6 Impactful Ways ESG Is Reshaping Credit Card Offerings
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Read full bioSustainability is here to stay – and it’s disrupting the credit card industry. From eco-friendly credit cards to perks that contribute to the well-being of the planet, credit card issuers are coming up with different offerings to cater to conscious consumers. Enter ESG, which stands for Environmental, Social, and Governance and refers to a set of standards and principles used to evaluate whether a company is being socially and environmentally responsible.
ESG is often discussed in the context of socially conscious investors making decisions, but it’s a broad framework that can also be applied to how consumers make choices – including the credit cards they choose. A PwC survey revealed that a majority of consumers are more likely to buy from brands who share their values by upholding ESG principles. Additionally, over three quarters of consumers said they would stop buying from a brand that treats employees, the environment, and communities poorly.
To provide you with an in-depth understanding of ESG’s impact on credit card options, we’ve gathered insights from a panel of financial experts.
Experts featured in this article
Josh Prigge, Company Owner, Sustridge
Jonathan Merry, Founder, Moneyzine
Eric Novinson, Founder, This Is Accounting Automation
John Ross, CEO, Test Prep Insight
Eugene Klimaszewski, President, Mammoth Security
Thomas Franklin, CEO and Co-Founder, Bitinvestor
ESG principles reshape credit card options
“As someone who has been in the sustainability industry for more than a decade, I strongly feel that ESG principles are expected to play a role in shaping credit card options and consumer choices as sustainability awareness becomes more prevalent in the banking sector,” Josh Prigge, Company Owner of Sustridge, told Credello.
For example, Prigge names Aspiration as a pioneer at the forefront of this trend, with cashback cards that encourage reforestation efforts while discouraging expenses related to fuel.
“Their Redwood card, made from recycled ocean plastics, has resonated with Gen Z and Millennials, leading Aspiration to acquire 750,000 personal customer accounts as of 2022. Established industry leaders have taken notice,” notes Prigge.
Now brands like Citi are hopping on the trend – Citi’s Green Credit Card, for instance, allows cardholders to leverage credit card rewards to invest in nonprofits, adds Prigge.
These innovative products point to a shift towards sustainable and socially responsible credit cards. Prigge also expects that regulatory bodies will increasingly get involved in the next few years, as demonstrated by the recent ban on PVC payment cards by the EU.
Ultimately, consumers shape markets through their decision-making, and “consumer demand for banking aligned with values will push issuers towards developing products that offer transparency regarding activities and affiliated companies,” Prigge told Credello.
Eco-friendly cards attract conscious consumers
Have you heard of recycled or biodegradable credit cards? It’s still a rather niche trend, but Jonathan Merry, Founder of Moneyzine, shared with Credello that it’s a creative way for credit card issuers to attract conscious consumers – and that it’s only going to become more of a thing in the next few years: “Credit card issuers are using eco-friendly materials for their cards as part of their bigger plans to be more sustainable.”
Furthermore, as the demand for sustainable financial products increases, we’ll see more credit card perks like rewards for sustainable spending – say, buying organic or using renewable energy – or features like contributing to carbon offsetting programs. In other words, ESG principles are pushing plastic out the door in favor of a new customer experience for cardholders – one that is aligned with their values.
Banks integrate ESG in product design
On that note, banks are redefining both their brand and product suite to align with ESG principles. Consumers are going to notice new elements like carbon emission reports on their credit card statements or be using virtual cards instead of physical ones.
“Some banks have already designed their products to incorporate these principles. For example, a bank can list the carbon emissions associated with each product purchase on a credit card statement. I’ve also seen FinTech that issues virtual cards instead of plastic credit cards for environmental reasons,” Eric Novinson, Founder of This Is Accounting Automation, told Credello.
Skepticism over ESG’s market influence
That said, there’s also skepticism about how much ESG principles can influence the drive for growth and profit. Some may view ESG as an ideal more than a real market-impacting force.
“I think we’ve seen the end of ESG and the power it has over markets and consumers alike. The recent fiasco at OpenAI, with the departure and quick return of Sam Altman as CEO, indicates the direction of consumer and business preferences—capitalism beats principles,” John Ross, CEO of Test Prep Insight, told Credello.
“OpenAI was built on the mission of delivering safer AI to humanity and taking all measures necessary to keep progress in check. However, in the end, capitalism smothered morality and principles.”
According to Ross, stock market index funds are crushing ESG funds, which is only going to affect people’s faith and excitement about the power of ESG to create a more sustainable world. This may end up influencing credit card offerings, too: “When it comes to credit card offerings and consumer choices, ESG is going to have a lot less sway over people than before.”
ESG values drive credit card trends
Whether ESG will create a healthier take on capitalism is yet to be confirmed – and it’s a big ask. One thing is for sure: ESG is about values – and the next generation of consumers is increasingly motivated to purchase from brands that reflect their values.
“A significant shift has been occurring towards environmental, social, and governance (ESG) principles, impacting various industries, including finance. ESG principles are increasingly influencing both the product features and consumer choices in credit card offerings,” Eugene Klimaszewski, President of Mammoth Security, told Credello.
Klimaszewski notes that “consumers today are more conscious about the impact of their spending habits on the environment and society.” They want their credit cards to follow suit.
“This awareness is driving the demand for credit cards that align with ESG values,” adds Klimaszewski – think cards that provide rewards for environmentally friendly purchases or donate a portion of transaction fees towards certain causes.
According to Klimaszewski, we can expect a continued rise in ESG-focused financial products in the next few years: “This trend reflects a broader societal shift towards sustainability and ethical consumption, and credit cards are a direct channel through which consumers can express these values.”
Digital wallets reflect ESG preferences
Digital wallets were once favored by crypto fans, but they are now becoming mainstream. People want to reduce their environmental footprint and are starting to gravitate towards digital options over physical cards.
“This preference includes the use of contactless credit cards, payment apps on smartphones, and digital wallets, as shown by a 2021 Visa study. The usage of digital wallets is projected to rise sharply—from 2.6 billion users in 2020 to over 4.4 billion by 2025, as reported by Juniper Research,” Thomas Franklin, CEO and Co-Founder of Bitinvestor, shared with Credello.
“For example, some companies now provide cards that are primarily digital, with the option to obtain a physical card if desired. Approximately 85% of shoppers prefer digital options for in-person purchases.”
Technology thus plays a huge role in promoting ESG principles in financial transactions – the more accessible and effective the tech, the more plastic will become obsolete.
Bottom line
Yes, there is skepticism about the true power of ESG. But trends like eco-friendly credit cards, banks adapting their product design to align with ESG, consumers looking to align their financial choices with their values, and the increasing popularity of digital wallets, do point to the fact that ESG is starting to have an impact on credit card offerings and shaping the financial landscape.
The more banks follow suit and create sustainable products and credit cards, the better the options for consumers looking to create a better world through their purchasing power.