Discerning and Eco-Conscious Customers Making the Sustainable Payment Card a Mandatory Solution for Issuers

As it relates to materials, different ecological materials such as Polylactic Acid (PLA), Polyethylene Terephthalate Glycol (PETG) and ocean bound plastics will offer a variety of pros and cons related to carbon output, recycling, and end-of-life disposal. Payment card vendors have been in conversation with banks and financial institutions to determine which sustainable materials can achieve environmental goals, without compromising on personalization or card security. Scalability and choice are being achieved, with a significant amount of market movement related to sustainable card issuance, and vendors receiving large orders for the sustainable cards they offer in their portfolios.

It has been a long process to get to this point in the sustainable payment card market, with many pain points having to be addressed, such as the use of including elements like recycling and disposal processes, with end-of-life cards needing to be reclaimed to be disposed of in a sustainable manner. All these considerations have been part of the assessment stage when deploying sustainable cards, as they will be intensely examined against how these solutions perform in the field. Vendors active in this space have launched cards made of sustainable materials that integrate well with existing infrastructure and can achieve sustainability at all lifecycle stages. The lifecycle of the card is one side of the equation, but other elements are also being debated; how expensive will such payment cards be, are they of comparable quality, and how much of an addressable market is there for the product? It is clear now that Mastercard and Visa are fully behind, and in the case of Mastercard mandating, the migration to sustainable materials, so the addressable market will number in the billions, rather than millions, of cards.

Cardholders in 2023 are more likely to have protecting the global ecosystem as a core value that is shown in the choices they make and the businesses from which they procure goods and services. The payment card also falls into this category and as the payment card acts as a branded display of the bank and an anchor of trust between bank and customer, it becomes a sustainable offering that assures consumers about their personal contribution to sustainability and helps advise their purchasing decisions.

Cardholders have to consider whether the card issuer shares the same approach to sustainability and has solutions ready to go to supply the market with a truly eco-conscious product that can be proven to be sustainable and not just marketed as such. The pivotal factor is that the payment card must still see regular usage and maintain its position as a regular tool in the customer’s day-to-day life. Instead, the challenge is to manage design and feel, against its ecological contribution, which can be better achieved through looking further than the material used and into the wider lifecycle of elements such as transportation and recycling.

Sustainability is seeing a considerable amount of drive from the mounting pressure provided by industry stakeholders, including investors, banking regulators, and payment networks. These all have the power to demand the development and launch of sustainable solutions from payment card vendors and financial organizations, and to demonstrate sustainability within daily operations. Merchants have experienced this pressure for a number of years, and now this has turned toward financial institutions, with agile neo and challenger banks, including GoHenry, Starling Bank, and Tomorrow, already deploying sustainable offerings within the payments space, giving rise to sustainability on a more mainstream level.

Sustainably-minded consumers now expect banks to echo their customers’ values. This is something that has changed drastically over the last decade, when bank offerings such as nearby branch locations and competitive mortgage rates were sufficient to secure the interest of a prospective customer. This was largely because a sustainable approach to banking and payments was not considered as a significant factor due to the lack of visibility on the link between the banking industry and its carbon footprint. Nowadays, sustainable solutions have piqued customers’ interest in opting for financial institutions with identical values that are developing sustainable banking practices, with a vast majority of consumers preferring their bank to offer eco payment cards. This paradigm shift has now occurred in 2023, with many global financial institutions keen to show their environmental focus via net-zero solutions and carbon offsetting programs. This has now extended to neo and challenger banks looking to target eco-conscious consumers. Such fintechs have now positioned themselves to support the demand for sustainability in the payments market, leveraging their more flexible business models and branchless banking, which demonstrates a commitment to minimizing carbon output.

Upon initial startup, the majority of neo and challenger banks tend to focus on developing compelling User Interface (UI) and streamlined banking experiences to draw prospective customers’ attention. In 2023, neo and challenger banks have found a strong niche in Millennial and Gen-Z customers who are more likely to be eco-conscious than other customer demographics. While it is important to gain the attention of these consumer segments, achieving strong customer retention to build a consistent revenue stream is also needed, which is much more easily achieved through the message that their solutions are truly sustainable. Gen--Z and Millennial customers are attracted to services and offerings that demonstrate they can help support sustainability and their ESG values, with the obligation for neo and challenger banks to match this commitment to ensure users do not migrate to a competitor with more sustainable solutions.

This is a critical change in the industry and means that smart card vendors must offer a range of sustainable card solutions that banks and financial institutions will need to include in their portfolios. Aside from industry regulation from payment networks such as Mastercard and Visa, which are playing a larger role Year-over-Year (YoY), the customer perspective is forcing many players in the payments card market to rethink their approach to sustainability. Those that do not cater to a more eco-conscious population will fail to draw in new customers compared to their competitors, which is vital for new-to-market neobanks looking to secure a reliable source of revenue. ABI Research, recommends that sustainable card offerings be part-and-parcel of an issuer’s portfolio to future-proof against further regulation in this space and to attract new customers for whom environmental preservation is a priority.