As showcased at eco-centric conventions like the recently held COP27 Summit, there’s a sense of urgency for sustainable banking to address concerns about climate change. This has forced financial institutions to increasingly feel the pressure to reduce their Greenhouse Gas (GHG) emissions.
Integral to these sustainable development goals is using renewable payment card materials, with many big banks swapping first-use Polyvinyl Chloride (PVC) with alternative payment card materials that are less harmful to the planet.
Not only is the push for eco-friendly banking the result of Environmental, Social, and Governance (ESG) regulation pressures and encouragement from the United Nations (UN), but it’s also an excellent way for banks to win over the hearts and minds of eco-conscious consumers. As noted in our 2023 technology trends whitepaper, companies of many industries will continue focusing on ESG initiatives to appease customers, partners, employees, investors, and other stakeholders.
A recent survey from the cloud banking platform Mambu revealed that 60% of consumers want every financial institution they interact with to be sustainable. By offering sustainable payment cards, banks solidify their net-zero commitments in a tangible way that bridges the positive emotions from the consumer to the brand. This can create a stronger bond with consumers that want brands to tackle global warming, with a better chance of them becoming long-term customers.
At first, complete digitization may seem like the answer to greener banking. After all, digitization eliminates the main culprits—reliance on paper, physical documentation, and Carbon Dioxide (CO2)-emitting transportation.
However, the increase in digitization can place further pressure on Information and Communications Technology (ICT), the cloud and mobile infrastructure, and the data centers that they are powered by. This enormous amount of energy consumption has a higher impact on power sources.
Today, first-use PVC cards account for 87% of the more than 3 billion payment cards shipped worldwide. PVC, which consists of toxic chemicals like chlorine and dioxin, is considered by many to be one of the most harmful plastics on the market. When PVC cards are manufactured, a host of pollutants are released into the air—damaging everything from drinking water to the ozone layer.
As consumers have gotten savvier about environmental concerns and how brands conduct operations, this has increased the payments market investment in Research & Development (R&D) for alternative card materials.
Many banks are shifting toward eco-friendly payment cards to accommodate climate policy and consumer demands.
Below are the alternative payment card materials that can be leveraged.
The chart below shows ABI Research's forecasts for payment cards by material.
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We expect a 14% decrease in the total share of payment cards shipped with first-use PVC in just four years. Indeed, smart card players are quickly adapting to the call for socially responsible banking. Besides reducing carbon emissions, alternative card materials provide a differentiated market position.
The shift toward mass adoption of eco-friendly payment cards will depend on influential marketing campaigns by banks, financial institutions, and smart card manufacturers. These campaigns must educate consumers about why a product (s) aligns with their values. This is where brands must be careful not to practice “greenwashing.”
For example, some payment card offerings dubbed “renewable” are made of primarily first-use PVC. Banks must do their due diligence and set up proper procedures to support their sustainability claims. If not, customers will quickly detect false information surrounding your sustainability claims and call you out on social media.
It is becoming critical to understand the consumer and the social/environmental values they increasingly place on sustainability from the businesses they transact with. This is very much visible in the payments market, with cardholders and prospective customers willing to select or transfer to banks that reflect their global values by developing and adopting sustainable banking practices, with a vast majority of consumers preferring their bank to actively contribute to preserving the planet and offering sustainable material payment cards.
Ultimately, eco cards should be marketed as a solution, not a product. Using sustainable materials is just one aspect of a greener banking market. Card issuers must consider how payment cards—especially PVC cards—will be disposed of or recycled once they expire.
A circular banking economy is an untapped and unregulated space that desperately needs more attention. Without setting up and educating customers on an end-of-life card disposal program, payment cards will end up in landfills—hindering sustainability progress.
For best practice, smart card vendors, banks, financial firms, and their partners must be mindful of the following:
Additional Resources:
How the Payments Market Is Solving Environmental Concerns