14 Mar PAYMENTS AND ENVIRONMENTAL IMPACT: ARE GREENER CHOICES POSSIBLE?

We rarely think of environmental impact when it comes to payments.

Nevertheless, all methods of payment have hidden costs for the Planet.

To date, information on the environmental impact of payment transactions is limited.

In Europe, the Dutch National Bank (DNB) is among the institutions that have investigated the issue through a “Life cycle assessment of cash payments”, published in October 2018. [1]

This valuable study, which examined both the impact of coins and of banknotes, revealed that the largest impact on the environment was due to the coin production phase (32%) and to the operation phase (64%), the latter including energy use of ATMs as well as transport of banknotes and coins.

How to reproduce these results in numbers? The “2021 Italy Cashless Report – Ongoing changes and future prospects” by The European House-Ambrosetti & Community Cashless Society mentions 4.6 g CO2 equivalents (CO2e) for an average single cash transaction.

As far as cashless methods is concerned, the CO2e per transaction goes down to 3.8 g, with a relevant aspect to highlight: with regards to digital payments, 75% of the above mentioned CO2 impact comes from payment terminals.  

The conclusion that can be logically drawn here is that non-card e-payment methods not requiring a dedicated terminal, such as MyBank, may contribute to further reducing this remaining percentage of 75%. [2]

Furthermore, payment solutions that, like MyBank, are alternative to the most “traditional” payment tools, may be drivers of sustainable finance as facilitators of dematerialization processes that promote environmentally friendlier business procedures.

Although alternative payment solutions are no guarantee of Carbon Neutrality as they rely on complex infrastructures requiring significant energy use (resulting in the production of CO2 that is not easily quantifiable), let’s consider the amount of materials and processes they allow to save.

For their production only banknotes require cotton, thread, foil, and ink; coins need copper, steel, aluminium, zinc, nickel, tin; for the majority of credit and debit cards, plastic takes the starring role along with raws materials, which include chemicals derived from petroleum.

But let’s think above all of all the processes and elements involved in their production and distribution: refining, pressing, blanking, annealing and upsetting of metals for coins alone and fuels, packaging for their transportation, more plastics, metals and energy for the terminals needed for cards.

Moreover, there are further aspects to look at.

Today, the concept of sustainability is not only focused on the environment, but it encompasses different areas: we talk about social and financial sustainability, for example.

Sustainability also goes hand in hand with inclusion, both being key drivers for brands and companies.

The account-to-account (A2A) payment system MyBank is based on, enables a socially, financially and environmentally sustainable approach, according to Giorgio Ferrero, Executive Director at PRETA, the company that owns and manages alternative payment solution MyBank. Financial inclusion is closely linked to sustainability and, along with transaction security and personal data protection, it has been at the core of the MyBank solution since its launch.

With the MyBank pay-per-link service offered by banks, for example, merchants can collect online via a payment link sent to customers via e-mail, text message or QR code, without the need to have or modify an existing e-commerce website. Essentially a ready-to-use tool, the MyBank pay-per-link solution does not require any additional terminal or equipment, any technological interventions, or significant investments for retailers, thus supporting their digitization along with their dematerialization processes.

Read our blog post dedicated to account-to-account payments to find out more features for consumers, businesses and banks/PSPs.

[1] https://www.dnb.nl/publicaties/publicaties-onderzoek/working-paper-2018/life-cycle-assessment-of-cash-payments/

[2] https://www.deda.group/blog/global-sustainable-instant-digital-payments?uniq=1ce0d157c4232a07bdfc2b0510ef88d3f