The banking and financial services industry (BFSI) is a traditionally paper-based environment and therefore it must work hard to implement green initiatives that reduce waste and create environmentally friendly, sustainable business practices.
Following the 2008 financial crisis, both regulators and customers are taking a critical look at the banking industry, including its environmental footprint. In the future, it will be important for the sector to illustrate its awareness of the key role it plays in creating a greener environment. Responsible companies understand that sustainable business practices can achieve a nicer future for the planet, while at the same time these practices can help drive efficiencies and improve financial performance.
Investing in sustainable practices is also good for the bank’s public image , as Co-operative bank and Triodos have proven by yielding a significant growth thanks to their ethical green credentials. The social profile of financial institutions plays an increasingly important role in the choices a customer makes, and this is particularly true now that the ability to move from one provider to another has become much easier and the concept of long-term banking relationship is increasingly under pressure.
The Role of New Technology
New technology plays a pivotal role in helping businesses achieve their environmental objectives. Over the past decade there have been many innovations in information and communication technology, including electronic bank account management (eBAM) and electronic invoicing (e-invoicing), which offer new sustainable ‘paperless’ concepts that are attractive to the bank and customer. The competition has been ramped up by the rapid development of online payment alternatives, such as WorldPay and PayPal, and smartphone-based mobile payment wallets, such as Google Wallet, which use near field communication (NFC). In the not too distant future a bank card will no longer be needed to fulfil a transaction and accounts will be settled by the click of a button or swipe of a screen.
Banks are already responding to these changes in technology and acknowledge their possible effect on customer behaviour. The trick now is to introduce technological innovations that make a demonstrable contribution to sustainable targets, such as reducing environmental impact, as well as adding to the efficiency of internal operations and customer satisfaction.
The Benefits of a Cashless Society
Let’s look, for example, at the impact of a reduction in cash payments. The production of money is a polluting and energy-consuming process, and the transportation and monitoring costs also consume a lot of energy at a huge premium. Robberies and thefts of transported currency, as well as fraud, are an increasingly heavy social burden and the total cost of cash handling in Europe is estimated at €84bn per year. The introduction of a cashless society would generate not only tremendous cost savings, but would also produce direct environmental benefits, reducing crime and increasing public safety, as well as reducing paper production. This represents a big change for many countries where cash is still king as the dominant payment method.
It is important to realise that mobile payments will go far beyond an electronic transfer (e-transfer) from one account to another. This is because the smart phone is much more than just a wallet: it is also a marketing tool for business–to-consumer (B2C) behaviour. It won’t be long before products and services are marketed directly to the device and consumer spending behaviour will change dramatically as a result. The emphasis is no longer on the payment transaction, which will not happen face-to-face, effectively creating a completely new concept for customer contact. The payment function will instead become integrated into the use of the smart phone device and within social media, such as text messaging, online communities as well as Twitter and Facebook. This provides unprecedented opportunities for new forms of service which are tailored to specific customers. The outcome of this bespoke interaction is increased customer loyalty, acquisition and retention as well as immediate mobile payment for goods and services marketed correctly.
Developments in mobile phone technology and NFC also means that financial institutions will have to compete with new players in the market such as Google and Apple. These big brands have proven their reliability as a major asset in storing and processing money. They must now continue to invest in the technology and stay ahead of the curve by developing new concepts.
Working Towards a Greener System
Not only will the bank card eventually disappear but the paper bill will also become a thing of the past. Digitisation is a way to simplify internal processes and reduce costs, as well as reducing paper flow and therefore working towards a greener system.
By digitising systems such as electronic procurement (e-procurement) and e-invoicing, the amount of paperwork within the procurement department can be reduced significantly. Digitisation of these processes is a good example of how sustainability goes hand-in-hand with business efficiency by creating improved and faster control processes which benefit the customer.
The reduction of cash payment methods and paper flow offers clear advantages in terms of sustainability and corporate social responsibility. In this increasingly environmentally conscious age, it helps companies to reduce their carbon footprint and enhance their green credentials. A more automated electronic system also offers greater ease of use for the customer while the use of smart phones offers unprecedented targeted marketing opportunities. One thing is clear, the digitisation of the banking industry is fundamental to its sustainability and give way to new business models for future proof financial services.
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