From consciousness to action: Fintechs and sustainability
Calculate and reduce your carbon footprint. Use your savings to support eco-sustainable development projects. Embark on a journey to reduce the environmental impacts of your habits. These are some of the goals of Green FinTechs, a new generation of highly green digital financial services.
Green FinTechs, like other FinTechs, operate based on a variety of different models. Some collaborate with the traditional banking system, while others openly oppose it. Some take a B2C approach with direct customer contact, while others focus on providing B2B services and helping partner companies meet their customers' eco-sustainability needs.
Step 1: Carbon footprint calculators
Carbon footprint calculation is a very popular feature among FinTechs, neobanks, and digital banks. For example, Italian company Flowe (in partnership with ZeroCO2 and Everyday Climate Action) allows users with a Premium paid account to see the CO2 produced by their purchases and to offset it by planting trees.
Mitto, the FinTech with a manifesto
Spanish company Mitto, a classic mobile neobank with a linked card, has a similar feature which is also available in a version designed for minors 14 years and up. Mitto’s manifesto declares the company’s intention of helping consumers understand the impact of their money and their choices, “one payment at a time.”
Each purchase is classified according to an MCC (Merchant Category Code), which categorizes companies according to the products or services they offer. The Mitto algorithm calculates specific CO2 emissions for each purchase according to euros spent. And of course, there’s a network of partners, enabling Mitto customers to purchase products and services from sustainable brands (companies that use recycled materials, healthy foods, etc.) with discounts of up to 30%.
The UK's crowded landscape
UK FinTech Creed is collecting pre-registrations in the runup to their launch. It offers neither a checking account nor a debit card, but rather acts as an affiliate, tapping into open baking to analyze its customers' transactions through accounts and cards that they hold with other banks and determine the carbon footprint of purchases. Currently, it covers 97% of banks active in Great Britain. Creed also offers features like setting savings goals and a robo-advisor to help customers invest in sustainable businesses, with prizes and rewards for green purchases. But it doesn't do all this for free—Creed costs £1.25 per week. There are currently over 1,200 users on the waiting list.
Set to launch in early 2022, UK-based Tred is similar to Creed but offers an account with a linked debit card...strictly made with recycled material, of course. Novus is another FinTech that currently has a waiting list, with 25,000 registrations and counting. For each payment made with the Novus card, the FinTech funds a good cause of the customer's choice at no added cost and sends a notification like "you just spent 50 euros in this shop, and you contributed to the fight against malaria."
Picnic: Sustainability as a Service
The Sustainability-as-a Service model is the basis USA FinTech Picnic, which calls itself "FinTech for good." Part digital bank, part B2B service provider, Picnic aims to enable “ethical cashback” by channeling customers’ purchases toward non-polluting affiliate companies. The "green concierge" service supports customers' journey toward a more sustainable lifestyle through data analysis. And financial sustainability is also a focus: AI-powered overspending risk analysis activates automatic overdraft protection, and medium-term expense analysis allows Picnic to provide budget optimization tips.
White label sustainability: ecolytiq
In Europe, Berlin-based ecolytiq, which provides Sustainability-as-a-Service solutions, has partnered with Worldline to calculate the environmental impact—including carbon emissions—of customer behavior. equensWorldline’s carbon footprint calculation service includes access to data from over 3,000 banks in 18 European countries. Their goal is to allow any partner bank to offer this service to its end customers.
The CO2 footprint will become a commodity
Considering the wealth of options available today, it’s likely that these features will become available in many banks' and neobanks' apps, and they may become a key component in building a strategy for companies to differentiate themselves and survive among so many competitors.
Step 2: engage your savings for a more sustainable world
Another key part of this strategy is a company’s ability to help customers transition from a simple awareness of their impact to taking a more active, responsible role as:
- a consumer, through partnerships with companies that offer sustainable or “green” products and services (note: it will be essential for FinTechs to guarantee genuine sustainability and weed out greenwashing);
- a saver, by ensuring that deposits are used to finance the green transition (directly by FinTech, if it has a banking license, or through its partners); and
- an investor, by offering a range of investment products including ETFs and crowdfunding opportunities that meet ESG criteria.
In France - Helios
In Europe, French FinTech Helios declares that "at the bank, your money isn’t tucked away in a safe, it's polluting!" This bold statement reinforces its promise to allocate customers’ deposits toward financing the energy transition. The Helios website connects users to a tool provided by Oxfam France to calculate the carbon footprint of their money at the principal trans-Alpine banks, giving them an extra nudge to switch to Helios.
Among the latest debuts in the world of "FinTech for the green saver" is Tomorrow, which differentiates itself from other banks by vowing to never invest in damaging industries like weapons, coal power, or genetic engineering. Tomorrow is a mobile bank that uses customers’ deposits to finance exclusively sustainable projects, which they monitor for ecological, social, and economic impact. They also provide a series of GreenTech functions for other neobanks, which is a smart market differentiator.
Climate First Bank
US-based Climate First Bank, with a flagship physical branch in Florida, follows the same model and claims to finance only sustainable projects. While their products and services are primarily web- and mobile-based, they collaborate with many local businesses, likely due to the unique environmental characteristics and challenges found in Florida.
Impact Crowdfunding in Italy
On the investment front, we find crowdfunding platforms that invest in green projects like Italian companies Ener2Crowd and Ecomill. In the real estate crowdfunding sector (which has seen a great deal of success) many projects focus on improving energy efficiency. Demetra Lending is a recently launched Italian company that allows customers to finance high-impact real estate projects which meet a set of “Impact First” social and environmental criteria: no soil depletion, ecosystem damage, or disruption of undeveloped lands. From a social standpoint, it’s worth noting that the procedure for pre-auction projects (property that is about to be sold at judicial auction) stipulates that once an agreement is reached with the creditors, the foreclosure process is halted and the debt is cleared. The debtor’s property will be sold on the open market and the debtor will receive 50% of the margin on the sale. An ad hoc section for environmental rehabilitation is planned within the next 2 years.
Circa 5000: green and social micro-investments
There is also space in the market for micro-investments, according to UK FinTech Circa5000 (known as Tickr until September), which raised $3.4 billion in funding as of February 2021. The platform plans to expand in Europe, though Italy won't be among the priority markets—Germany, Scandinavia and Ireland are more likely. Circa5000 allows customers to invest small amounts, starting at £10 (increased from Tickr's previous minimum of £5) to support companies with environmental or social impact through a savings account or ETF. Circa5000 reported 100 users in the UK, 80% of whom were first-time investors, probably because they tend to be quite young. They also provide carbon footprint assessment and a network of sustainable partners for customers’ purchases. Circa5000 costs £1 per month, plus 0.5% per annum of the amount invested and any ETF commissions. There is also a “Junior “version, for children, which still costs £1 per month but applies a reduced commission of 0.3% per annum on savings accounts with over £3,000 in funds.
Step 3: compensate
Green FinTech is also working on building a partnership network to allow its customers to do something good for the environment and for society. Several Italian financial companies collaborate with Treedom, an e-commerce platform that plants trees in different parts of the world (for a fee). These include UniCredit, Banca Sella, Credem, FCA Bank and Younited Credit. In some cases, the number of trees planted is directly linked to virtuous customer behavior, typically the choice to receive statements or other documentation in digital format rather than on paper.
The synergies between mobile banking apps and environmental initiatives are almost endless. imagin, the mobile app for children, teens, and young adults from Spain's CaixaBank, asked its users to participate in a plastic collection initiative, and recovered a total of 200 kg of material. They also collaborate with TooGoodToGo, which is a service allows you to buy a package of food nearing its expiration date at a heavily discounted price, that supermarkets or restaurants would have otherwise thrown away. And it’s supporting two startups: eCoDeliver, which aims to make deliveries more sustainable by assigning packages to individuals who will already be travelling the required route and to a fleet of electric vehicles within cities; and Kidalos, a “Toys as a Service” platform, with a catalog of children's toys that can be rented and then returned when the children outgrow them.