How open banking is helping consumers live more sustainably

French car­bon track­er Green­ly esti­mates that Euro­peans have an aver­age car­bon foot­print of 15 tonnes of CO₂ emis­sions per year. To meet the EU’s car­bon-zero goal, that sta­tis­tic needs to reduce to 3.5 tonnes by 2050.

Open bank­ing could be use­ful to help achieve this goal as it allows third-par­ty apps to access pay­ments and sub­scrip­tion data. This allows finan­cial ser­vice providers and fin­techs to col­lab­o­rate on inno­v­a­tive sus­tain­abil­i­ty prod­ucts.

“Cur­rent accounts are a vast source of data. A huge amount of infor­ma­tion can be derived even from one sin­gle trans­ac­tion,” says Tasha Chouhan, Tink UK and IE bank­ing and lend­ing lead. “By aggre­gat­ing, cat­e­goris­ing and analysing trans­ac­tions, open bank­ing allows us to cre­ate mean­ing from data to help peo­ple make informed deci­sions about sus­tain­abil­i­ty.”

Research by Tink found more than half of 18- to 34-year-olds (53%) want their finan­cial ser­vices provider to active­ly help them mit­i­gate their envi­ron­men­tal impact. Some 23% of respon­dents are already using an app to record their car­bon foot­print. NatWest now includes a car­bon-track­ing fea­ture in its mobile app for its retail bank­ing cus­tomers. Devel­oped with Tink and sus­tain­abil­i­ty fin­tech CoGo, the app can nudge con­sumers on how to reduce their car­bon foot­print by using loca­tion infor­ma­tion that is shared with oth­ers.

An ini­tial pilot found that cus­tomers reduced their CO₂ by 11kg each month and led to behav­iour­al changes such as eat­ing less meat, com­post­ing or even switch­ing ener­gy providers. 

“It’s impor­tant to raise our cus­tomers’ aware­ness of the envi­ron­men­tal impact of their spend­ing and how they can make pos­i­tive changes,” says Wendy Red­shaw, chief dig­i­tal offi­cer for retail bank­ing at NatWest Group. “The fea­ture pro­vides hints and tips on how to devel­op green­er habits, and users can log their com­mit­ments and behav­iour­al changes.”

Banks prompt customers to make greener choices

NatWest plans to roll out more API-led sus­tain­abil­i­ty func­tions in its app, with a pilot Green Plan that will sug­gest actions cus­tomers can take to make their homes green­er. 

Are these prompts enough to ini­ti­ate real change? Con­sumers often suf­fer from an inten­tion-action gap, which is when their val­ues and opin­ions don’t match their pur­chas­ing deci­sions.

A study by EY found that 84% of con­sumers con­sid­er sus­tain­abil­i­ty to be impor­tant when mak­ing pur­chas­ing deci­sions but just 18% of respon­dents were con­sid­ered by EY to be ‘plan­et-first’ shop­pers. 

“Peo­ple agree on the val­ue and impor­tance of top­ics such as sus­tain­abil­i­ty and diver­si­ty,” says Gustaf Anselms­son, founder and CEO of GoKind, a sus­tain­abil­i­ty price com­par­i­son ser­vice based in Swe­den. “We have this pic­ture that what­ev­er a con­sumer says their val­ue is, this is how they will act.

“This doesn’t mean that you have frauds as your con­sumer base. It means that we’re eas­i­ly per­suad­ed by the per­verse incen­tives of mar­ket­ing and sales.” 

GoKind, through Tink’s API, uses con­sumer bank­ing data to sug­gest more eth­i­cal choic­es. Anselms­son says the com­pa­ny takes a holis­tic approach to sus­tain­abil­i­ty and ranks busi­ness­es on their diver­si­ty prac­tices as well as envi­ron­men­tal impact. Users are then giv­en cash rewards for switch­ing to the high­est-rat­ed brands on the plat­form. 

It sug­gests small changes first, such as shop­ping on sec­ond-hand clothes sales plat­forms rather than using fast fash­ion, before sug­gest­ing more labo­ri­ous switch­es such as chang­ing an ener­gy sup­pli­er. 

“We haven’t stum­bled upon any­one that feels joy in switch­ing ener­gy sup­pli­ers,” says Anselms­son. “Even if you enjoy being sus­tain­able, it’s quite heavy to flick through a sus­tain­abil­i­ty report.

“Rather than say­ing, ‘This is your life, you have twice the CO₂ emis­sions you should have, do these 20 things, com­plete­ly change your lifestyle,’ we’re reward­ing the cus­tomer, and try­ing to move them grad­u­al­ly.” 

Consumers turn to climate-conscious banks

These changes in con­sumer behav­iour should in turn penalise busi­ness­es that aren’t pri­ori­tis­ing sus­tain­abil­i­ty. An increas­ing­ly envi­ron­men­tal­ly savvy con­sumer base, mak­ing the ‘right’ deci­sions, could expose organ­i­sa­tions that lag. 

Cur­rent EU reg­u­la­tions require com­pa­nies with more than 250 employ­ees to report their diver­si­ty and sus­tain­abil­i­ty efforts. New leg­is­la­tion intro­duced this month requires UK-based busi­ness­es with more than 500 employ­ees to report on their envi­ron­men­tal impact.

Anselms­son believes wide­spread use of open bank­ing data cre­ates an imper­a­tive for larg­er com­pa­nies to improve, and for small­er oper­a­tions to report their ESG efforts. 

“We can indi­rect­ly incen­tivise SMEs and com­pa­nies that don’t have a legal require­ment to report,” says Anselms­son. “It cre­ates an imper­a­tive. We’re try­ing to cre­ate a nat­ur­al urgency for com­pa­nies of all sizes to improve.”

Alex­is Nor­mand, CEO of Green­ly, agrees. “Busi­ness­es typ­i­cal­ly begin their cli­mate jour­ney when a cus­tomer requires them to report it – because they are them­selves work­ing for a larg­er com­pa­ny which wants to reduce its emis­sions through its sup­ply chain,” he says. “When you start los­ing busi­ness because you’re mak­ing few­er sus­tain­abil­i­ty efforts than your peers, hav­ing a low car­bon strat­e­gy sud­den­ly shifts from a ‘nice to have’ to a ‘must have’.” 

Green­ly uses data from an SME’s bank­ing and account­ing out­put, and infor­ma­tion sources such as cloud com­put­ing usage and trav­el soft­ware, to cal­cu­late the car­bon foot­print along its val­ue chain. Work­ing with these third par­ties can put pres­sure on the large finan­cial insti­tu­tions. Tink’s research found that 52% of 18- to 34-year-olds would not bank with a provider that held assets or invest­ments con­tribut­ing to cli­mate change. 

“Younger gen­er­a­tions of con­sumers now demand their provider is cli­mate con­scious and their mon­ey is invest­ed eth­i­cal­ly and sus­tain­ably,” says Tasha Chouhan, UK & IE Bank­ing Lead at Tink.

Time, then, for finan­cial ser­vice providers to inno­vate in sus­tain­able prac­tices to bet­ter under­stand the cli­mate lia­bil­i­ty on the bank’s books.