The FinTech industry is known for its agility, innovation, and future-focused approach to providing financial services. Now, this aptitude for change is being applied to help combat the climate crisis.
From AI-powered solutions to blockchain-based authentication, to digital banks and cloud-run systems, FinTechs all over the globe are embracing innovative technologies to create sustainable financial products that support Environmental, Social, and Corporate Governance (ESG) goals. Green finance has also emerged as a sector dedicated to helping channel public and private investment to more sustainable assets.
In fact, sustainable economic models are set to create opportunities worth $12 trillion a year by 2030, according to the Business and Sustainable Development Commission. Not only do these models represent a necessary path toward a more environmentally-friendly economy, but they will also provide access to opportunities for growth for environmentally-conscious FinTechs.
Let’s dive into why the demand for green FinTech, the innovative technologies powering green FinTech solutions, and the key players driving the sector forward.
There is no time left to wait before taking action, on multiple fronts, to combat the climate crisis. With COP27 recently wrapped up, pressure is mounting on governments and corporations across the world to expand their commitments to environmental action.
From the global institution down to the consumer, all actors need to investigate what we can do to mitigate the worst of the climate crisis and ensure maximum protection for people and the planet. The financial services sector holds a huge responsibility to adopt sustainable practices and facilitate increasing funds for sustainable projects.
What’s more, consumers are becoming increasingly concerned with the environmental impact of their spending decisions, including the financial services they use. In fact, over 72% of consumers and small business clients are interested in environmental sustainability, and more than 69% would prefer their debit or credit cards to be made out of recycled materials.
A wave of green FinTechs has arisen as a result of this urgent need to take climate action, and they are harnessing cutting-edge technologies to combat this global crisis.
By virtue of being 100% digital – without the endless paperwork and brick-and-mortar storefronts that traditional banks are known for – many FinTechs are already laying the foundations for a more sustainable model.
When banking with a digital bank, for example, customers don’t need to drive to a physical location to access certain services and don’t receive paper statements in the mail. Many FinTechs are now going further than this and using cutting-edge technologies to advance their environmental impact.
The majority of FinTechs have forgone energy-hungry on-site data centers to power their systems. Instead, most have opted for 100% cloud-based architectures to host their infrastructure. Cloud vendors such as AWS and Microsoft Azure are proving to be energy-efficient options for digital businesses, with one study finding that moving to the AWS cloud could help companies reduce their IT carbon footprint by up to 88%. When using a scalable cloud service, businesses are able to optimize their energy usage – but this doesn’t happen automatically. The architecture should be designed with energy efficiency and data storage minimization in mind.
UK-based Tandem Bank is on a mission to become the UK’s first green digital bank. Together with intive, Tandem Bank leverages cloud technologies to power its green digital banking products. These include its secure, scalable platform and revolutionary digital app, which help customers access funds to make their properties greener.
Cryptocurrencies are notorious for their negative environmental impact, particularly those that use proof-of-work algorithms, which consume high amounts of electricity. However, blockchain solutions that use algorithms such as proof-of-stake, which require less energy to run, are being leveraged by many FinTechs to help build a more sustainable financial future.
Blockchain is enabling more transparent supply chains so that purchasers can get a clear picture of the transactions that bring their product from source to store. One such startup doing this is Provenance, which uses peer-to-peer payment solutions to ensure responsible and sustainable tuna sourcing in Indonesia. Treelion is another innovative FinTech that’s using blockchain to create a decentralized network to launch and manage green digital products, enabling green economy capital flows and the growth of green digital ecosystems.
And even the crypto giants are making moves to reduce their environmental impact. At COP27, a group of Web3 companies joined civil society leaders and the UNFCCC Climate Innovation Hub to announce the Ethereum Climate Platform. The platform’s mission is to “incentivize and fund the development of real-world projects that will mitigate greenhouse gas emissions and deliver positive environmental and social impact long into the future.”
FinTechs across the globe are making use of artificial intelligence (AI), machine learning (ML), and data analytics to power their sustainable products.
The FinTech app Joro uses data analytics and AI to allow users to accurately track the carbon footprint of their spending, empowering them to build a more climate-positive lifestyle. Joro’s proprietary emissions data and algorithm leverage users’ purchasing data to calculate their personal footprint and guide them to take more environmentally-conscious actions.
Driving institutional change, MioTech is an AI-powered platform that delivers ESG data to financial institutions, helping them become more aware of their environmental and social impact and make better-informed decisions around sustainability.
Green financing is a movement that’s committed to increasing financial flows toward sustainable or green investments. A wave of FinTechs has emerged that are dedicated to facilitating this flow of capital towards environmentally and socially responsible products and projects.
For example, intive is partnered with Mosaic, a leading financing platform for US residential solar and energy improvement projects. Mosaic has helped over 160,000 homeowners invest in sustainable home solutions. intive has been instrumental in helping the company evolve and improve its digital systems and drive innovation in its real-time financing app.
Another example of this comes from Norwegian-based MIRIS X, a funding platform for high-impact environmentally sustainable projects. MIRIS X also tracks how funds are used in sustainable projects through supply chain monitoring, providing insight into project finances, progress, and impact.
At intive, we use ready-to-use cloud solutions to drive time-to-market for emerging FinTechs, as well as provide technical know-how in areas such as cryptocurrency, blockchain, and digital wallets and payments. Not only dedicated to providing technical excellence, intive is also committed to ensuring maximum impact in the digital products we co-create with our clients – whether that’s for business, the environment, or for society-at-large.