The time to decarbonise payments is now, and digital payments are leading the charge

Digital payments: a greener choice

The study, led by Patrice Geoffron, Professor of Economics at Paris Dauphine-PSL University, used the life cycle analysis (LCA) methodology to compare the CO2e emissions from different payment methods, both in-store and online. The findings suggest that widespread adoption of digital payments can play a significant role in reducing carbon emissions. For example, the study shows that in-store cash transactions emit 14% more CO2e emissions than in-store digital payments. The emissions from a cash payment amount to 2.8g[1] of CO2e, while a digital payment generates just 2.45g.

When factoring in the emissions from cash sourcing and transportation (considering a single cash withdrawal provides for an average of seven transactions), cash payments are 15 times more carbon-intensive than digital payments. That's 36.8g of CO2e for cash, compared to just 2.45g for digital payments. Clearly, payments can play a crucial role in shaping a sustainable future.

It is important to note that the study's results do not include post-transaction-associated carbon, such as merchant storage and transport processes and cash management systems. This makes the results that much more impactful. Essentially, the potential for digital payments extends beyond the report's findings.

As per online transactions, in Belgium, consumers use a dedicated physical device specific to the Belgian market to manage customer authentication. This represents 75% of the emissions of the online payment transaction, producing 8.9g of CO2e emissions compared to the 11.9g of CO2e  emissions of the entire transaction.

Decarbonising the Payment Ecosystem

The study didn't just study physical vs digital payment methods; it also explored ways to decarbonise the payment ecosystem more effectively. While the study focused on the Belgian market, where Worldline is a major payment processor, its findings can be expanded to the broader payments ecosystem. From the results, it's clear that several measures have the potential to reduce the carbon footprint of digital payments drastically.

Players in the payments ecosystem can eliminate physical waste and reduce carbon emissions associated with production and waste processing by eliminating paper receipts. Additionally, using virtual cards rather than physical ones reduces the environmental impact of card manufacturing and distribution. These measures also extend to the customer experience. For example, by promoting phone-to-phone payments, banks and merchants can reduce emissions from payment terminals and cut down on energy use.

By implementing such measures, payment providers and merchants can cut CO2e emissions from digital payments by 70%, reducing emissions per transaction to just 0.74g. This represents a quarter of the emissions from traditional cash transactions, demonstrating the vast potential for reducing the carbon footprint of payment systems.

In addition, by better supporting online transactions and payments, and embracing digital technologies, smart-phone based transactions could experience a reduction in carbon footprint by up to 93%. This highlights the importance of digital innovation and technology in pursuing a greener, more sustainable world of finance.

It's clear that digital payments have substantial potential to contribute to Europe's carbon reduction goals. Through steady adoption, digital payment methods can support the much-needed push towards more sustainable processes.

With industry-wide initiatives to decarbonise the payment ecosystem, both on a regulatory and business level, industry players and consumers alike can create a more sustainable future and positively contribute to European ambitions regarding CO2e reduction targets. As an industry, embracing these eco-friendly practices can move the world of payments and society at large closer to a carbon-neutral world.

Read the report in full for a detailed overview of the impact of digital payments in a sustainable future: Accelerate the decarbonisation of payments.

Read the press release: Worldline Belgium-based study confirms digital transactions are greener than cash.

[1] Excluding mobility to the ATM