Putting Sustainability in Payments

Carl Slabicki, Co-Head of Global Payments, BNY Mellon

How green are your payments? Carl Slabicki, Co-Head of Global Payments at BNY Mellon, explores the environmental impact of paper checks and how digital solutions can lead to a sustainable future.

Sustainability has fast become a top priority for stakeholders across the globe. From international climate agreements and regional initiatives, to corporate sustainability frameworks and individuals adjusting their consumption behaviours, calls to action are on the rise across the board.

As part of these efforts, corporates are looking to embed sustainability into all aspects of their business. And one area ripe for innovation – both from an environmental and efficiency perspective – is the U.S. payments space, which still relies heavily on paper-based payments.

The True Cost of Checks
Recent payment-industry developments, in combination with the growing consumer demand for ESG-friendly initiatives, are encouraging an increased focus on sustainability among corporates.

Some regions have been quick out of the gates in this respect. In Europe, for example, corporates have long embraced environmental, social and governance (ESG) considerations. In contrast, U.S companies have been slower – and are only now beginning to catch up. Th shift comes as global regulators and policymakers are increasingly issuing guidance on potential framworks for mandatory reporting of climate risk.

As sustainability considerations rise up the agenda, the use of paper-based payments – such as checks – has come under increased scrutiny. Every year, corporates in the U.S. collect an estimated 2.3 billion checks from customers paying their bills. That comes with a staggering environmental impact: roughly 455,000 trees, to be precise. To put this in perspective, avoiding the paper stemming from all those trees would be equivalent to taking nearly 5,000 passenger cars off the road for one year.[ii]

The Digital Journey
Moving from paper to electronic payments can be a straightforward step toward these sustainability goals, but the business reasons for displacing checks are just as clear as the environmental ones. Checks are also an inefficient way to collect payments and they sometimes incur more risks, such as checks getting lost in the mail or being returned, as well as the potentially greater risk of check fraud.

Digital payment channels, by contrast, provide a host of potential benefits to corporates. They not only provide an environmentally friendly alternative to checks but also can help reduce the risk of fraud, giving corporates faster access to their liquidity and helping to provide an improved client experience.

Amid the industry-wide focus on addressing sustainability, banks have been leveraging existing real-time payments infrastructures and offering new enhanced solutions to encourage more clients to transition from paper to digital. For example, BNY Mellon recently launched a first-of-its-kind, real-time electronic bill and payment solution (RTP e-bill), which leverages The Clearing House’s RTP® network to enable U.S. businesses to present digital bills to their consumer clients in real time and receive instant payments via the consumers' preferred online and mobile banking channels.

Banks like BNY Mellon are also exploring carbon-tracking tools that show the true cost of paper payments to clients, while offering financial benefits for those that embrace digital solutions. Such initiatives, combined with the wider environmental and efficiency stakes, provide a bedrock of motivation for financial institutions, corporates and consumers to dispense with paper checks.

A Greener Road Ahead
When the world has started to pay attention to the importance of sustainability – banks are helping their clients to implement digital payments strategies to solve for some of the legacy inefficiencies in payments and the over-reliance on paper checks. But there is more work to be done. Only a strong push for digital alternatives will help the industry embrace sustainable payment methods in the future.

The views expressed herein are those of the author only and may not reflect the views of BNY Mellon. This does not constitute Treasury Services advice, or any other business or legal advice, and it should not be relied upon as such.

[ii] As per the EPA website, this assumes that a typical passenger vehicle emits about 4.6 metric tons of Co2 each year. This assumes a fuel economy of 22 miles per gallon and drives around 11,500 miles per year. Every gallon of gasoline burned creates about 8,887 grams of CO2.
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