Decarbonising finance: The critical role of fintech-bank collaborations

Current challenges in the banking sector

While the effects of climate change is worsening, climate action has taken a backseat for many individuals and businesses, driven by challenges such as the cost of living crisis and shifting political landscapes.  However, regulatory pressures are mounting, with governments increasingly mandating corporations to report and reduce carbon emissions. Banks, in particular, are now required to measure emissions under the Task Force on Climate-Related Financial Disclosures (TCFD), with strong encouragement to include scope 3 emissions. The upcoming Sustainability Reporting Standards (SRS) in 2025 will also make Scope 3 reporting mandatory, directly impacting banks and by extension, the SMEs in their supply chains.

Beyond regulatory requirements, banks are also facing growing pressure from stakeholders—such as investors and customers—who are demanding greater transparency and meaningful action on climate-related risks.  Failure to meet these expectations poses not only compliance risks but also significant reputational hazards. Engaging customers in sustainability efforts is, therefore, a crucial strategy for banks to navigate these challenges and drive impactful change.

Engaging customers is key to decarbonisation

Moving beyond traditional, transactional relationships, banks must foster deeper connections with their customers by offering personalised experiences that empower and motivate them to take climate action. Banks possess a wealth of transactional data from both individuals and businesses. By integrating this data with carbon emissions data, banks can offer customers actionable insights into the carbon footprint associated with their spending. This transparency enhances customers' understanding of their environmental impact, boosts carbon literacy and enables banks to offer targeted recommendations that promote more sustainable choices. For instance, if a customer's energy bill indicates high usage, the bank could recommend actions like lowering the thermostat or switching to a green energy provider, giving an estimate of the potential carbon and cost savings. Such personalised recommendations make climate action relevant and actionable, deepening customer engagement. 

With more detailed data on individual behaviours and preferences, banks can improve the timing and relevance of green financial products, making them more effective. For example, a bank could develop a rewards system that offers customers additional benefits, such as better interest rates on savings accounts or waived fees, when they reach specific sustainability milestones—like reducing their household carbon footprint by 20% or consistently choosing public transport over personal vehicles. These incentives not only motivate customers to take climate action but also increase engagement with the bank’s digital platforms, transforming the banking app into a hub for both financial management and sustainability.

Accelerating decarbonisation through fintech partnerships

Fintechs, with their specialised expertise and cutting-edge technology, present a significant opportunity for banks to engage customers in sustainability efforts, accelerate decarbonisation, and overcome operational and strategic challenges. 

One of the main challenges banks face is accessing and using relevant customer data due to reliance on outdated technology systems. Fintechs offer innovative solutions that significantly improve banks' capabilities in collecting, analysing, and reporting ESG data. By leveraging advanced technologies, fintechs can integrate financial and non-financial data, enabling banks to develop a comprehensive and accurate view of both their customers and their own carbon footprints.

The combination of fintechs' ability to innovate rapidly, and banks' capability to scale solutions means that impactful solutions can reach the market more quickly and efficiently. This collaboration empowers the financial sector to respond more dynamically to the demands of climate action, driving the transition toward a more sustainable economy on both local and global scales.

For example, when Cogo launched its consumer app, it reached around 50,000 users. While this was a solid start, we soon realised that achieving a substantial impact required collaboration with larger institutions. Today, we partner with 17 of the world’s leading banks, and the collective impact is significant. For example, our partnership with NatWest has engaged over 1 million customers, with about 40% taking climate action. This underscores the transformative potential of fintech and bank collaborations in driving meaningful change.

Cogo: Your decarbonisation partner 

Cogo’s innovative solution seamlessly integrates with mobile banking platforms, combining transactional data, country-specific emissions data, and our robust carbon methodology to empower customers to track and reduce the carbon footprint of their spending. By translating spending data into carbon emissions, users gain timely insights into their environmental impact directly within their banking app, significantly enhancing carbon literacy and raising awareness.

Beyond just tracking, Cogo enriches customer understanding by visualising their environmental impact and offering personalised recommendations to further reduce their carbon footprint. These insights not only show users how much they’ve already saved by taking action but also project potential future savings, providing ongoing motivation for continued progress.

What sets Cogo apart from other carbon solutions is our application of behavioural science techniques to boost engagement and drive meaningful behaviour change. Our approach is designed to turn awareness into action, ensuring that sustainability becomes an integral part of everyday financial decisions. Discover how our solutions can help your bank lead the way in decarbonisation.

Conclusion

The partnership between banks and green fintechs is crucial for driving meaningful progress in decarbonisation. By leveraging advanced technology and data analytics, banks can better understand and manage their customers' carbon footprints, offering personalised recommendations and green financial products that resonate with individual needs. Engaging customers through tailored solutions not only helps reduce overall emissions but also builds stronger, trust-based relationships. As regulatory pressures increase and the demand for sustainability grows, these partnerships are not just beneficial—they are essential. The integration of AI further enhances these efforts, enabling rapid adaptation and precise targeting of climate actions. Together, banks and fintechs can lead the charge in the fight against climate change, creating a more sustainable future for all.

Ready to lead the way in sustainable banking? Contact us today.