A total of 687,000 tonnes of paper, enough to circle the Earth 239 times, could be saved each year if every US household stopped receiving paper bills and statements, according to a 2008 report by Javelin Strategy & Research.
Tomorrow’s banking technology will be judged by the amount of effort that it reflects in reducing the carbon footprint, or by contributing to eliminating its impact on natural resources. As a concept, it is a proactive and smart way of thinking with a vision for future sustainability.
By adopting mobile technologies, smartphones and tablets, financial institutions have attracted a new breed of eco-friendly customers. People worldwide are now turning to eco-friendly banking as a way of helping reduce the carbon footprint of their day-to-day banking activities.
What defines eco-friendly banking activities? When does a bank’s sustainability initiatives become a significant part of the customer’s buying decision? What considerations can validate the claim of being eco-friendly?
Key Elements in Turning Cash Green
Institutions that are truly committed to implementing green banking will need to accelerate the digitisation of the entire flow of transaction messages in the bank-to-corporate, corporate-to-bank, and corporate-to-customer networks.
What the simple e-statement achieved in giving immediate, secure, easy-to-retrieve, and eco-friendly access to financial information, the relatively more sophisticated products of remote deposit capture, electronic invoicing (e-invoicing) and smart printing aim to achieve today. When the inflow and outflow of rich information for corporates is integrated with their internal systems, e-formats help corporates turn existing partnerships in their supply chain into a sustainable business platform. Such a transformation goes beyond embracing the green agenda.
Corporates are also moving from paper-based instruments to electronic instruments for processing payments that, for example, were traditionally done using cheques and demand drafts. With the efficiencies involved in processing electronic payments (e-payments) resulting in quicker turnaround times and lower costs, corporates can minimise their usage of paper and also process payments much more efficiently and effectively.
E-invoicing: The Tide is Turning
The receivables workflow for a mid-market distributor is a prime area where greening the supply chain can start with eliminating and automating manual processes. A mid-market distributor’s base that spans several countries makes it challenging for operations and treasury teams to respond manually to inquiries, reconcile messages, invoices, and other financial instruments.
A survey by Billentis reported a 20% increase in the number of business-to-business (B2B) e-invoices sent globally in 2011. The report also forecasts an increased acceleration in the adoption of technology. In addition, the use of e-invoices mandated by legislative bodies in a number of countries that include Austria, Demark, Guatemala and Singapore is contributing to the increase in adoption rates.
The manual and intensive workflow for receivables processing is one of the biggest areas where there is a need to make supply chains more cohesive and reduce reliance on unsustainable paper. This presents the opportunity to use an accounts receivable (A/R) imaging solution that is both powerful and cost effective.
Among the benefits that an A/R imaging solution provide are:
- Elimination of manual data entry.
- Reduction in discrepancies and exceptions.
- Reduction in processing costs.
- Convergence of information flows into a common repository.
These benefits fit well with ongoing corporate initiatives to increase internal efficiency. Fifty percent of respondents to a survey conducted among 500 corporate treasurers by JP Morgan Chase and Business Finance magazine cited e-invoicing as a chance to lower the cost of electronic clearing and the ability to optimise the availability of funds.
Trade parties in the corporate financial supply chain can also reduce manual processing by trading – through raising purchase orders and invoices electronically, accepting invoices and making payments, all on a common platform. Electronic acceptance of invoices and electronic financing requests can significantly reduce the use of paper for corporate transactions.
Smart Cheque Printing: Greening with Better Instrument Design
The benefits of smart printing are endless. Significant efficiencies are already being achieved from improving printing technology. Banks are looking to provide simple technology solutions that can make a big impact by using less paper. A flexible way to design cheque printing for example is a facility that transfers the onus onto the user to take proactive steps to engage in smart printing.
This is needed as cheques continue to be popular among B2B institutions: Nancy Atkinson, senior analyst for the Aite Group, estimated in a recent study that 70% of B2B payments are still made by cheque. Facilities that allow users to choose better options when printing cheques offer affirmative action for helping the environment.
Barclays’ transaction banking platform now offers its customers intuitive features to help minimise the use of paper for printing cheques. Its options to help users print wisely include:
- The option to print three instruments per A4 page rather than only one, which is common practice.
- The ability to select the desired font and size for each field that gets printed, to make it more compact.
- Flexibility in designing the cheque printing layout.
- The ability to select the relevant cheque information from a drag and drop list.
- Maintaining the final design for repetitive printing tasks.
Remote Deposit Capture: Mainstreaming Innovation
Remote deposit capture (RDC) technology promises three key benefits:
- Increased availability of funds.
- Reduced processing errors.
- Transformation of payments into a self-service operation.
Increasing customer demand for RDC is turning this development into an opportunity to earn fee-based income. Although adoption is the highest amongst major banks, RDC is cited by analysts as a key area for infrastructure and technology investment across banks of various sizes in 2012.
Integration of an RDC solution with remittance and cash management applications is driven predominantly by demand from corporate banking institutions. Integration of back end systems with the RDC solution will offer banks an opportunity to innovate.
There are various parameters that RDC solutions should offer in order to prove sustainable as a transaction messaging platform and also green:
- Streamlined enrolment of end users to minimise effort on their part, as well as that of the bank.
- Creating intuitive Web 2.0 interfaces to make the process fast and easy.
- Providing the ability to process various transaction and document types.
- Easy electronic/system-based exception handling and risk monitoring.
With RDC, corporate institutions and bankers alike benefit from:
Reduced use of paper
Cheque images are sent to the bank electronically, making deposits easy to track and process. The entire value chain turns into a true straight-though processing (STP) network that is also green.
Increased competitive advantage
RDC enables quicker availability of funds within the corporate network, making cash flow decisions much more dependable.
Electronic Announcements and News Feeds
Important functions for banks are staying connected to their customers and marketing their services. These functions are necessary to create ‘stickiness’, in order to retain and cross-sell to the customer base. Tonnes of paper are used by banks for mass communications with customers to showcase their achievements, initiatives and awards. But this information can be shared electronically, rather than relying on paper and ink.
Banks have already started move to share this information electronically by means of email, as well as through online notifications and communication using e-portals. An added advantage of such electronic communication is the ability for both the bank and its individual customers to customise their preferences for the kinds of news and communication to be provided and the manner in which they are displayed.
Emerging Market Banks Not Left Behind
Banks in emerging markets are also seizing opportunities in an emerging low-carbon economy. In December 2011, India’s IndusInd Bank inaugurated Mumbai’s first solar-powered ATM as part of its Green Office Project campaign titled ‘Hum aur Hariyali’ (Our bank and greenery). With a solar-powered ATM, the bank expects to save around 1,980 kilowatts (Kw) of energy annually as well as reducing carbon emissions by 1,942 kilograms (kg). It also expects a power bill saving of around rupees (INR) 20,000 (about US$500) per ATM per year in urban areas, where it replaces diesel generators with solar panels.
“There is already a group of leading banks in India that recognise the importance of their role and the commercial advantage this will give them,” says Emily Farnworth, senior advisor on the finance sector to The Climate Group, which acts as secretariat to signatories of the Climate Principles. For example, the State Bank of India (SBI), as part of its green banking policy, plans to set up captive windmills to generate 15 megawatts (MW) of power in the states of Tamil Nadu, Maharashtra and Gujarat.
The increasing availability of low cost solutions that vendors and banks offer through online banking, smart printing, RDC, and e-invoicing technology areas, accompanied by highly scalable and efficient deployment and support models, provide a true advantage to both corporates and banks in harnessing the go-green trend. With vendors making both technology and efficient workflows available, greening through effective capture of deposit information and streamlining the receivables processes as discussed above will help introduce complete visibility into back office operations. Both corporates and banks are realising the immense value from such green initiatives that extend beyond just facilitating better transaction banking.
The environment is being depleted. If the environment was human, it would be exhausted. Our survival is dependent on how we act and live today. Our children need to learn to reuse, reduce and recycle so that they can help move towards a cleaner and healthier environment in the future.
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