Sustainable payments – How green is my card?

As cash use drops around the world and micro-merchants go digital, card payments are using more electricity than ever, to say nothing of crypto’s voracious energy appetite, so are sustainable payments achievable?

Payments Cards & Mobile’s James Wood looks at steps this industry needs to take to become sustainable.

The green lobby has had easy targets in the past, including airlines, the car industry, fishing and mining.

But the payments business may be next to face serious pressure over its environmental record: a late 2021 report in the New York Times claimed bitcoin mining consumes as much electricity as a medium-sized country every month.

“One crypto transaction uses as much energy as ten US households do in a day.”

With almost nine in ten consumers saying they expect their financial institution to offer eco-friendly payments according to Idemia, it’s time for change. As payments go green, business leaders will face the challenge of remaining competitive while respecting the environment.

Not just bitcoin – processing and cards

By now, the environmental objection to bitcoin is so widely understood as to not be worth repeating.

Briefly then, for the record – if the bitcoin industry were a country, it would have the 65th largest energy consumption on earth, according to digiconomist – and one single crypto transaction uses as much energy as ten US households do in a day.

New coins are proliferating that offer reduced transaction times and claim to use less energy than bitcoin, such as Solarcoin, which only creates new coins when it has used one megawatt of sustainably-produced energy in its processing, or Pwrledger, which tracks its use of sustainable energy and ensures the use of green sources wherever possible.

“Critics claim card payments use four times more energy than crypto, once the entire value chain is included.”

In any case, crypto’s proponents argue, the traditional payments industry uses far more energy than crypto once bank branches, ATMs, card production and processing are taken into account.

An estimate by hackernoon on the Medium platform claims the global banking industry consumes four times more energy in total than crypto, assuming 665,000 bank branches world-wide and more than three million ATMs, as well as processing and card personalisation operations.

“DNB estimate the payments business could reduce its energy use by 44% with no impact on operations.”

A 2017 study from the Netherlands National Bank (DNB) concluded there’s much room for improvement.

While debit cards were found to have a lower environmental cost than cash, the DNB still estimated the card industry could reduce its environmental impact by 44% without any negative impact on operations.

According to analysis from TietoEVRY, three-quarters of the energy use in the card business comes from processing operations, while in card production itself, just over half of all energy used goes into the production of NFC chips to be embedded in the plastic card.

If there’s room for much improvement, then the need for change is pressing – and that pressure isn’t just coming from customers and environmentalists.

In Spring 2021, the UN announced the formation of the Net Zero Financial Alliance with 43 banks from 23 countries committed to net zero emissions by 2050.

Meanwhile, the EU is examining how to include sustainability in its regulations, ensuring that financial services providers and financial advisers deliver on customers’ sustainability wishes.

As Elina Mattila, Executive Director at Mobey Forum, says: “there are challenges that limit further innovation, not least that bank senior management needs good understanding of the topic, particularly as pressure mounts from regulators.”

Green at every turn?

It’s clear that issuing a recycled card or localising personalisation centres won’t be enough: what’s needed is an end-to-end approach to sustainable payments, from card production and personalisation through to POS terminal management, processing, reporting and, eventually, recycling cards and terminals at the end of their life cycle.

At the end of last year, Nordics payments services giant TietoEVRY announced a partnership with Finland’s Savings Bank Group to give customers the option to have their card made from ocean-recovered plastic, plus the option to have the cards recycled at end of life.

TietoEVRY also undertakes card transaction processing at its data center in Stavanger, Norway, using 100 percent renewable energy sources. On its website, the company claims to have reduced its environmental footprint by 56 percent since 2016.

In mid 2021, research and advisory firm Celent produced a graphic outlining what it defines as the “three pillars” of card sustainability.

Noteworthy among these is the importance afforded to customer communication, together with the wide range of production materials now on offer, including sustainably-sourced wood.

As the graph shows, sustainability in payments comes down to making smart choices about detail as granular as how and when cards are shipped to customers, the amount of paper used in reporting and customer communication, and locating personalisation centres as close as possible to customers themselves to reduce the miles travelled by physical cards.

By implication, card businesses should also be thinking about rationalising the number of servers they use, the energy and operational efficiency of their account management systems, in brief… their entire operational footprint.

Time and cost – will the card last?

The industry’s switch to sustainable payments isn’t going to be cheap.

The 2021 European Banking Outlook by consulting firm Oliver Wyman estimates that $1.5 to $2 trillion needs to be invested in green techniques by Europe’s banks in the next decade – more than double the amount earmarked by the EU for the same purpose.

By itself, this figure is a strong argument for issuers to promote digital wallets and wearable payments over cards, since these methods don’t require the production and integration of more chips and extra plastic cards.

“Europe’s banks need to invest between $1.5 and $2 trillion in the green economy this decade” – Oliver Wyman

That said, consumers prefer cards over wallets, and an alternative future would see cards becoming more powerful, with a wider range of functions, as well as more green.

It’s also possible that we’ll see a big reduction in the industry’s energy footprint as more merchants switch to accepting transactions on mobile phones (see “The Soft Machine”).

Whatever the route the industry chooses, it’s time for us to move to more sustainable models – especially in processing and card production – before the regulatory net tightens and firms are compelled to act, regardless of the financial cost.

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