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Panellists at EBAday 2023 shared their thoughts on how sustainability is becoming a bigger deal for the payments world, while warning industry about the impact of regulation.
“If you think about two or three years ago, payments and sustainability were two different topics,” said Andrea Giuliani, head of payments solutions at NTT Data Italia. “But what we are seeing today is that payments and sustainability overlap.”
Now, this means tackling challenges, he explained, while speaking on the panel "Sustainable finance: assessing shades of green across payments and banking".
“What we see as the main gaps that we need to cover are around the lack of agreement, such as too many certifications.”
“We need to have an agreement on that,” he explained.
Much like other elements of the financial services industry, payments has become increasingly keen to show off its green credentials.
Mastercard, for example, has its Priceless Planet Coalition, which is dedicated to restoring 100m trees by 2025.
Visa, meanwhile, achieved carbon neutrality in 2020 and has committed to net zero emissions by 2040, ten years ahead of the goals set out in the Paris Agreement.
Beyond these initiatives, market players are having to comply with green taxonomies, labelling what is sustainable and what is not. In 2024, the first set of companies will need to comply with the EU’s incoming Corporate Sustainability Reporting Directive (CSRD), which came into force in January this year.
To deal with this, companies need to ensure that their data is ready to comply with this kind of reporting, said Giuliani.
“The regulation can seem a bit overwhelming, such as the changes in the reporting” commented Stephen King, vice president, sustainability solutions at Visa.
According to King, transaction data “is not a bad place to start” regarding reporting.
“There is a base that already exists, so it is just building on top of that,” said King.
In addition, he noted that “experts are out there and are coming forward”.
“The big banks, the big companies will be able to do it themselves, but for elements of the ecosystem, partnering and all of us doing a little more together is the spirit of the regulation."
“It was designed so that we don’t have to go off and do our own thing,” he said.
Ainsley Ward, payments solutions vice president at IT firm CGI suggested that there “always has to be a carrot and a stick,” regarding regulation.
“We found that with SEPA in 2008. Environmental change, sustainability, sustainable practices will be exactly the same.”
Things are about to get interesting, he said. “We are in that phase where we are in the transition of regulation taking over from just best practices.”
Many banks and clients will be concerned about the CSRD, he noted. For example, firms will need to understand and report on various forms of data for reports that are due in 2025.
This includes the amount of electricity used in a firm and whether it is renewable.
“We know that reporting is a challenge in the banking space and this is a new type of reporting with data that we haven’t had to gather before. It is going to cause a few problems.”
And beyond the CSRD, Ward noted that the incoming Digital Operational Resilience Act (DORA) also has a sustainability angle.
“If you’re looking at a regulation around operational resilience, as is DORA, and how to continue business in certain tricky circumstances, if those circumstances are caused by environmental problems, we need to change the way we look at our infrastructure so we can continue doing business no matter what,” he explained.
“If our coastal data centre is suddenly under three feet of water due to a colossal storm influenced by climate change, how can we continue our business?”
Meanwhile, another gap that needs to be addressed is the price of sustainable products, admitted Giuliani.
“It is difficult to tell a customer that something is the right product, but that they have to pay more to be sustainable,” he said. “It is quite strange in these terms.”
A lot of sustainability products remain expensive, agreed King.
“Sustainability is known to be an expensive thing to get involved in and, often, this can be justified, as these are longer lasting and better products,” he said. “In the net, this is a positive.”
King said that the next wave of products must also be inclusive.
“We need to get to a place where the price point and the way it is delivered is available for everyone,” he said. “The ones that are starting to differentiate are moving quickly to reach consumers. From an innovation perspective, this is an area that is available for those who feel they can differentiate in areas such as clothing.”
Yet, Ward suggested that not every solution needs to be more sustainable.
For example, efficiencies can be made by moving to a cloud-based infrastructure and also by allowing staff to work from home, he suggested.
