In today’s eco-conscious world, the question of “Cash or Card?” extends beyond just convenience, considering environmental impact, particularly regarding sustainability in the payments industry.
This article delves into the environmental footprints of both cash and physical cards, highlighting how their production processes — from the mining of metals in coins to the fossil fuel-based plastics in debit cards — contribute to significant ecological damage.
It also examines the carbon footprints of digital payments, revealing that despite their lack of paper usage, they come with hidden environmental costs due to the energy demands of data centres.
So, how are consumers and banks supposed to prioritise sustainability in payments when traditional payment methods contribute to their carbon footprint?
There are answers! The rise of alternative payment methods such as digital wallets, blockchain technology, and eco-friendly banking practices offer promising pathways to reduce this serious environmental footprint and make positive impact.
We’ll explore how banks are adopting renewable materials for bank cards and POS terminals, implementing green energy solutions, and developing sustainable banking and payment practices to lead the charge towards a more sustainable future in the payment ecosystem.
The Environmental Impact of Payments
Production of Cash & Plastic Cards
“Cash or Card?” A question asked frequently within the payment process, but there is far more to consider when selecting a payment option than just convenience.
Both have environmental impacts that may surprise you.
For starters, producing cash and manufacturing bank notes isn’t as straightforward as it seems. Banknotes are made from a mix of cotton and other fibres and polymers, which have their own environmental footprints. Coins are made from metals like nickel, copper, and zinc, all of which need to be mined. This mining process is damaging to the environment, leading to habitat destruction, soil degradation, and pollution.
Plus, the whole process of making, transporting, distributing, and eventually disposing of cash is very energy-intensive. Incinerating bank notes also releases air pollutants, and recycling metals takes a lot of energy – which is not always derived sustainably.
Plastic payment cards aren’t off the hook either. Aside from the fact they require EMV chips, which are currently essential to carry out contactless payments, the main card body of most of these cards is made from polyvinyl chloride (PVC), a type of plastic that is derived from fossil fuels.
Credit cards expire every 3-5 years, depending on the issuer, and get replaced which adds to the pile of plastic and e-waste we’re already struggling with. And because they’re made from multiple layers of different materials, they often end up in landfills along with the non-recyclable thermal paper receipts that are printed with each transaction.
While cash and cards are allowing customers to make more convenient transactions, they’re not in aid of climate action.
Energy Consumption of Digital Payments
Driven by convenience, the pandemic, and sustainability goals, three quarters of adults have a bank or mobile money account.
Although digital payments may seem like a greener alternative payment method to cash and plastic cards, they come with their own energy costs that we must not ignore.
With every tap, swipe and online transaction, there is a whole network of servers, mobile networks, data centres, and communication systems working behind the scenes to process that payment.
These data centres are massive consumers of electricity, especially when you consider the millions of worldwide digital transactions happening every second. And if these data centres are powered by non-renewable energy sources, that means a significant amount of carbon emissions.
While digital payments reduce the need for physical materials like paper and plastic, their reliance on ubiquitous infrastructure is a growing environmental concern that’s often hidden from view.
The Appeal of Sustainability in Payments to Consumers
Due to increasing awareness, education, and concern over climate change and associated environmental issues, more and more people are trying to live more sustainable lifestyles.
Increased sustainability efforts could include using reusable shopping bags instead of disposable, eating sustainably-sourced food produce, and shopping second-hand.
Opportunities for Sustainability in the Payments Industry
Digital Wallets & Contactless Payments
Consumers can reduce their environmental impact by moving away from cash and non-biodegradable plastic cards.
Digital wallets featuring virtual cards and digital wallets eliminate the need for these and digital invoices cut down on paper waste caused by paper receipts.
Plus, without the need for fuel-burning transport of physical cash, emissions are reduced. Even banking infrastructure becomes more environmentally friendly, with fewer physical branches needed.
Blockchain & Green Finance
Blockchain technology offers a transparent and efficient way to promote eco-friendly solutions in payments.
By using decentralised ledgers, blockchain ensures that transactions are securely recorded and traceable, reducing the need for intermediaries and cutting down on the energy-intensive processes typical of traditional banking.
It can also facilitate the transparent tracking of funds in green projects, ensuring that investments are genuinely contributing to sustainable development and efforts.
Eco-Friendly Bank Initiatives & Offsetting
Consumers are increasingly looking for transparency in how their money is managed, favouring banks and payment services that invest in sustainable products and initiatives.
This could include sustainable investment options which target sustainable industries, partnerships with environmental organisations, and so much more.
A popular e-initiative includes carbon offsetting, which allows consumers to offset the carbon footprint of their purchases. This may include a planting trees for every purchase, but this is just one example.
Using Eco-Friendly Materials
The payment card industry annually produces around 6 billion cards worldwide, which is equivalent to 30,000 tons of PVC.
Some financial institutions are offering sustainable alternatives with biodegradable or recycled material credit cards, including Copecto’s wooden TIMBERCARD: the world’s first plastic-free wooden banking card.
The main card body of the TIMBERCARD is fully biodegradable and is even compostable at home. The wood used is also from FSC©-certified forests in Switzerland and the EU, and only bio-adhesive is used for bonding the different layers.
The card has a sleek design and the real wood gives it a beautiful texture. Brands will make each payment a unique experience that is likely to spark conversation each time it’s used.
Using Renewable Energy
Banks can integrate renewable energy into their operations, through anything from solar panels on branch rooftops to green energy for offices and data centres.
Many banks are also investing directly in renewable energy projects like solar and wind farms, while offering green financing products to support the transition to clean energy.
Through the use of renewable energy in digital operations, banks not only cut their environmental impact but lead by example, showing how sustainable practices can drive both ecological and economic benefits.
Making POS Terminals from Renewable Materials
Before, POS, payment terminals were unsustainable due to non-biodegradable plastics, high energy consumption, short lifespans, non-recyclable components, and unsustainable packaging.
Now, banks are using biodegradable or recycled plastics, opting for energy-efficient designs, and ensuring eco-friendly packaging, they’re reducing environmental impact.
Modular designs and durable materials extend the life of these devices, cutting down on waste. Plus, take-back programs for old terminals ensure proper recycling and reuse of materials.
Sustainable Banking Practices
There are numerous sustainable practices that payments companies and banks can do to recognise and mitigate their environmental impact:
- Green Loans & Mortgages – Offer loans with favourable terms for projects that have a positive environmental impact, such as financing for energy-efficient homes, electric vehicles, or renewable energy installations.
- Sustainable Investments – Avoid unsustainable and environmentally damaging industries such as fossil fuels. Invest in sustainable projects and initiatives, such as renewable energy, clean technology, and green infrastructure.
- Green Bonds – Banks can issue green bonds to raise capital for projects that benefit the environment, such as clean water projects, sustainable waste management, and renewable energy initiatives.
- Sustainable Branches – Reducing the number of branches open and using resources by having a useful and efficient mobile banking service. In-branch they can also use renewable energy, energy-efficient designs, and reduce waste.
- Carbon Neutral Operations – Reducing emissions and investing in carbon offset projects. This can be in both in-branch or through smart investments and energy-efficient technologies, as well as minimising waste.
- Transparent & Ethical Practices – By being more open about where they invest their money and how they operate as well as ensuring that their practices align with broader social and environmental goals, customers can make more informed decisions about where to bank based on their values.
Conclusion
By choosing sustainable payment methods, consumers can contribute to a more eco-conscious economy, aligning their financial habits with their environmental values.
With the rising concern and awareness surrounding climate change, individuals are becoming more curious about how their spending affects their carbon footprint, and how they can be comfortable with their environmental responsibility from their purchases.
Spending habits can only account for so much, the actions and investments of banks behind the scenes are becoming more and more important.
More consumers want complete transparency from financial institutions, and many pick which bank is right for them based off their green initiatives, environmental credentials, and ethical values. There are many ways in which banks can be more eco-conscious.
This can be done through in-branch sustainable practices, sustainable manufacturing and distribution of cash/cards, including the material of their bank cards, and by directing capital towards projects that mitigate climate change and preserve natural resources.
Green finance plays a crucial role in the global push for a more sustainable, low-carbon economy for future generations.
Choose TIMBERCARD by Copecto to make your financial journey more sustainable – because every payment is an opportunity to contribute to a greener future.