Companies covered: Paypal Holdings Inc • Global Payments Inc • Wirecard • Aliant Payments. Themes covered: • Macro-economic and ESG-variable analysis of the industry, regulatory, policy, and innovation landscape • Key insights on infrastructure developments • Key initiatives and challenges within the industry • Identify ESG leaders within the industry • Understand key initiatives and the impact of companies within the sector to fuel an informed decision-making process, etc.
GLOFinancial institutions and technology vendors have repurposed their strategies on digital payments—more so—on the back of a dip in physical cash. Add to it the technological innovations that have leveraged online banking. Cash may still be the king; electronic payment, however, is giving a run for the money. An exponential rise in smartphone usage, surging internet penetration and growth in e-commerce have made electronic payment a force to reckon with. Meanwhile, the luxury of contactless and fast payments comes with caveats—environmental, social and governance challenges.
Amidst climate change, a volatile economy and the Russia–Ukraine war, society, businesses and governments have exhibited a strong commitment to foster an inclusive workplace, accentuate low-carbon energy solutions, bolster transparency and create long-term value. Several financial institutions have started carbon offset programs, providing rewards and loyalty points. In September 2021, Ascenda joined forces with Patch to enable consumers to redeem their rewards points for carbon offsets, helping reduce and eliminate GHG emissions.
PayPal Propels Science-Based Targets (SBTs)
Carbon footprints from the digital payment ecosystem have prompted financial institutions to up their sustainable strategies. A study from Cambridge inferred that Bitcoin used 80% more energy consumption in 2021 compared to the preceding year. Digital wallets reportedly consume less energy vis-à-vis cryptocurrencies, offering opportunities galore. In March 2022, Helpful rolled out digital wallets that it claims can save up to 80% of the CO2 produced from payment transactions.
The potential risks posed by adverse weather conditions on facilities have encouraged companies, such as PayPal to underscore science-based GHG emission reduction targets. The Fintech player achieved 100% renewable energy sourcing for its data centers in 2021, while it reached 90% total energy use in 2022. The American giant formed science-based emission reduction targets—to minimize absolute operational GHG emissions by 25% by 2025. In 2022, the company set the goal to engage 75% of its suppliers (in terms of spending) to SBTs by 2025 and Its IT asset management team retired 338 metric tons of IT hardware across the data center services.
Global Payments Underscores Philanthropic Activities
The social criterion emphasizes a shifting business environment where companies are gearing up to enhance workplace diversity, financial literacy, social equity and health & wellness. In 2021, Global Payments Plano, Texas office teamed up with the National Breast Cancer Foundation (NBCF) and collected USD 1,600 for charity. Besides, the Lindon, Utah team formed a canned food drive to donate 2,500 cans to a local food bank. Taking the philanthropic work further, the company doled out USD 5 million in 2021 to underpin several organizations, such as Red Cross, the American Heart Association, UNCF, Leukemia & Lymphoma Society, Susan G. Komen and Mercer Medical School.
To reinforce financial literacy and economic inclusion, the Fintech company offers around 4 million (especially small and medium-sized businesses) locations globally with digital commerce solutions, allowing acceptance of more than 140 payment methods. Meanwhile, the U.S.-based company has propelled its DEI strategies to augment female representation to 47% and boost the number of people of color to 39% by 2025.
JP Morgan Embeds Transparency and Accountability
Corporate governance has become a value proposition to impel ethics & compliance, board diversity, transparent work culture, independence and anti-corruption activities. In 2021, directors at JP Morgan were offered education on DEI, cybersecurity, its climate risk management framework and technology. The Board in the financial service company has ramped up corporate culture and values, boosting diversity in leadership positions. As of April 2022, Out of ten, there were four women directors and one black director. Further, women accounted for 37% of seats on the Operating Committee (as of December 2021).
While digital solutions have become invaluable in the economy, data privacy and cybersecurity threats have sent alarm bells to stakeholders. The Global Cybersecurity and Technology Controls organization analyzes changes in global threats and monitors JP Morgan’s operations. In 2022, the company was involved in policy issues, such as software bills of materials, evolving U.S. National Institute of Standards and Technology (NIST), zero trust and notification. The need to protect the global financial system and underpinning cybersecurity will help companies achieve ESG goals.
Fintech players have expedited their strategies to undergird climate solutions and build financial confidence among underserved and vulnerable communities. In the 2021-2022 ESG Report, American Express announced an infusion of USD 3 billion toward DEI initiatives and underrepresented groups through 2025. During the Earth Month of 2022, the financial service company asserted that at least 70% recycled or reclaimed plastic would be used to make most plastic cards by 2024. The rising footprint of contactless- and card payments against the backdrop of the COVID-19 pandemic has made electronic payment the next big thing. The global digital payments market size stood at USD 68.61 billion in 2021 and will expand at a CAGR of 20.5% between 2022 and 2030, reports Grand View Research.
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Summary:
Environmental, Social, and Governance (ESG) in Digital Payments Industry
The current trend of investments is impacted by the introduction of policies in areas of Environment, Social and Governance.
The inadequacy in the conventional banking system has led to the development of the digital payments industry. The key leaders of the industry have aimed at reducing the inadequacies in the conventional banking system, where no frauds or crimes related financial transactions take place. However, the main challenge for the market in terms of ESG arises in the aspect of social pillar, where the access to technology is still a challenging issue among communities that are underdeveloped or do not have the infrastructure to support the system. This could hamper the growth of the industry in terms of social inclusiveness.
The Covid-19 pandemic has led to a new increase in the usage of the digital payment methods, where consumers preferred contactless payments. Since then, governments of international states have increased the limit of the transactions of the digital payment methods, further increasing the usage of such apps.
ESG Trends
Despite the impact of the pandemic on the digital payments industry, which led to steep increase in the usage of payment apps and the expansion of technology, the lack of access to technology among underdeveloped infrastructures is a large hurdle to social inclusiveness in the market i.e., lack of access to technology to the potential customer.
According to a report, around 2.5 billion people in the developing countries are still relying on the hard currency or cash to carry out day to day business, despite the spike in the usage of the technology. It has been reported that due to the lack of access to digital payment technology a series of challenges in terms of wealth inequality, increased transaction costs as well as corruption may crop up. The United Nation’s Sustainable Development Goal 9 aims at the access to technology of communication and internet to least developed and developing countries by 2020. Since digital payments technology has benefits of reducing the cost and time as well as the contact that occurs due to the transaction, access to such technology is beneficial to people when it is inclusive in nature. Thus, companies in this sector have significant challenges in addressing this issue and attaining the SDG.
It is further iterated that the access to digital payments technology can also give access to the savings, insurance, and other financial benefits to vulnerable people of the society. It further creates an awareness about such financial benefits, leading to reduction of financial barriers. Therefore, this market can also help in hastening service providers to develop infrastructure to reach countries with social barriers and contribute significantly to SDG 4 – quality education. Notwithstanding, there are a few companies in the digital payments industry that are contributing to access to education through various initiatives within their ESG priorities.
One of the key players of the market has made Diversity, Equity, and Inclusion initiatives to create a positive impact, expanding social inclusiveness through giving access to technology. This has been done by incorporating a much cost-efficient technology to their payments app, which decreases the disparity of the access to digital payments technology. As of 2020, the leading company has impacted around 3.5 million consumers contributing to positive social and community development.
Growth of the Digital Payments Market
As of 2021, the digital payments market was valued at USD 68.61 billion at global scale and is forecasted to grow at a CAGR (compound annual growth rate) of 20.5% from 2022 to 2030. Customer preference for real time payments is reported to be one of the key driving factors of the market. In the year 2020, India has registered 25.6 billion real time payments, an increase of 70% from the year 2019. Despite the challenges for the market in terms of social inclusiveness, the key leading players are making technologies much cheaper and creating an entry door for potential customers to access the technology, reducing the disparity.
Key Companies in this theme:
• Paypal Holdings Inc
• Global Payments Inc
• Wirecard
• Aliant Payments
Scope of the Digital Payments Industry ESG Thematic Report
• Macro-economic and ESG-variable analysis of the industry, including regulatory, policy, and innovation landscape
• Key insights on infrastructure developments and ESG issues affecting the theme
• Identify key initiatives and challenges within the industry
• Identify ESG leaders within the industry
• Understand key initiatives and the impact of companies within the sector to fuel an informed decision-making process
• Analysis of industry activities based on multi-media sources, including significant controversies and market sentiment
Key aspects of the Digital Payments Industry ESG Thematic Report:
• Offers a global perspective of the industry and the policies and measures taken by the players, for overcoming the challenges faced in terms of Environment, Social and Governance.
• Key insights into the sustainability practices of major players in the market.
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About Astra – ESG Solutions by Grand View Research
Astra is the Environmental, Social, and Governance (ESG) arm of Grand View Research Inc. – a global market research publishing & management consulting firm.
Astra offers comprehensive ESG thematic assessment & scores across diverse impact & socially responsible investment topics, including both public and private companies along with intuitive dashboards. Our ESG solutions are powered by robust fundamental & alternative information. Astra specializes in consulting services that equip corporates and the investment community with the in-depth ESG research and actionable insight they need to support their bottom lines and their values. We have supported our clients across diverse ESG consulting projects & advisory services, including climate strategies & assessment, ESG benchmarking, stakeholder engagement programs, active ownership, developing ESG investment strategies, ESG data services, build corporate sustainability reports. Astra team includes a pool of industry experts and ESG enthusiasts who possess extensive end-end ESG research and consulting experience at a global level.
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