Digital green banking is limited playground and there is not so much to see today

Digital is today responsible of as much C02 emissions as the whole word truck fleet . By what means are banks today tacking this issue through their digital proposition?

First of all, we could not argue against this: ESR is a trendy topic. Fortunately! So naturally, in discussions with our clients, the subject of the apprehension of green banking through digital came up often in our R&D phase on the redesign of our rating model. Numerous discussions took place for a result that we would describe as limited insofar as the indicators identified remain limited regarding climate change issue from our point of view.

The indicators finally selected (for benchmarking purpose more than digital performance evaluation) are as follows:

– The possibility of activating a dark mode on the mobile application

– The presence of a carbon footprint calculator (and potentially a proposal for actions to offset it)

– Promoting green banking offers (savings, insurance, credit) on the mobile application and/or on the authenticated web space of the customer

Moreover, we would like to believe that this subject can make bankers a bit schizophrenic since part of their business model is linked to payments and therefore to consumption, which can be contradictory with the sustainability themes.

DARK MODE FEATURES

For a start, the time spent per day on the banking app app (a bit less than one a minute on average per session across Europe) compared to other (much more trendy) apps is very low which makes the green impact of such a feature quite limited.

The principle, for OLED smartphone, is that when they display black colour, the individual pixels are turned off and do not consume any power. Other dark colours will only consume a small amount of energy compared to brighter colours. This is in contrast to phones with an LCD screen that has to rely on backlight (black colour means that light was not able to reach the screen).

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The share of OLED in smartphone display types globally was expected to reach 45% by the end of 20222. So the green impact of dark mode features occurs for less than half of the smartphones. And for our point of view (and as mobile app users) this features seems more interesting when we look at visual comfort. And this is something that is very much in demand by users according to what we see with our monitoring of mobile application reviews.

And on the topic of dark mode, the results show that we are far from a large majority of players having implemented this; for example, in France, in the market where we study the most players, dark mode is present in less than 20% of cases; in Belgium, for example, it is only one bank who offers such a feature.

CARBON FOOTPRINT CALCULATOR

Banking carbon footprint calculator are mainly based on:

  • Data collection from multiple sources: card transaction data, open banking data, electronic invoices, KYC data and also specific purchasing patterns. Digital allowed to easily collect those kinds of data (more or less depending on regulatory rules).
  • Mapping of all the transaction data to carbon footprint databases related to various parameters which may include transaction-level, merchant-level and product-level parameters. The accuracy of a carbon footprint calculator depends on the level of detail of the parameters.
  • Show relevant information to the mobile banking use; emissions data can be aggregated from the calculator into engaging user experiences in a number of ways. For example by giving comparison of their personal emission levels against national or demographic averages.
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Although current transaction data are useful for estimating emissions, there are several limitations to their use. The number of categories distinguished in the transaction-based footprint is often limited. Therefore, the categories corresponding to the transaction may be too general and not always perfectly applicable. In addition, transaction data generally stores merchant information (e.g. Amazon), not individual products or services. This limits the ability to accurately quantify the product-specific footprint and instead leaves the estimation to the industry sector rather than a specific product.

Thus, a €50 purchase from Amazon may have been a beautiful garden plant that would sequester CO2 all over its lifetime, or a gas cylinder that would generate CO2, and current retailer-level information does not allow us to distinguish the two.

Even if it was a fashionable subject in our discussions and if some banking players have integrated such functionalities in 2022, they remain nevertheless very few on the market: France and the Netherlands are where banks have implemented the most calculators (only ~25%) and none offers a compensation system.

GREEN BANKING PRODUCT SHOWCASING

Last subject, and these is the least digital one. We looked at the extent to which banks were using their digital assets to showcase ‘green’ products.

The following graphs do not show the existence of these types of products in the banking offers but their promotion on their digital assets.

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Percentage of European showcasing green banking offers on their digital assets (in November 2022 – 80 European retail banks)

Investment product are obviously the most showcased product: they have indeed a longer history and the regulatory aspect may also have something to do with it.

The main green lever of digital remains the global dematerialization (less paper, much less need to go to a bank branch) and beyond « green » investments strategy. It is by enriching their digital proposal (day to day banking operation, alerting…) and adapting it to their customers’ needs that retail banks will have a real impact in terms of sustainability.

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