Green fintech is quickly becoming this decade’s largest sustainability trend.

Payments have historically been viewed as a mundane back-office function. For decades, few stopped to consider the environmental impact of trees, trucks, diesel and emissions associated with moving money. Things are changing. Businesses are looking for hard answers on how green their money movements are.

And here’s the thing…

Instant international payments are at the forefront of change. Eliminate paper. Eliminate couriers. Eliminate days of settlement time. You eliminate a massive percentage of emissions right along with it. Legacy rails for cross-border payments simply weren’t designed with the environment in mind. They were designed 30+ years ago for an entirely different world. That’s why understanding SWIFT, SEPA and ACH transfers is so important when determining how “green” your instant international payments really are. Some rails are MUCH more efficient than others.

Here’s the game plan:

• Why Green Fintech Is Suddenly a Big Deal
• The Real Sustainability Cost of Old-School Payments
• How Instant International Payments Reduce Emissions
• What Sustainable Businesses Should Do Next

Why Green Fintech Is Suddenly a Big Deal

Green fintech refers to the convergence of financial technology and environmental sustainability objectives. It encompasses a range of applications, from carbon-tracking apps to blockchain-based green bonds to renewable-powered payment rails.

It’s not marketing fluff either.

85% of fintech companies claimed to be sustainable as of late 2023. Compare this to approximately 50% just two years prior in 2021. What a huge increase in such a small time frame.

Why the sudden rush?

Customer demand is a massive motivator. Gen Z and millennial customers care about where their money goes. More than 70% of Gen Z and millennial customers demand eco-friendly banking alternatives. When you realize they’ll hold the majority of wealth within the next ten years, it’s a trend you can’t ignore.

And then of course there’s regulation. ESG reporting mandates in Europe, climate disclosure regulations in the US, green taxonomies across Asia are all pushing companies to substantiate their sustainability pledges. Payments are right at the center of that information.

Cleaning up their compensation practices is typically the lowest-hanging ESG fruit for most firms.

The Real Sustainability Cost of Old-School Payments

Most business owners have no idea how much environmental damage traditional payments really cause.

First of all: paper cheques. Every year in the US, 68 million trees are cut down to produce paper products. Enormous amounts of those are used for cheques, envelopes, invoices and receipts. Each one of them requires:

• Water and pulp to produce
• Ink and printing energy
• Fuel to ship and mail
• Landfill space at the end

Now consider money. Cash has to be mined. Coins have to be minted. Dollars require cotton farms, printing presses, armored trucks, cash-in-transit fuel and bulletproof vaults. It all uses energy. Most of it runs on fossil fuels.

Bank wires aren’t as clean as you think. The old fashioned international wire passes through an average of 3-4 intermediary banks before it reaches its destination account. Every one of those “hops” involves data centres, servers, people-hours and paperwork.

The bigger the payment chain, the bigger the footprint.

That’s why green fintech is booming. When a company replaces a slow, paper-laden payment with a digital transaction, emissions decrease.

How Instant International Payments Reduce Emissions

This is where instant international payments really change the game.

Legacy correspondent banking systems pass money along a chain of banks. With today’s fintech solutions, money moves straight through. Fewer servers process the transaction. There are fewer intermediaries to authenticate. Documents don’t have to fly across the world.

It’s already underway. Non-cash transactions in the euro area more than doubled from 21% in 2016 to 41% in 2022. Studies also found digital payments outperformed cash across 17 of 18 environmental metrics evaluated.

Here’s why instant international payments are so much greener:

• Less paper: No invoices, no cheques, no printed statements
• Less transport: No couriers, no cash-in-transit vehicles
• Less energy per transaction: Modern rails are built for speed and efficiency
• Fewer intermediaries: Direct payments cut out unnecessary steps

Companies that pay global suppliers, freelancers or contractors on a weekly basis realize the greatest benefit. Each transaction moved from an ACH or wire to an instant international payment eliminates days of back-office handling and associated carbon.

Oh and there’s a commercial incentive as well. Quicker payments = improved cashflow, happier suppliers, less FX fees. Sustainability and margin begin aligning.

What Sustainable Businesses Should Do Next

Ready to make your payments greener? Here’s where to start.

Audit your existing payment stack. Examine all methods by which money exits your company. How many pieces of paper? How many middlemen? How long does each take? You can’t manage what you don’t measure.

Cut the paper first. Switch from paper cheques to electronic transfers wherever possible. Digital invoicing and digital receipts are low-hanging fruit your team can likely implement in a matter of weeks.

Use instant international payments when working across borders. If you pay overseas suppliers, contractors or remote workers, move to a platform that allows for real-time settlement. It’s better for emissions and your bottom line.

Ask your providers about their sustainability credentials. Not all fintech is powered by green data centres. Some are powered by renewable energy, some aren’t. Ask your payment provider what their carbon footprint looks like.

Track and report your emissions progress. Include payment-related emissions in your ESG reporting. Your investors and customers will start to demand it.

Little changes can make a big difference. Say you’re a business that processes 100 international payments per month. Simply switching payment rails can greatly reduce your footprint.

Bringing It Home

Green fintech is more than just a buzzword. It’s a movement.

Cash used to move from place to place with the help of trees, trucks and time. Now it moves via servers, code and instant global transfers. Compare the two and the eco-friendly option becomes clear.

To quickly recap:

• Payments have a real environmental cost you probably haven’t measured
• Green fintech is growing fast and backed by regulation
• Instant international payments cut emissions across the board
• Small changes to your payment stack add up to big sustainability wins

Solar panels and recycling bins are just two pieces of the sustainable business puzzle. True sustainability asks us to examine each process we run and consider: is there a cleaner way to do this? For many businesses, payments is one of the easiest places to achieve sustainability and it shows not only on your carbon report, but on your balance sheet too.

Sources:

• 85% of fintech companies – https://gitnux.org/sustainability-in-the-fintech-industry-statistics/
• 68 million trees – https://dashsolutions.com/blog/eco-friendly-energy-reduce-carbon-footprint-with-digital-refunds/