Green Fintech

It takes advantage of new technologies (like cloud computing, big data or mobile devices) and revitalised older ones (like AI, open network protocols and cryptography) to create new value for established customers or previously underserved customers. Sometimes this value is purely in terms of reduced cost or speed but often it facilitates new services that were not feasible before, at least in certain market segments.

The term Green Fintech has only recently become commonly used. In essence it can apply to any fintech product that aims to achieve a green outcome as one of its core benefits. This could for example be reducing carbon emissions, directly money to deployment into the green economy or ensuring lending has a measured impact. While there are many areas of financial services where green fintech can enable customer value, we think it is vital for the green element to be meaningful. Is it more than a label or a marketing campaign – is this really leading to more sustainable economic activity?

To help appraise how green a fintech product is, we find it useful to apply a green test relevant to the functional purpose of the product. With gratitude to David Shrier and the Oxford Said Business School, we use their functional framework for fintech to consider the main themes of green fintech propositions. In the diagram below, we have defined a green finance test for their four core finance functions. We also illustrate what ‘dark’ or ‘light’ green propositions may look like in these functional areas. This is not to say that light green does not create value but there is a distinct difference in potential environmental impact between the two. Light green should be better than non-sustainable products and it may provide a necessary first move in establishing a market position. But it is important to be clear to customers what they are getting and not present all solutions as equal in terms of green outcomes.

The threat for incumbents from new market entrants is always important to understand but there are also areas of opportunity for current providers. This could represent a resilient area of strategic advantage if the firm’s existing capabilities can be applied in an innovative way to create new green products and services that offer both real customer value and measurable green benefits.

If it would be useful to get a deeper assessment of the competitive threats and opportunities presented by green fintech, please contact info@euvita.co.uk.