Mind the sustainability gap
For many businesses in most sectors, sustainability is increasingly and routinely factored into the way products are produced, positioned and transported. If anything, the pandemic has intensified the scrutiny from today’s socially aware, environmentally conscious consumers.
But, in the world of financial services, there has been much less emphasis.
New research suggests that things are continuing to change: the role that financial companies can play by connecting with the sustainability agenda is an opportunity waiting to be pursued – and a vacuum waiting to be filled by the first movers.
In the retail industry, the subject of sustainability can never be overlooked. It is invariably high on the agenda and considered at every step of the product lifecycle from testing to advertising. This is in response to clear consumer demand. Google searches around sustainability terms like “plastic free” and “eco-friendly” for beauty products, for example, are up almost 300% in the year to February 2020.1 To date, the same interest in sustainability among financial services business has not been there. But times are changing.
There are a few boutique banks, like Tomorrow or Triodos, that target consumers via ‘green’ products and services like a sustainable card or providing information to the customer on their CO2 footprint. We also know that, behind closed doors, banks have to meet increasingly rigorous environmental reporting requirements, and many have made net-zero carbon commitments. The rise of digital banking offers an opportunity to accelerate the shift to sustainability if leveraged correctly but, to date, for everyday financial services businesses targeting everyday people with everyday products, sustainability has not been a central consideration.
Making sustainability central
The apparent disconnect between wanting to be more sustainable and really foregrounding it seems to apply equally to financial services businesses and the consumers they serve, and education is clearly important for both.
In a proprietary Visa research project conducted in Germany in 20202 it transpired that most people who took part had never made a connection between current accounts and carbon, savings and sustainability, or payments and the planet.
Digitally-savvy consumers with regular incomes represent the type of mass affluent customers many banks might want to attract. Within this demographic they all had expectations of today’s brands to act sustainably, and they all gave examples of how they had changed their own behaviour to reduce their impact on the planet. Yet when the discussion turned to financial services they were perplexed – with almost none of them able to see any connection or relevance. The good news is they were very open to ideas.
However, with a little bit of prompting, they started to see some potential intersections between finance and sustainability (like, for example, paperless accounts, branchless banking and ethical investments). Then, as they dug deeper still, enthusiasm grew, with many jumping into the spontaneous co-creation of intriguing new product concepts.
An opportunity for banks to do well by doing good
By the end of the session, 50% of participants said they would definitely consider changing to a more sustainable bank if the proposition were right. And the chance to attract and acquire new customers is one of several potential business benefits. For example, a sustainable banking proposition that resonates with consumers has the potential to increase customer engagement, help payment products to gain top-of-wallet preference and tap into incremental revenue streams. However, financial institutions need to avoid any blatant “greenwashing”, or misleading consumers about their sustainability credentials, as consumers are increasingly sensitive to this.3
The survey also uncovered some fascinating nuances in the way consumers think, feel and behave towards sustainability. Several distinct customer personas or pen portraits were revealed – that is, fictional characters who represent the customer segments that a bank may choose to target. These personas differed greatly in how they lived, thought about and implemented sustainability in their daily life.
What was most interesting was the level of engagement among the participants – irrespective of which persona they fitted into, they were all interested in sustainability, had modified their behaviour to live more sustainably and, once they had moved beyond the initial disconnect, clearly had ideas about how their banks could develop more sustainable products and propositions.
For financial services, it is clearly important to take these different customer behaviours into account when you develop a value proposition, and of course when you are trying to attract more customers, and engage with them in a way that truly anticipates and addresses these needs – before somebody else does.
The study asked people about the type of financial products that could help them live more sustainably. Here are four approaches that met with particular enthusiasm.
- Understanding how the way they spend their money impacts the environment and contributes to their carbon footprint
Consumers were enthusiastic about payment products that could help them measure and manage their impact on the planet. Many were also happy to share any additional behavioural data if it would improve the level of insight they received.
- Finding ways to offset their carbon footprint
Products that link carbon offsetting to spending behaviours have deep appeal. Consumers want choices of how to offset their emissions and transparency of the goals and success of each offsetting initiative.
- Offering incentives to help them change their habits and create new sustainable behaviours
Consumers would like to be rewarded for doing the right thing and to be able to spend those rewards on sustainable projects. For example, the opportunity to contribute points to environmental charities or initiatives was compelling for many people.
- Anchoring their understanding of their impact on the world
People want clear, helpful information about the impact of their behaviour and the environmental benefits being delivered from any behavioural changes. For some, comparing their environmental impact with family, friends and colleagues would encourage them to change their behaviour.
2 Visa research project in partnership with Spielfeld Innovation Research 2020
This research was commissioned by Visa. 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.