “It’s perfect for businesses on-the-go and banks like Monzo and Revolut now offer it, as well as providers such as Square and SumUp.”
Payment providers that integrate this type of real-time payment into their service range will find a lot of eager customers over the next few years. The North American SoftPOS market is set to witness market growth of 19.3% CAGR between now and 2030, with Canada setting the pace at 21.9%, according to Juniper Research.
2. Batch transfers (especially credit) are the greenest payment instrument
The European Automated Clearing House Association (EACHA) is one of the world’s most important payment organizations, responsible for connecting the continent’s clearing houses and making cross-border payments easier.
It recently released its green rankings, a report that uses the latest ESG requirements to rank payment methods by their sustainability.
Top of the list is batch transfers, a method that combines multiple transactions into a single processing cycle, reducing operational costs and improving efficiency.
Batch credit transfers are the most energy-efficient of these, as they use less KWh than debits, but both kinds outperform instant payments, which come next on the list.
Credit card and debit card transactions in third place use almost three times as much energy as batch transfers.
Greenest payment systems by energy consumption in KWh
Source: EACHA
But how can a business integrate batch transfers into a service offering?
Well, the report recommends that businesses sign up for a “single credit message” (SCM) infrastructure that centralizes their payment processing (including batch, real-time, and cross-border transactions) through one unified platform. FedNow is the prime US example, while Payments Canada is the Canadian equivalent.
These payment rails let you build service layers on top of them, including request-to-pay (R2P) and variable recurring payments (VRP), offering more flexibility - flexibility that’s useful in a complicated international payment landscape.
“In an interconnected world, payments companies often deal with customers from different countries, each with its own set of regulations.” says Jonathon Hamburg, Founder and Executive Vice Chairman of Berkeley Payments. “Harmonizing these requirements and ensuring consistency across borders remains a significant challenge.”
An SCM infrastructure can help overcome this challenge by simplifying the payment process through instant transfer times and fewer fees.
Not only are these infrastructures set to be a big hit with customers, but they’re also the most energy-efficient payment mechanism – and the cheapest.
3. An increased focus on ESG
Payment providers are feeling the heat to prove their green credentials thanks to a recent final rule from the SEC (Securities and Exchange Commission) which demands companies share information about their environmental impact, as per ESG criteria.
The new law requires companies to specify how much greenhouse gas they produce, how they manage climate-related risks, and their sustainability goals. The aim is to provide investors with a deeper insight into companies' sustainability practices.
The ‘social’ side of ESG has come under particular focus, with initiatives like Earned Wage Access (EWA) coming to the fore. 91% of employees have stated they want EWA, according to JP Morgan research, yet only 7% of companies offer it.
Payment providers that already offer prepaid cards to their customers can steal a march on their competitors by using them to allow workers to receive on-demand payments.
Integrating sustainable practices doesn’t just score well for ESG criteria; they're also a magnet for socially conscious customers and employees.
4. Data-driven customer empowerment is on the rise.
It’s not just businesses who are increasingly conscious of their environmental impact, but consumers, too.
Payment providers hold a unique position to empower these individuals by providing them with data-driven insights into their purchases and associated carbon footprint.
In its most recent sustainability report, UK payment specialists Pay.UK pointed out how providers like Doconomy are pioneering this approach. By sharing information about their spending habits, they aim to help consumers make informed and impactful choices.
Looking ahead, however, the potential for payments to drive sustainability extends beyond individual consumers. Businesses are under increasing pressure to evaluate their supply chains and minimize their environmental impact.
Payment providers can play a pivotal role by providing data-driven insights in these areas, too.
"We can take very large, important steps by working sectorally and having a conversation." said one contributing peer to the report.
5. Issuing virtual payment cards is a growing eco-friendly trend
Everyone knows that producing debit and credit cards has an environmental impact, but just how much?
According to card manufacturer Thales, the average PVC bank card generates about 150g of CO2 equivalent over its lifecycle or, in other words, around the same as five plastic shopping bags. With billions of cards in circulation, this environmental toll adds up.
So how can cards be more sustainable? The answer, in part, is virtual cards, which many financial institutions (and non-banking businesses) now offer to their customers.
Stored in a mobile banking app or digital wallet, virtual card payments are quickly increasing. Secure tech like Apple's Face ID, set to play an important role in the future of biometrics, is much safer than physical cards and you can even choose single-use virtual cards so each transaction gets a unique card number. This makes it much harder for anyone to misuse your card details.
Matthew Jones, the financial expert mentioned above, sees them as a huge boon for businesses, too. “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.”
Businesses are clearly seeing the benefits of issuing these cards for themselves. By 2028, virtual card transaction volume is set to reach almost five times its 2023 figure, hitting 175 billion, or 22 for every person on the planet.
Making your business sustainable in more ways than one
When we ask ourselves “What does sustainable mean in finance?”, the answer can go two ways.
The first, as we’ve covered, is how sustainable payments are in terms of environmental impact. The other refers to longevity: how can businesses that issue payments be sure that their own provider is a long-term growth partner?
After all, 75% of VC-backed fintechs fail, according to recent data from fintech experts Pyments.
Jonathon Hamburg, Berkeley Payment CEO, says we can use a simple checklist to get a better idea of the staying power of a provider.
“There are several signs of a robust and healthy platform that is going to be around for the long term,” says Hamburg, “which we can get to by asking the following:
- Has the provider been around long enough to demonstrate a sustainable, long-term business model?
- Are they compliant with all regulations (including ESG) without cutting corners?
- Are they profitable, or are they just burning through other people's money?
- Does the provider show diversity in clients, platform use cases, and evidence of stability?
“I think these are all good indications of companies able to withstand shocks.”
Finding a payment provider that can tick these boxes, as well as meet vital green initiative requirements looks to be the key for businesses that wish to offer payments to customers – and have the peace of mind of a long-term partnership.
Want to keep your business ahead of sustainable payment trends? Sign up with Berkeley Payments and find out how our A2A payment solutions can help you do this – and open up a long-term revenue stream.
