What banks miss in the fight against climate change
A problem as complicated as climate change doesn’t need an equally complicated solution for banks – it just needs a smart one.
As if it were a reflex, the first instinct of many banks and financial institutions aiming to embrace sustainability is to look inward. Common thought dictates that an analysis of energy consumption, company travel policies, and recycling programs is a comprehensive solution to becoming a bastion of corporate sustainability.
However, for banks serious about taking climate action and reaping the corresponding benefits, they will have to go from just dipping their toes into the water to uncovering the iceberg of opportunities that floats beneath the surface.
And that starts by engaging customers as a partner in climate action.
See bank customers in a new light
The traditional relationship between banks and their customers revolves around one thing: money. Money is an important part of everyone’s life. It also influences the way we impact the environment. What banking currently lacks is the connection between the two. It lacks transparency.
With each dollar, euro, and pound spent, consumers are unknowingly spending a carbon currency. Each purchase is a vote for the kind of future humanity will live in. Customers, however, lack that perspective on their money.
Banks have the power to change that. Money management doesn’t just determine financial health – it also influences environmental well-being. Transparency makes customers feel valued.
Empowering customers with the transparency and knowledge to shift towards smart and sustainable spending habits will results in a new kind of customer-bank relationship. In the age of personalization, the more information customers have, the more they feel empowered to make the choices best for them – and for the environment.
The Covid pandemic has accelerated an already astronomical demand for quality digital experiences. Customers are looking for tailored offerings that best serve their needs. In fact, according to a McKinsey study, 71% of consumers expect companies to offer personalization and 76% are frustrated when this doesn’t take place.
Customer loyalty and spending behavior is also in transition. A pandemic-driven fluidity has resulted in 75% of consumers having tried a new shopping behavior. Not only are customers more open to trying new, sustainable products, they also are more often comparing the products and services they buy.
To avoid churn, financial service providers must view sustainability as the opportunity to redefine their role – from money managers to lifestyle enhancers.
The big data problem: opportunity in disguise
Banks oversee a large amount of unstructured financial data. Keeping that data secure, while realizing its full potential to improve the customer experience is a tall order.
But the problem of organizing and transforming that data into something useful for customers is not insurmountable.
Like many climate solutions, the technologies and providers to accomplish this already exist. Financial institutions must, therefore, muster the willpower to collaborate, modernize, and act.
The open banking revolution has shifted the way banks provide cutting-edge services. In the field of sustainable banking, open banking allows banks to rely on expert climate fintechs to repurpose and structure their data.
Climate change is risky business
Capitalizing on data requires an undeniable realization that climate change is not just an opportunity for banks – it’s also a large risk. As leading banks assess their vulnerabilities and prepare for stress tests, they will come to view climate action as a rising tide that lifts all boats.
When customers take action that reduce the effects of climate change, banks benefit through a stabler future.
Just as banks undertake climate change risk management, such as assessing the carbon intensity, fossil fuel reliance and ecological impact of investments, so, too, can banks pass that capability and, ultimately, the empowerment onto their clientele.
The benchmark between the banks of yesterday and the banks of tomorrow will be how they capitalize on the valuable data pools they possess to offer state-of-the-art customer experiences.
The state of our climate gets worse by the hour. As dire climate thresholds are surpassed, one thing becomes clear: we need to prioritize quick, scalable, and effective climate action. In the financial services industry, there are few strategies better than billions of empowered consumers around the globe equipped with the transparency, knowledge, and tools on how to use their money as a tool for climate good.
Authored by Max Honzik, PR & Content Manager at ecolytiq