A Mastercard survey shows 54% of adults see reducing their carbon footprint as more important now than pre-pandemic. Financial technology institutions, taking heed of this interest are launching carbon calculation tools for consumers — some examples being those launched by NatWest, Santander, and BNP Paribas. Card networks like Mastercard and Visa are also partnering with software-as-a-solution providers like Doconomy, and ecolytiq respectively to enable their partner networks to easily integrate carbon calculators and other sustainability solutions into their products.

How does carbon footprint tracking work?

To understand how a carbon footprint tracking solution enabled by a bank works, we can segment the process into three phases.

The carbon calculation tools themselves are based on elaborate frameworks that take into account various established algorithms; merchant category codes to identify transaction types, carbon impact as per product, country-level metrics, and other databases. The transactions are matched to industries, and consumer habits such as diet or lifestyle, and their resulting emissions (carbon dioxide equivalents or CO2e) are calculated.

This analysis produces the real-time carbon footprint summary of a user and is presented to them via the banking app. In addition to showing the carbon impact, users are also prompted towards recommendations for reducing or offsetting carbon impact, investing or supporting green initiatives, and more.

How do banks integrate carbon footprint calculators?

Carbon calculation service providers integrate with banks in multiple ways; from collaborating via APIs to independent white-label solutions that can be embedded into the bank’s tech stack.

In most cases, solution providers integrate via APIs to enable on-demand use of services and allow clients to control the customer-facing interface. Transactional APIs allow a consistent flow of data and real-time updates of carbon insights.

Some, like CoGo, Doconomy, ecolytiq also offer white-labelled applications that can be bought off the shelf and plugged directly into existing banking solutions with minimal customisations.

The As-a-service Model for Sustainable Finance

In the coming years, service providers building tools facilitating sustainable finance will be prime attractions for consumer-facing entities. The digital infrastructure required for such collaboration will also be crucial. Building on the open flow of data backed by customer consent, enablers can drive impact across the value chain. Data-driven simulations for testing will enable more robust solutions that can provide more accurate outputs and calls to action.

The first-mover pull of carbon footprint tracking tools has spurred many financial institutions into action. As sustainable finance becomes more mainstream, the demand for such ESG-centric (environmental, social, and governance) use cases will grow rapidly.