- 4 weeks 1 day ago 08:00 am
- 1 month 1 week ago 05:00 am
- 2 months 1 week ago 09:00 am
- 2 months 3 weeks ago 05:00 am
- 3 months 1 week ago 05:00 am
In the wake of the Covid-19 pandemic, it is clear that, as a society, we have become much more comfortable with contactless payments. A hesitation to handle ‘dirty’ cash has led to mass adoption of this new method of transaction; in fact, according to industry research, almost 60% of in-store shoppers paid using a contactless card last year – an increase of 94% compared to the previous year. From an ESG perspective, this is very much a good thing for several reasons: ￼
Digital payments can reduce the use of physical materials, such as paper and plastics, resulting in less waste and a smaller carbon footprint. A staggering six billion plastic payment cards are printed annually, almost half of which are credit cards. That’s equivalent to 140 million kilogrammes of plastic, which will take millennia to break down. Clearly, that is not sustainable, especially given that there are no guidelines about disposing of or recycling them when they expire. For most of us, the instructions are to cut them up and chuck them in the bin, which then ends up in a landfill. An alternative to traditional cards is presented through contactless methods like mobile e-wallets such as Apple Pay or Google Pay, where the phone functions as the card.
The digital economy can promote financial inclusion and social equality; however, the government and the financial services industry must collaborate to take responsibility for the deployment of cost-saving digital means to reach those currently financially excluded. Together they can enable individuals who may not have access to traditional banking services or are underserved by the banking system to participate in the economy. With contactless payments, people can make transactions using a mobile phone or a simple card, reducing the need for a traditional bank account, which not everyone can take for granted.
Digital transactions can enhance entrepreneurship in emerging economies with low levels of financial literacy. Contactless payments can benefit smaller businesses, particularly those in neglected communities. By accepting digital payments, these businesses can access a broader customer base and grow their operations. At the same time, contactless transactions improve the customer experience, lower barriers to entry in terms of cost, and produce better insight into purchasing patterns.
Facilitating financial transactions
Digital payments can contribute to the growth of the global economy through increased efficiency and productivity, reducing paperwork and processing times. They promote financial inclusion, as noted above and expand the existing customer base. They are also more transparent and accountable than traditional methods with a clear paper trail. It is also worth noting that they take place practically in real-time, accelerating the circulation of capital in the economy while typically costing less per transaction than a plastic payment.
Payments can improve traceability and transparency, making tracking transactions easier and detecting fraudulent activity. This enhanced level of transparency with a clear audit trail can help governments and regulatory authorities to monitor transactions and reduce corruption. Such an approach fosters trust in the financial system, which, in turn, attracts more investments and stimulates economic growth. At the same time, contactless payment systems often use biometric authentication, such as fingerprint or facial recognition. This strengthens security and prevents unauthorised use of payment methods, reducing the risk of corruption through identity theft or fraudulent transactions.
Provide support in troubled times
As a company with a significant Ukrainian footprint, we have seen first-hand how digital payments have provided a lifeline during the war, allowing individuals and businesses to diversify their financial holdings and reducing the risks associated with holding all assets in cash during times of instability. At a more fundamental level, they enable swift and secure payment for vital goods when disruption reigns and allow humanitarian aid, crowdfunding, and remittances to be paid to support victims of war.
This is a brief overview of how digital, contactless payments are transforming how we shop and conduct business in a more balanced and ethical manner. Looking forward, as cryptocurrency continues to evolve, it will also have the opportunity to produce similar benefits. It promises to lower barriers to entry, reduce transaction costs, and improve transparency. Cryptocurrencies also offer secure and decentralised storage of value, reducing the risk of inflation and government interference. Taken together, digital payments and crypto have the potential to make a notable impact on ESG strategies, making us all more sustainable.
Get FinTech news headlines, videos, stories and product reviews on your mobile device. Download Financial IT App for Free