Sustainability Strategies: 3 ways to Decarbonize Payments in Latin America

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    In Latin America, several green initiatives have taken place in the payments industry, with little to no adoption. Do Latin American consumers truly care about sustainable finance and lower carbon products?

    How should payment companies in Latin America be thinking about sustainability?

    Arthur Deakin

    Director of Energy Practice at AMI

    Contact the author

    In 2022, over 600 billion card transactions were processed globally.1 Each card transaction accounted for roughly 3.78 grams of CO₂, totaling 2.2 million tons of CO2.2 To put this in context, these emissions account for less than 0.1% of total global emissions and are therefore a negligible part of the climate problem. Accounting for only 7% of global card transactions,3 Latin America’s share in the problem is even smaller.

    Although consumers are becoming increasingly aware of the carbon footprint of the products and services they purchase, there is still a strong disconnect between the transaction of money (i.e., the way money moves) and sustainability. This is partly because the direct carbon footprint of banks, acquirers, and card networks is relatively small, pushing climate efforts toward more impactful areas such as decarbonizing transportation or transforming energy matrices by replacing coal with solar power.

    When moving money, customers prioritize safety, speed, and cost, not necessarily their environmental footprints. And yet, green products and sustainable finance is a notable trend in Latin America, with banks, acquirers and fintechs experimenting with ways to offer customers environmentally friendly options. This apparent contradiction is causing confusion, leaving payments companies in Latin America to ask the question, does sustainable finance and lower carbon products matter to my customers now? If not now, when will it be?

    LatAm green payment initiatives struggling to resonate with consumers

    Payment companies have had mixed success when deploying sustainable initiatives in or outside Latin America. Aspiration, a US-based company that provides carbon removal solutions for corporations, partnered with Mastercard to launch “Aspiration Zero,” a credit card program in which customers use their loyalty points to plant trees and offset their carbon footprint. In May 2023, they decided to terminate the program for undisclosed reasons.

    In Brazil, digital bank C6 launched “Aqua,” a credit card made from biodegradable material that allows clients to use loyalty points earned to help preserve forests. The company does not report the number of Aqua cardholders, but it appears to have gained limited local traction.

    And yet, green initiatives persist. In Mexico, BBVA allows its 19 million app users to calculate their carbon footprint based on their card transactions. This is merely at the surface level—some fintechs are aggressively betting on the ESG agenda. Brazilian Regenerative Finance (ReFI) company Greener insists that “businesses can save forests,” as it helps companies offset their carbon emissions by selling digital tokens tied to carbon credits. By doing so, companies can show customers that they are investing in environmental protection efforts.

    These initiatives, however, continue to see limited adoption, signifying, perhaps, that most consumers in Latin America don’t care as much as their European or American counterparts. Credit card owners in emerging economies are likely to keep prioritizing rewards, lower costs, and security in making their choices—not the amount of carbon their devices emit.

    Although still incipient, these projects have sparked conversations around sustainability in the payments sector, which eventually can lead to a domino effect of more significant decarbonization efforts and companies rushing to define their strategy.

    In the future (when this will happen is still speculative), PCMI predicts a world in which companies of all kinds will be expected, if not forced, to limit their carbon footprint, and doing so will become a run-of-the-mill cost of doing business. How companies do this will be up to their discretion, likely gravitating towards measures that most powerfully resonate with consumers. It is still early days for most companies in Latin America, especially in payments, but PCMI envisions three ways payment companies can begin to tackle this ill-defined and ambiguous imperative.

    3 ways to effectively address decarbonization in payments

    Work with data centers, suppliers, and other vendors that use clean energy. First, payment companies should use clean energy for their own operations whenever possible, including signing long-term power purchase agreements (PPAs) with clean energy providers or switching to EV fleets. Secondly, payment companies can take a step further, making their supply chain greener by working exclusively with renewable-powered data centers or contracting manufacturers (of payment equipment, for example, such as POS devices) that use clean energy. This is a relatively low-hanging fruit, as renewable energy is cheaper than fossil fuels in most of Latin America, including in major markets such as Brazil and Chile.

    Move towards instant payments and virtual cards. Cash and check transactions emit 4-5 times more carbon emissions than card transactions, while instant account-to-account payments produce up to 80% less CO2 than a physical card transaction:4 5 they require fewer data stops/intermediaries, so the energy needed to process them in data centers is reduced. Open banking can also lead to higher approval rates, which reduces the number of total transactions;6 given that open finance and real-time payment transfers are advancing rapidly in Brazil, this could significantly reduce carbon emissions in the local payments sector, and if marketed that way, could increase their appeal to green minded consumers.

    Use carbon offsets to eliminate difficult-to-mitigate emissions, such as those linked to customer preferences. In the medium term, many customers will continue to prefer paper receipts, physical paper statements, or in-person banking services, contributing to emissions. Encouraging customers to adopt more eco-friendly practices can be challenging, especially those still skeptical of digital options. Easy-to-use carbon offset programs that fund environmental initiatives, such as reforestation or renewable energy projects, and working with Regenerative Finace (ReFi) companies, can help businesses mitigate their carbon footprint, even as their customers continue to prefer traditional services. With Stripe Climate, for example, merchants can direct a fraction of their revenue to help scale emerging carbon removal technologies in just a few clicks.

    A crossroads ahead

    In the long-term, a green payments environment could consist of creating a low-carbon digital value network in which various types of digital assets (e.g., crypto, tokenized real-world assets, traditional fiat) move through real-time payment rails that transmit data without any middlemen or large amounts of processing power. What this network will look like is not yet clear, but there is an opportunity for card networks, acquirers and others to pioneer and develop the low-carbon systems and infrastructure needed for it to succeed.

    “Feel good and do good” will be an attractive motto, but it will only succeed if it is profitable for those providing the services (in terms of actual revenue, market share, or overall positive market perception).

    In the short and medium term, payment companies need to understand what their customers expect from them with regard to environmental sustainability.  Globally, as much as half of Gen Zers say they would pay a premium for green products, while this is true for only 16% of baby boomers.7 These numbers for Latin America have not yet been clearly determined. Attention to this issue will be required of every company eventually, outrightly through regulation or indirectly through the risk of losing market share. Companies first need to understand when this will occur, and secondly, they must differentiate between which initiatives will have the most impact on reducing emissions and which will most resonate with consumers—are not necessarily the same. These questions have major long-term implications for technology, supply chain, sourcing, and marketing decisions. Even if the point is moot now in Latin America, it will not remain this way forever. Companies should begin their strategizing now.

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    1. Capital One Shopping Research, “Number of Credit Card Transactions per Second, Day & Year,” ↩︎
    2. BRC, “Making checkouts greener.” ↩︎
    3. Statista, “Total number of general purpose card transactions in Latin America from 2018 to 2022” ↩︎
    4. Compte CO2, “CO2 emissions from various means of payment.” ↩︎
    5. AltFi, Exclusive: Open banking payments generate 4x fewer carbon emissions than cards, GoCardless finds.” ↩︎
    6. BRC, “Making checkouts greener.” ↩︎
    7. McKinsey & Co, “Buying into sustainability,” ↩︎

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    Arthur Deakin

    Arthur Deakin is the Director of Energy at Americas Market Intelligence (AMI), a strategy consultancy specialized in the energy industry in Latin America. Arthur has executed nearly 100 consulting engagements for Fortune 500 clients in the region.