Payments and Sustainability Go Well Together

The Payments industry plays a key part in ensuring that people and organizations can buy and sell goods/services in an easy and convenient way. The economy and livelihoods cannot work without this facility - the ability to make payments for goods/services is critical as without it, we cannot access the resources for which we need to live. The industry enables this buying and selling by enabling people, organizations and other payments plays (like banks, fintechs, etc.) transfer money domestically and internationally, through secure and fast technology.

With the industry being an integral part of the economy, it is affected by sustainability issues. The following are 9 material issues for the Payments industry, along with how they should be managed by a Payment Service Provider.

Environment

Carbon emissions: Like all businesses, the payments industry contributes to carbon emissions. Given that we are not on track to achieve the 1.5 degree celsius carbon reduction goal, the industry has a responsibility to significantly reduce its emissions. This can be done through investing in, and utilizing, renewable energy, especially in its office buildings and its data centers (the biggest energy guzzler the industry has). Other things it can do is reduce business travel and instead use digital communication tools.

Sustainable materials: The payments industry uses non-degradable plastic for its cards. This adds to the global plastic waste, an increasingly mounting problem on our land and in our seas. The industry therefore has a responsibility to source for more sustainable materials that are both durable and can biodegrade without harming the environment and biodiversity. Such materials can be innovated within companies or sourced across other industries.

Supply chain accountability: The sustainability of suppliers affects Scope 3 emissions, and even reputation of companies. Payment players have the responsibility to educate their suppliers, and hold them accountable for their actions and the materials they use. As well as for their processes (e.g. mandating recycling of electronic wastes).

Economic/Governance

Advocacy for financial and digital inclusion: There is evidence that the more an economy is dependent on cash, the higher its rate of fraud. Payments companies therefore have a role in advocating with governments for a greater shift towards cashless economies (greater digital payments). Relevant issues to also advocate for are removal of barriers for vulnerable groups to access financial services (e.g. tiering levels for Know-Your-Customer so that some documentation can be waived to receive loans up to a certain threshold).

Inclusive growth: The very nature of sustainable development means that no one is left behind. This means that as the payments industry is enabling economic growth, it has the responsibility to ensure that it is inclusive. For Payments, growth comes with enabling people access banking and payment services - being able to easily receive loans, save, transfer to friends & family, and make purchases. Traditional modes of accessing these services exclude the poor because of Know-Your-Customer requirements, documentation requirements, credit history requirements, inaccessibility of bank branches, high product and services prices. However, Payments players can tackle this by eliminating these barriers. For example, deploying solutions that can allow the poor to pay for large priced appliances or business inventory in installments; enabling them save, transfer and receive loans (e.g. micro-credit) right from their low cost phones, enable governments and NGOs channel aid quickly and securely to vulnerable groups, etc.

Digitising supply chains: The Payments industry is the main proponent for going cashless and digital. And this is even more pertinent in sustainability, where it could mean the difference between a subsistent supplier receiving 100% of his/her entitlement verses 50%. E.g. enabling a subsistence farmer to receive digital payments in a low-cost way means that they can be paid directly (rather than through a middleman) from the manufacturer, and in an immediate, safe and secure way.

Social

Diversity: Payments, being a technology space, has typically been dominated by men. A sustainable player will however, realise that different perspectives are always needed for innovation, and make deliberate effort to ensure this. This could include having literacy programs to ‘catch girls young’ in STEM fields, and actively recruiting in diverse networks. It could also include aiming products at targeted vulnerable groups e.g. female micro-retailers. Having equal gender representation on the Board is also a key action.

Employee up-skilling: Payments companies are essentially technology companies. The technology space is usually in flux, with innovations emerging every day. Players therefore have a responsibility to up-skill their staff and equip them to continue to add value to the industry (not just in their current jobs, but throughout their careers).

Consumer financial literacy: Financial literacy is essential for planning, which in turn is essential for sustained development of an individual and households. This is especially important with vulnerable groups so that they can manage their funds appropriately and save for emergencies. Players in the payments industry have a responsibility to organize, coordinate and facilitate such literacy in a localized and meaningful way for vulnerable groups and micro & small business owners.

The above are some key ways companies in the payment industry can contribute to sustainable development across social, economic/governance and environmental dimensions.

This article was originally submitted as a requirement for course completion to the Lagos Business School sustainability center