The card networks have worked on sustainability and carbon reduction within their operations for years, and now consumers are starting to demand environmental benefits at the product level.
Both Visa and Mastercard are focusing on incentives such as rewards tied to environmentally focused payments. The networks' moves come as card-issuing banks look to tap the emerging economy for carbon reduction, and internal research from both card networks points to consumer interest in linking payments to tangible outcomes that reduce the impact of climate change.
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Visa plans to roll out a package of products for issuers and consumers in 2022 that is designed to encourage "green" shopping and payments. Mastercard is pushing technology development and is also approaching issuers with green incentive marketing.
"Sustainability has become a key priority and is accelerating," said Sue Kelsey, executive vice president for global product at Mastercard in New York. "We're seeing governments and financial institutions moving toward net zero commitments. But at the same time, we're seeing an increase in consumer interest and demand for sustainability solutions."
Visa's bundle includes a carbon footprint calculator that helps cardholders to offset carbon use, sustainable card materials and payment processing for donations to environmental groups.
"Consumers don't just want to know their carbon footprint, but they also want to have access to carbon offsets, for example," Sabo said.
Visa is also examining how to bring sustainability and other economic benefits into its rewards program. It's working with issuers to customize programs for each bank, and expects to launch incentives early in 2022. "We're looking at how to make sustainable living more attractive," Sabo said.
Mastercard recently announced it would open a sustainability innovation lab in Stockholm to look into how technology such as 5G, quantum and artificial intelligence can be used to improve environmental outcomes. The Stockholm center doubles as a "lab as a service" to work with clients and partners to create new products, and includes an experience center for product demonstrations. Research tied to the Mastercard innovation lab has started, and the facility is scheduled to open in 2022.
Mastercard also recently partnered with HSBC to allow cardholders in the United Arab Emirates to donate air miles toward restoring mangroves through the card network's Priceless Planet Coalition. "We're looking to use rewards with more sustainable outcomes in mind," Kelsey said.
Sixty-two percent of consumers say it's become more important for companies to act in a sustainable manner, according to new research from Mastercard. This is a trend that demonstrates a wish to transact or pay in a way that is mindful of environmental impact, Kelsey said.
Also, 85% of consumers say they are willing to take personal action to combat environmental and sustainability challenges, and 54% of consumers say the pandemic has made it more important to reduce their own carbon footprint, according to Mastercard. In separate research, Visa found 80% of millennials are interested in applying for an environmentally focused credit card, along with 62% of the general population.
Both Visa and Mastercard have corporate-focused environmental programs.
Banks over the past year have pursued new initiatives to boost market share in the "
The financial services industry is also operating under
The regulatory environment and consumer demand make payment products such as rewards a natural "next step," according to David Shipper, a Scottsdale, Arizona-based strategic advisor in Aite-Novarica's retail banking and payments practice.
"Now there are pretty good tools out there to track the carbon impact of your spending," Shipper said. There have been a lot of products and programs that allow people to view information on how their transactions affect the environment, but the technology behind these tools is allowing more granular data, Shipper said.
Tying points or miles-style incentives or rewards directly to green or sustainable products is an acceleration of the concept that allows consumers to directly make a change, Shipper said.
"It's also a very good product for credit cards," Shipper said. The rewards are a form of currency that can both result from an environmentally aware purchase as well as fund a green energy program, he noted.
In that way, credit card issuers could use green-focused rewards programs as a way to reach younger consumers, who are interested in environmental issues but have been gravitating toward other payment options in recent years, according to Shipper.
Kelsey acknowledged the popularity of environmental issues with young consumers, and said Mastercard was drawing interest from multiple demographics. "We see sustainability as something that can work for all consumer groups," she said.
