In the broadest sense, Financial Technology or Fintech has been around since the banks adopted those early room filling mainframe computers to automate their accounts. However fintech as a financial market phenomenon has developed rapidly over the last 10 years, using mobile apps, digital user experience, ubiquitous data and modern system architecture to create a financial service that can be easier to use, more cost effective or even available to groups of customers previously unserved by established financial providers.
More recently green fintech has evolved, but what is it? Put simply, Green Fintech refers to the intersection of similar financial technologies with sustainable, environmentally-friendly purposes. It involves the use of fintech and iterative, customer focused product design methods to develop innovative financial solutions that deliver environmental sustainability goals, such as reducing carbon emissions, conserving natural resources, and addressing biodiversity.
So sounds positive but in what types of financial services is green fintech starting to provide a new route to achieving these green benefits?
- Sustainable investing: Some fintech firms are developing platforms and tools that enable investors to allocate their funds to environmentally friendly and sustainable investments, such as companies that focus on renewable energy, clean transport or sustainable agriculture. These fintechs often try to make investing easier; curating a list of funds and automatically managing portfolios to sustainable objectives.
- Green crowdfunding: Another group of fintechs are developing platforms that enable investors to invest their funds directly to sustainable and environmentally friendly projects, such as community renewable energy and clean technology schemes.
- Green Lending: Some fintech companies are developing or distributing green mortgages and other loan products that are specifically designed to finance sustainable projects, such as green buildings and renewable energy installation.
- Digital payments: Digital payments have already reduced the use of paper and other physical materials. However some options go further, for example providing data on the carbon footprint of the business or product related to the transaction.
- Energy management: Some novel fintechs are developing solutions and tools to help consumers and businesses fund low carbon technologies in innovative ways – for example to transfer the loan between owners where the low carbon asset is permanently sited in the home.
It is worth considering whether these green fintech services can be a viable way for you to achieve some of the sustainable outcomes you wish to realise with your finances. Many fintechs do a reasonable job describing their impact but do look for some external validation and comparison. In addition, it is critical that the service also delivers real value to you as a customer and not require a trade off between being green and the quality of the financial outcome for you as an individual.