Writing for Payment Expert, Paul Holland, CEO of Beyond Encryption, explores why financial institutions should be placing a greater emphasis on green finance not for a good marketing stunt, but because it will help bring transformative benefits to KYC and communications.
As sustainability continues to climb up the corporate agenda, the financial sector is facing significant pressure to cut its carbon footprint and play its part in addressing climate change.
With research revealing that nearly three-quarters of consumers are more likely to choose a bank with a positive social and environmental impact – it is clear that sustainability must become a priority rather than an afterthought.
However, sustainability goes beyond meeting the expectations of eco-conscious consumers – it presents an opportunity for banks to streamline their operations, cut costs and deliver enhanced customer experiences.
But where should banks start in reducing their carbon footprints, and what benefits can this transformation bring?
How banks can go about building a greener future
With research revealing that the average savings account alone can contribute up to 2.3 tCO2, banks must start looking at different areas within the business where they can cut carbon emissions. Worryingly, a new report has also revealed that at the current state of progress, only 16% of financial institutions surveyed will reach Net Zero by 2050.
With these statistics in mind, banks must act now and begin to evaluate the areas in their business where they can operate in a more sustainable way.
One way in which banks can reduce their carbon footprint is by switching from legacy postal communications to secure digital alternatives. With every tonne of post generating around 3 tonnes of CO2e, a switch to paperless communications would go a long way in helping banks to be more sustainable.
Another way in which banks can reduce their carbon footprint is by automating their “Know Your Customer” (KYC) process. This procedure requires consumers to provide physical documentation, such as ID, to verify their identity before opening or applying for a bank account, helping to protect both customers and their banks by mitigating fraud.
During the pandemic, the need for a digitised KYC process became clear as it drove a shift in both criminal behaviour and financial institutions’ ability to interact with their customers.
By replacing outdated KYC processes with digital-first solutions, banks can reduce emissions associated with print and post by eliminating the need for physical documentation and manual checks, therefore reducing paper waste and shrinking their carbon footprint.
Banks can take this one step further by adding a layer of automation to this process to streamline document review and screening, which could cut down KYC processes from being weeks long to just minutes.
In order to ensure that banks’ sustainability efforts are effective and on track, they must also invest in environmental, social, governance (ESG) reporting. A cost-effective way of doing this is by leveraging smart devices to look at factors such as carbon footprint and energy efficiency.
These devices can also be used to help identify areas where more sustainable practices are required to support banks in continually advancing their sustainability efforts and keeping up the required momentum.
The benefits of going green
Along with helping to meet the demands of eco-conscious consumers and doing their part by reducing their carbon footprint, going green can unlock a wide range of benefits for banks from an operational and customer perspective.
By switching from legacy postal communication to secure digital alternatives, banks will be aligning their communications with their customers’ preferences.
Research from Ofcom’s ‘Residential Postal Tracker’ shows that 50% of consumers no longer want to receive bank letters. This clearly shows that carbon-heavy, outdated processes are losing their appeal, and adhering to these preferences will help banks greatly improve their customer experience.
A further study revealed that banks are losing 20% of customers due to poor customer experience. This change will also help banks get back on track and deliver the experience that consumers expect. Not only this, but by switching to digital alternatives, banks will unlock a range of time and cost-saving benefits.
Digital communications have become a more effective way of communicating with customers, as they are much faster than traditional postal communications, which often suffer from delays and take days to arrive.
Postal comms are also significantly more expensive, with the average letter costing up to £1.65 to post. While this might sound like a small win in isolation, for large banks with millions of customers it could have huge cost-saving benefits.
Banks that automate and enhance their KYC processes by switching to digital alternatives will also unlock a realm of benefits.
Firstly, automated KYC processes are more accurate than manual reviews, which will reduce the need for repetitive checks or reprocessing and allow banks to save time and resources.
Automated KYC processes can also greatly shorten onboarding timelines from weeks to minutes, which will help to improve customer satisfaction from the offset and allow their journeys to start the right way. This process will also allow banks to stay up to date with the latest regulatory requirements to ensure that customers’ safety is consistently prioritised.
Finally, automated systems can help banks boost their scalability by allowing them to onboard new customers at scale without being restricted by time-intensive, manual processes – meaning they will be supported as they grow.
As consumers continue to be driven by environmental responsibility, banks have been presented with an opportunity to pave the way for a more sustainable financial future.
By adopting these digital-first practices, banks will be able to reduce their carbon footprint and unlock a range of operational and customer benefits along the way.
This transition is more than a business choice – it is an important step in building trust and aligning with eco-conscious consumers.
