What is climate engagement?
Banks are feeling the heat – and it’s not just from out-of-control global warming. Customers today are more willing to drop their banks in the pursuit of better products. In the battle for loyalty, banks are on the frontlines of the war for attention. The demand for engaging, digital content has never been higher nor the competition stronger. That's where climate engagement in banking comes in.
Five hours a day – that’s how much time the average person spends on their phone. That time is divided among many apps, notably social media, but also with banking apps. How much time the banking app gets compared to the competition depends on its ability to draw and keep customers engaged. And exactly how to do that has puzzled banks for years.
Key to that is a laser-focus on customer demand and a big shift in demand is centered around sustainability offerings. Increasingly, customers are looking to their banks for green banking products only to come up empty handed.
Engaging on climate
Consumers around the world can feel a change in their surroundings. Storms are hitting harder, droughts are lasting longer, wildfires more destructive and increasingly people want to act. Yet, the age of information has left many people in a state of decision paralysis.
Financial institutions have long overlooked their role in solving climate change and the benefits of embracing action on it. Now many are waking up and looking to engage with their customers in the process.
Climate engagement in the banking industry refers to the process of channelling customer demand around climate change into action. But what exactly that looks like in practice depends on who you ask.
While some financial institutions may limit themselves to providing climate awareness through carbon footprinting tools to customers, the true differentiating factor is about driving engagement through education and providing the means to take action.
It’s not just about offering information; it’s about igniting a journey of behavioral change. What sets visionary banks apart is their ability to foster active engagement and genuine empowerment.
By embracing climate engagement, banks have the opportunity to catalyze the transition from customers’ anxiety around the climate crisis to meaningful action, seizing the pivotal opportunity to guide individuals toward impactful environmental initiatives that can have a positive impact.
But the window of opportunity is closing. Now is the time to be a climate leader, not a mere follower.
What banks should know
As the connection between spending and environmental impact takes hold in consumers’ minds, many are finding that this isn’t the case for their financial services provider.
A Mambu survey found that 67% would like their bank to become more sustainable in the future, with only 2 in 5 people thinking that their current bank communicating their sustainability commitments clearly.
There’s a massive opportunity for banks to respond on the demand from customers. A Tink survey found that while 40% of UK customers expect their banks to offering tools to track their environmental impact, only 24% do.
However, as awareness grows around the existence of these green banking tools, so too, will the pressure on banks to act. If not from their customers, the pressure will come from regulatory bodies, investors, and even employees.
And then there’s a business case for banks. ecolytiq data has found that providing climate engagement features can have a real impact – both on the business success and environment protection. Bank customers reduced on average their CO2 footprints by 13% within the first year, 81% saw their awareness around sustainability increase and an increase of 145% in overall in-app engagement.
There is a growing demand from consumers for banks to go one step further and act as an adviser and enabler for their own personal sustainability transitions. In a recent survey by McKinsey, 64% of consumers said they were more likely to respond to an offer from a bank on installing solar panels compared to working directly with the supplier. Consumers trust banks to provide them with advice and financial analysis, and banks should leverage this into promoting more sustainable purchasing behaviors.
Building a dynamic catalog of digital banking services was a major challenge for financial institutions during the first two decades of the 21st century and the next frontier will be sustainability.
How to best harness climate engagement
The way banks leverage their digital capabilities to power their sustainability offerings will set the tone for their climate action strategy. There are a lot of benefits to climate engagement for banks.
Higher levels of engagement translate into higher levels of loyalty. Customers that feel a connection to a bank are likely to stay and provide more revenue. For example, we saw among our banking clients that in the first 6 months after adopting our platform, customers increased spending by 18.6%. This brand proximity also translates into more positive reputation as customer associate their banks with positive impact.
Attaining those benefits means finding the right partner. A common mistake many financial service providers make is not providing a comprehensive climate action journey. A crucial determiner to the success of these products is their ability to engross customers in climate engagement. This means innovating past basic carbon footprinting tools to incorporate effective behavioral science into promoting lower carbon lifestyles.