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Decarbonising finance: The critical role of fintech-bank collaborations

Green banking

20.6.2024

3

 mins

By 

Lucy O'Connor

Green banking
Decarbonising finance: The critical role of fintech-bank collaborations

20.6.2024

3

 mins

By 

Lucy O'Connor

Emma Kisby, CEO of Cogo, highlighted the critical need for banks to partner with green fintechs to drive decarbonisation at Money20/20. Here are the key takeaways.

Current challenges in the banking sector

The climate crisis has slipped down the priority list for many individuals and businesses. However, regulatory requirements are increasingly demanding businesses to report and reduce carbon emissions. Banks must now measure emissions under the Task Force on Climate-Related Financial Disclosures (TCFD), with strong encouragement to include Scope 3 emissions. Moreover, the upcoming Sustainability Reporting Standards (SRS) in 2025 will make Scope 3 reporting mandatory, directly affecting banks and indirectly impacting SMEs within their supply chains. To effectively reduce financed emissions, banks need robust methods to measure their retail and business customers' environmental impact actively engage them in their sustainability efforts, and help them reduce their carbon footprint. 

Engaging customers is key to decarbonisation

Engaging customers allows banks to collect data on spending patterns and behaviours. This data is crucial for understanding the carbon footprint of customers’ transactions and investments. With accurate insights, banks can quantify the emissions tied to specific activities and products, pinpoint high-impact areas, and identify which sectors and customer behaviours contribute most to financed emissions. These insights enable banks to offer personalised recommendations that encourage more sustainable purchasing decisions. 

The key to customer engagement is providing relevant, personalised information that resonates with individual needs rather than blanket solutions. By starting with small, manageable actions, like switching to LED lights, and gradually leading to more significant changes, banks can guide customers on a journey towards sustainability. This incremental approach makes it easier for customers to adopt new habits and see the impact of their choices. By understanding customer behavior and preferences, banks can also introduce green financial products when they are most likely to be accepted, therefore enhancing the effectiveness of these initiatives.

In recent years, banks have been increasingly supporting customers with home retrofits. We’ve seen mass marketing campaigns to promote energy efficiency upgrades, generous offers, and great partnerships. However, many have struggled with uptake because they target a broad audience without personalisation. There’s a big opportunity for banks to play a role in improving home energy efficiency, but banks need data to connect the dots. 

At Cogo, we can leverage customer data to identify energy expenditures and pinpoint where customers can save money. We then suggest recommendations like switching to green energy providers. From there, we encourage users to provide more robust data about their energy bills, either manually or through smart meter automation. This allows us to tailor recommendations to individual needs and where they are in their personal sustainability journey. Banks can then embed more relevant green financial products at the point of purchase, increasing conversions. 

However, customers won’t just share their data without a value exchange. Beyond financial offers and rewards, customers are seeking valuable information and actionable ways to reduce their carbon footprint. It is crucial that banks provide this support and embark on the sustainability journey with their customers. By doing so, banks not only help reduce overall emissions but also build stronger, trust-based relationships with their customers, positioning themselves as leaders in the fight against climate change.

Benefits of fintech and bank collaborations 

Banks often face challenges in accessing and utilising relevant customer data due to outdated technology systems. Partnering with fintech companies can help address these issues by integrating advanced technology into existing banking infrastructure. Fintechs bring agility and speed, allowing for rapid. Meanwhile, banks contribute scale and resources, reaching millions of customers and therefore amplifying the impact of fintech innovations. 

When we first launched Cogo’s consumer app, we engaged around 50,000 people. While this was a significant achievement, we quickly realized that to achieve the scale necessary for a substantial positive impact, partnering with larger corporations was essential. Today, we collaborate with 17 of the world’s leading banks, and the collective impact of their customers using our solutions is remarkable. Our partnership with NatWest, for instance, has engaged over 1 million customers, with approximately 40% taking climate action. This demonstrates the enormous potential and transformative power of fintech and bank collaborations in driving meaningful change.

Looking ahead to the future

AI offers vast opportunities to accelerate climate action and supercharge these bank and fintech partnerships. AI-driven models can predict the most effective climate actions and tailor recommendations quickly and accurately, adapting to individual behaviours and preferences. This technology enables banks to offer more personalized green products and services and improves reporting accuracy, enhancing transparency and communication with customers. 

Conclusion

The collaboration between banks and green fintechs is crucial for driving meaningful progress in decarbonisation. By leveraging advanced technology and data analytics, banks can better understand and manage their customers' carbon footprints, offering personalised recommendations and green financial products that resonate with individual needs. Engaging customers through tailored solutions not only helps reduce overall emissions but also builds stronger, trust-based relationships. As regulatory pressures increase and the demand for sustainability grows, these partnerships are not just beneficial—they are essential. The integration of AI further enhances these efforts, enabling rapid adaptation and precise targeting of climate actions. Together, banks and fintechs can lead the charge in the fight against climate change, creating a more sustainable future for all.

Ready to lead the way in sustainable banking? Contact us today.

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