By Karolina Szweda, Head of Growth Marketing at Connect Earth
Young people are demanding more innovation from traditional financial institutions, and are primarily in favour of lower costs and more flexible digital customer experience promised by challenger banks and other FinTech providers. The future of banking is digital, and traditional financial institutions are well aware that they need to embrace innovation to remain competitive in the digitalised market.
In order to win over the younger generations, especially Millennials and Gen Z, banks need to invest in their digital transformation and deliver more customer-centric solutions. One of the affordable low-hanging fruits is sustainability.
As the public’s attention to the climate crisis grows, consumers and businesses are increasingly interested in reducing their negative impact on the planet. BCG reports that as much as 73% of consumers are altering spending habits because of climate change, and, according to PwC, 88% of consumers want brands to help them live more sustainably. As far as businesses are concerned, they are increasingly aware of the mandatory disclosure regulations set to take effect within the next years in major economies, and the need for carbon emissions reporting.
The problem is that the vast majority of consumers and businesses do not have access to actionable data on their carbon emissions. We believe that this is where banks can step in.
Increasing customer acquisition and retention
According to Deloitte, 71% of customers are more likely to choose a bank with a positive environmental impact. In addition, Global Risk Regulator reports that 93% of people expect sustainable financial services to become the norm, and according to Tink, 62% of consumers want their bank to show them an overview of their carbon footprint.
Banks are in a unique position to respond to this increasing demand by embedding climate data in their financial services offerings, which can help attract new customers and improve brand loyalty on a large scale.
With a carbon tracking API solution integrated into a digital banking app, financial institutions can be a catalyst for change and enable their customers to understand how they can reduce their emissions. By providing carbon emissions data for each financial transaction, banks can support and encourage their retail banking clients, corporate clients and/or retail investors to act more sustainably, while also increasing customer acquisition and digital engagement.
Most importantly, banks can also measure how their customers’ spending behaviours are changing as a result of being exposed to climate-related information, which they can use to segment and understand their customers better.
Increasing digital engagement
According to EY, 61% of consumers want to access more information that can help them make better sustainable choices. Banks are in a position to empower customers to do exactly that, whilst increasing user engagement with their digital banking apps.
Educating consumers on how to make more sustainable choices can be achieved through gamification, personalised recommendations and rewards to encourage behavioural change. The analysis of spending data along with tailored educational content can enable consumers to analyse, learn and improve their consumption habits and empower them to act on this knowledge.
Before accessing their carbon emissions insights, users can enter their custom information about their lifestyle habits, such as diet (meat-based vs. plant-based), daily means of transportation (car vs. bus) and more. Machine learning models improve as users input data over time, making carbon emissions estimates more granular. The model is trained to support thousands of different user types based on their profile and enables the bank to customise the experience and gamify the emissions reduction process for users.
How banks’ customers can benefit from accessing carbon emissions data
As far as climate action is concerned, having a real-life overview of one’s carbon footprint can be a true game changer for millions of consumers worldwide. Access to carbon data increases climate change awareness and empowers people to make a real difference.
Earlier this year, our team at Connect Earth confirmed the partnership with KBC Bank in Bulgaria to help them drive customer engagement and provide their retail banking clients with climate insights into their spending. We aimed to bolster KBC Bank’s corporate sustainability strategy, whilst meeting increasing demand from climate-conscious clients.
The financial sector has historically lacked the infrastructure to support sustainable finance in a tangible way. We are happy to report that the green transition has begun.