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August 2022


3 - 4 Minutes

Rethinking Opportunity: Payments and the Circular Economy

The next ten years must see one of the fastest economic transformations in the history of the world. Enhanced by emerging technology, the payments industry can facilitate far-reaching change to help individuals and businesses adopt more sustainable behaviours.

Circular business models, such as rental, resale, and repair, have a crucial role to play in driving the world’s net zero targets. Building on a new Strategic Partnership with the Ellen MacArthur Foundation, Visa’s network is developing to help businesses and individuals learn and adapt for the future.

The task at hand

The transition from a linear take, make, waste economy to a circular economy — which is driven by design to eliminate waste and pollution, circulate products and materials, and regenerate nature — requires an entire systems shift, says the Ellen MacArthur Foundation.

According to the Circle Economy’s The Circularity Gap Report 2021, “our current economy is only 8.6% circular, leaving a massive Circularity Gap.” The report adds that that “we only need to close the Gap by a further 8.4%—or roughly double the current global figure of 8.6%—to get there” thereby closing the Emissions Gap by 2032.1

Individuals and households are looking for ways to make their money go further and they’re looking for ways to save the planet – we can be more successful at that when there’s alignment between the two. Katherine Brown, Vice President, Inclusive Impact & Sustainability at Visa Europe, says “Wholesale change won’t happen overnight, but commerce in the circular economy – or Recommerce – complements the model we know today rather than expecting to replace it completely. With climate change on the rise and a high cost of living, how we shop matters more now than it ever has before. A great payments infrastructure can reduce the friction in adopting new models like Recommerce, and help us rethink the way we consume. Simple choices like re-selling items when we’re finished with them, repairing devices or renting - electronics, tools, clothes, you name it –for a short time, could add up to a big impact for individuals, communities and our planet.”

Small and medium businesses are a driver of this change, but Visa’s research shows they need support – from governments and large businesses – to make the transition. As much as consumers are searching for ways to save the planet, they need local merchants to help them make the transition easier. This balance only works if there is access to education and tools to help find profitable solutions in a regenerative economy.

“The transition to net zero will require far-reaching social, economic, regulatory and technological system changes and the payments industry – given its fundamental role in the modern economy and its history in enabling large-scale socioeconomic progress – undoubtedly has a role to play,” the University of Cambridge Institute for Sustainability Leadership (CISL) says in its recent ‘Payments for Net Zero’ report.2

Isn’t there more we can do?

With customers at stake, retail banking has the potential to affect large-scale positive change in the transition to net zero. Up to a third of consumers in some EU countries would switch to a bank with a stronger product and service offering in sustainability.3 “We’re increasingly seeing customers demanding that their banks do something on sustainability, including via their products,” one respondent to research analysed by the Cambridge Institute for Sustainability Leadership (CISL) said.
Visa’s journey starts at home – we are pushing towards being net zero by 2040, ten years ahead of the global targets. Our employees have the opportunity to support and contribute to broader sustainability and impact programmes.
We are helping individuals and small businesses better understand the impact their purchases have and give them the information to help rethink their behaviours should they wish to choose more sustainable options. We partner with ecolytiq to provide bank customers with carbon footprint tracking, enable sustainable urban transport through contactless and other frictionless payment methods to accelerate adoption, and support all parts of our network as we grow and develop on this journey.

Sustainable living is often viewed as a more expensive option. We’re working on how to bring everyone along in this necessary transition so that sustainable options are accessible and affordable for all. We’re enabling the digitisation of 8 million small businesses in Europe (and 50 million worldwide) and have programmes to increase household participation in the digital financial economy.

Our research into the mechanisms to accelerate a regenerative economy helps to understand the role that businesses and individuals can play in this transition.

What do consumers want?

People want to adopt sustainable lifestyles but also think that governments and companies are doing too little to bring about change. Research from GlobeScan suggests that more than half of consumers think market choices are limited at present. One-third (34%) say businesses aren’t providing enough support and 46% say affordability is a problem.
GlobeScan says 60% of us are looking for more sustainable finance services and products. Meanwhile, 47% of people say they want to change their lifestyle “a great deal” to be more environmentally friendly but only 23% say they have made major changes in the past year.

What do SMBs need?

SMBs need a mix of capacity building and external support. Nearly half (45%) of a GlobeScan sample said advice and education, for example, on legal, regulatory and marketing issues, would encourage them to adopt more sustainable business models. Support can be provided with access to data and tools such as certification schemes, quantified environmental effects, and demand analysis.

In terms of external support, 35% say financial, governmental and regulatory support would encourage them and 33% say initiatives to support better networks, for example, local events and digital tools, would be useful.
SMBs lean on both sides of the sustainability issue. As suppliers they often have the business agility to adopt strategic and practical sustainability measures quickly and comprehensively. Meanwhile, SMBs’ buying power may make them more influential consumers.

Net zero success

The Intergovernmental Panel on Climate Change (IPCC) says the world already knows it has the means to meet targets for greenhouse gas emissions. The consultancy MarketsandMarkets4 suggest global demand for ‘Green Technology and Sustainability’ will triple in value from US$11.2 billion in 2020 to US$36.6 billion by 2025.

Super-smooth electronic banking, including ‘smart’ mobile phone apps, put payment platforms at the heart of the green economic renaissance. As important, perhaps, is enthusiasm among consumers, producers, and policymakers. Sustainable outcomes require more than best intentions. But without goodwill, net zero success will be much more elusive.

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All brand names, logos and/or trademarks are the property of their respective owners, are used for identification purposes only, and do not necessarily imply product endorsement or affiliation with Visa.

1 THE CIRCULARITY GAP REPORT 2021, https://www.circularity-gap.world/2021, © Circle Economy and its contributors set out in page 71 of its report, licensed under a Creative Commons Attribution-ShareAlike 4.0 International License (subject to Section 5 of that License) 
2 Payments for Net Zero: How the payments industry can contribute to the transition to a net zero economy, University of Cambridge, 28 October 2021, pg 3 https://www.cisl.cam.ac.uk/resources/publications/payments-for-net-zero  
3 Payments for Net Zero: How the payments industry can contribute to the transition to a net zero economy, University of Cambridge, 28 October 2021, pg 4 https://www.cisl.cam.ac.uk/resources/publications/payments-for-net-zero   
4 Payments for Net Zero: How the payments industry can contribute to the transition to a net zero economy, University of Cambridge, 28 October 2021, pg 42 https://www.cisl.cam.ac.uk/resources/publications/payments-for-net-zero

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