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Embedded Finance Supporting ESG Goals; With Aquanow, Aspiration, Blackhawk Network and Episode Six

EY estimates that the market size of global embedded finance will grow from $264billion in 2021 to $606billion as early as 2025. With the space set to dramatically disrupt the financial sector worldwide, The Fintech Times seeks to understand how.

Having explored various ways in which embedded finance can improve financial inclusion around the globe, The Fintech Times now shines the spotlight on another possibility for the sector: supporting global ESG goals. To do so, we once again reach out to the experts.

“ESG goals are a motivating factor behind purchase decisions”
John Mitchell
John Mitchell, CEO and co-founder at Episode Six

John Mitchell, CEO and co-founder at Episode Six, discusses the role embedded finance can play in directly supporting ESG goals: “Embedded finance can absolutely support global ESG goals.

“Take our partner, Mastercard, as an example. They developed a Carbon Calculator that enables consumers to view the carbon footprint of their purchase decisions. Consumers can also make donations to fund forest restoration projects.

“For some consumers, ESG goals are a motivating factor behind their purchase decisions, and embedded finance will enable entrepreneurial thinkers across the industry to meet those needs, so they can make informed choices that support sustainable businesses and initiatives.”

“Rewards programmes make excellent candidates for sustainability improvements”

Jeff Haughton is the senior vice president of incentives and corporate development and strategy at Blackhawk Network.

 Jeff Haughton, SVP, incentives, corporate development and strategy at Blackhawk Network
Jeff Haughton, SVP, incentives, corporate development and strategy at Blackhawk Network

“People are more aware than ever of how their behaviours, habits and lifestyles impact our environment, and millions are committed to reducing their environmental footprint. The same is true for many businesses – which can lean on embedded finance to do so.

“Organisations across the globe may not realise that their rewards programmes make excellent candidates for sustainability improvements, whether these programs target customers, employees, partners or otherwise. Many businesses still offer physical rewards (e.g. merchandise) that often require shipping, packaging and production supplies that can negatively impact the environment.

“But underneath the embedded finance umbrella, embedded rewards (e.g. digital prepaid and gift cards) can easily be substituted, are oftentimes preferred to physical rewards and reach people no matter where they are located.

“For example, our research found that more than 40 per cent of working Americans surveyed want embedded rewards in the form of digital gift and prepaid cards. Companies like Microsoft understand this preference, and offer embedded rewards options within everyday workflows many employees are already using within the Teams ecosystem. (So managers can distribute digital prepaid and gift cards during live meetings directly in Microsoft platforms within seconds to a single individual or even a large group of employees.)

“Embedded rewards can also be incredibly effective in creating frequent, high-value touchpoint opportunities that quickly reinforce shopping behaviours since they can be embedded directly into exchanges with customers via an app, email and so forth.

“In addition to being environmentally friendly, embedded rewards promote financial inclusivity; people can access funds and spend them – regardless of whether they have a bank account.”

“Consumers want to spend money with brands and companies aligned with their values”

Chad Hunter, senior director of carbon products and innovation at decarbonisation solution provider Aspiration, said: “Embedded finance is a critical tool to support global ESG goals in two primary ways: helping consumers shop in ways aligned with their values and crowding in capital for ESG initiatives.

Chad Hunter on Emedded finance ESG
Chad Hunter, senior director of carbon products and innovation at Aspiration

“First, the major environmental and social phenomena such as the climate crisis and other critical social movements of the past few years have demonstrated that consumers want to spend money with brands and companies aligned with their values. Whether they are socially conscious companies or sustainable brands, helping consumers better vote with their dollars through embeddable financial offerings is key to accelerating broader ESG goals.

“Second, companies that embed climate action opportunities at checkout like opting in to make products or shipping carbon neutral are seeing incredible increases in customer retention, repeat purchases, and loyalty sign-ups all while redirecting capital to high-impact climate projects across the world. These projects often support many of the UN’s SDGs beyond climate in the other environmental and social regimes such as improved biodiversity and reduced inequality.”

“Embedded finance helps to reduce inequality and promote social advancement”
Sebastien Davies on Embedded finance ESG
Sebastien Davies, VP of research at Aquanow

Sebastien Davies, VP of research at Aquanow, the infrastructure and liquidity provider empowering institutional and enterprise digital asset services, said: “By promoting financial inclusion, embedded finance helps to reduce inequality and promote social advancement, which is consistent with the social component of ESG.

“Further, building trust encourages transparency and better corporate behavior, which aligns well with the governance aspect of ESG. One of the main push backs against a more fulsome focus on sustainability goals has been their measurement and this will be a factor here as well.

“Until considerable time has passed, we simply won’t be able to empirically say that embedded finance has had a positive impact on the environment, society, and/or governance. However, it does seem sensible to think that it will.”

Author

  • Tom joined The Fintech Times in 2022 as part of the operations team; later joining the editorial team as a journalist.

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