Sustainability Strategies: 3 ways to Decarbonize Payments in Latin America

Arthur Deakin

Director of Energy Practice at AMI

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

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.

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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