How can fintech boost sustainable banking and what does it mean in the context of green economy and healthy households? Helsinki Business Hub hosted a sparkling fireside chat type of discussion with three experts who approach this topic from different angles and shared their wisdom, experiences and advice.
Sustainability in the banking industry has historically referred to banking solutions that take into account climate change. But that is not enough any longer.
“Recently, sustainable banking has also started to cover sustainability of private households since household borrowing has grown considerably. Nowadays, banks cannot avoid facing UN’s Sustainable Development Goals neither from the financial services point of view nor from the perspective of their daily business operations and practices,” says Marja-Liisa Niinikoski, CEO of Helsinki Business Hub as the opening words for the discussion.
“In my opinion, sustainable banking should be business as usual nowadays. There is no room in this market for a bank anymore, if you are not sustainable,” says Menno van Leeuwen who represents the Dutch bank ABN AMRO. He has worked with the bank for more than 20 years, and in his current position he is leading Impact Nation, a sustainability accelerator initiated by ABN AMRO.
“To succeed in the shift towards more sustainable operations, also banks are doing more and more collaboration with fintechs. We can see this trend very clearly in our program as an accelerator, matching corporations with tech and fintech companies that have solutions to boost the sustainability shift,” he explains.
Better choices every day
Monika Liikamaa, the Co-Founder and CEO of Nordic payment service provider Enfuce, has over 20 years of experience in the fast-paced payment industry. Enfuce has sustainability at the heart of the company as one of the core values.
“We really wanted to walk the talk, so we started by looking at our core business: payments. We started to dig deeper into the data that we have, tracking the actual emissions that impact the climate. And that is how My Carbon Action was born – the concept of doing something instead of just talking about something,” she tells.
“At the end of the day it’s about us consumers, ordinary people, making better choices. What we eat, what we consume, how we travel and how we save – and where the banks invest that money.”
According to Monika, leading a sustainable life is a little bit like dieting: it’s very easy to postpone the first step, but if you want to succeed, good choices need to be made on an everyday level.
“That impact can be utilized in different kinds of loyalty schemes, for instance, so there are lots of opportunities for banks, too. And when you see an opportunity, you need to think outside of the box, outside of the banking world,” she encourages.
Social aspect comes into play
Unfortunately, discussion about sustainability often narrows down to how much nature reserves you consume and whether you recycle your paper cups and plastic bottles.
“That is the easy way out,” says Repe Harmanen, CEO of Solidate Oy that provides solutions for solving the challenges of over-indebted people and helping them towards a balanced economic situation.
“When talking about sustainable banking, we shouldn’t think only about environment but also include the social aspect. I think there are lots of sustainable banks in the industry, but what we see as the reasons why people are in personal financial trouble, that happens mainly because of unsecured loans and consumer credit with high interest rates,” he says.
“It all comes down to a question of whether over-indebtedness is due to over-spending or due to over-lending? Sustainable over-lending is a paradox, those words simply don’t fit in one sentence.”
Menno agrees: “From the commercial side, you want to grant loans, but you don’t want your customers to end up in trouble. Traditionally you only experience that years later and it’s a lose-lose for everyone. So, it’s definitely good to give an instrument for having control over one’s expenses.”
Collaboration calls for compliance – and passion
If we cannot solve the above-mentioned challenges, both environmental as well as social, they will have large implications for the economy. To tackle these issues, tech can help, but lots of data is needed for new solutions.
Monika Liikamaa advises companies to take compliance seriously:
“I see too many fintechs trying to avoid compliance. You can’t do that. Compliance is extremely important, because this is a trust game as we’re talking about people’s data and money. The only way to close deals with big banks is to anticipate the compliance requirements. If you don’t know what the counterpart’s challenges are, you can’t win, because they can’t collaborate with you. We made it easy to collaborate with us and the rest is history.”
Menno van Leeuwen sees lots of opportunities for collaboration. According to him, it’s an opportunity era. The only way for banks to grow is to transform. And they can’t do it alone.
“Banks still have the trust factor and distribution network scale, whereas start-ups have a strong focus on a certain market and customer experience. They are fast and adaptative. If you combine these two, we can take big steps together,” he says.
It goes without saying that in order to be sustainable, the business needs to be profitable. But what else is needed if you want to succeed in this field?
“If you want to become a fintech start-up, start with marketing and communication and do a lot and do early: talk about your points an describe what ESG means to you. Secondly, ask your customers what they really need and what they want: do not come up with a story that they might want, ask what the actual need is. And thirdly, whatever you do, you need to touch the mental mindset of your customer,” Repe summarizes.
“Have a clear goal and a real mission and be passionate about your purpose,” Monika adds.
Avoid purpose washing and make real actions
Sustainability needs to be tangible and measurable, because otherwise it can be easily interpreted as green washing, or purpose washing.
“I have one message to all companies: please do not make a sustainability wash. Forget the humble mumble and be unique and make some real actions,” Repe says.
“The good thing is that we people are herd animals which means that when something becomes mainly adopted, it becomes a prerequisite. Sustainable banking is at a different stage in different parts of the world, but it is increasingly becoming a prerequisite at least here in the Nordics – you just have to do it, and the ones not doing it will have harder time to survive. And that is how it should be and how we want it to be,” Monika concludes.
This article is based on a masterclass session that was organized by Helsinki Business Hub on December 3, 2020 as part of the official program of the world’s largest technology conference Web Summit. The discussion was hosted by our CEO Marja-Liisa Niinikoski.