This article is an expanded version of a presentation given on 20th May 2021 at a Fintech & InsurTech Meetup Europe event.
Five years ago, sustainable finance was mostly a question for investment specialists. Now, a new wave of fintechs are bringing sustainability to the retail finance space.
As Brand & Marketing Lead at Tred, a green fintech, I spend a lot of time thinking about the challenges that face me and my peers as we bring this new technology to the mainstream. While these challenges might start with marketing, they go far deeper than that; solving them will require interventions across the business, from product to commercial models.
1. Establishing a new category – how do you sell consumers on a completely new product?
Sustainability in the context of retail finance is still something of an unknown entity. Consumers are familiar by now with sustainable fashion, ethical beauty, even green investing – but the sustainable everyday spending space has yet to be fully defined. Even the word ‘sustainable’ itself is vague, covering everything from carbon emissions to the fair payment of supply chain workers. Defining this new category, and Tred’s role in it, has been our first big challenge.
Educating people on something new costs time and money, always difficult with start-up budgets. Leveraging comparisons to familiar products can be a useful shortcut. At Tred we often compare our carboon footprint tracking to the process of losing weight: it’s hard to do without a set of scales to measure your weight overall, or calorie counts to control your progress.
Within the finance category, we’re often called ‘a green Monzo’ which can be helpful (who doesn’t like to be compared to a category-defining brand?) as well as a hindrance (we’re not a bank, nor will we be applying for a banking licence any time soon).
Defining a category is both the privilege and the pain of being an early entrant. As the market fills out with newer competitors eager for a piece of the pie, the challenge moves from establishing the category, to establishing yourself firmly as its leader.
2. Building trust – how do you convince people to hand over their money?
We all like to think our approach to finance is purely rational and numbers-based; but the truth is, most people’s relationship with money is highly emotional. Your money is your hard-won monthly salary, your life savings; it’s the roof over your head or your kids’ futures. Convincing people that they can trust you to take care of their money is therefore a key challenge for any finance brand, particularly so for tech startups with minimal name recognition.
The good news is that building trust isn’t (just) about multi-million pound advertising campaigns. Behavioural science tells us that behaviour often drives attitudes, not the other way round. In other words, if you try a new banking app and it leaves you with a good impression, your perception of that brand improves. On the flip side, if a bank messes up and transacts £1,000 of your money into the wrong account, they’ve likely lost your trust forever, no matter how established they are or how many millions they spend on glossy TV ads.
With this behavioural thinking in mind, a few ways we’re working to build trust in Tred are:
- Making a good first impression (which, when working with tech MVP thinking, means managing early users’ expectations properly)
- Making trial easy (Tred’s Open Banking functionality means people can choose to stick with their current providers rather than taking out a Tred card if they choose)
- Operating transparently (a brand that’s not forthcoming with information makes people assume they’re hiding something, even if they’re not)
3. Avoiding guilt fatigue – how do we stop scaring people off?
Alongside earning trust, the other biggest challenge we face is convincing people they want to spend time with us. There’s no point in building 100% accurate carbon tracking technology if all it does is make people feel guilty about their choices. Climate science is depressing enough as it is – if Tred simply adds to that negativity, we’ll never convert triallists into regular users.
Building a positive brand experience is therefore essential, for Tred’s commercial success, but more importantly for our overall goal of making a positive impact on climate change. Getting people to think about and change their behaviour in the long term is how we’ll make a difference – and that won’t happen if people get so bummed out by their first interaction with the app that they delete it forever.
From framing our ads in an optimistic light, to incorporating positive reinforcement within the app, thinking about how we present our technology to people is just as important for Tred as the development of the technology itself.
4. Engaging mass audiences – how do we move from being a niche brand to a mass-market one?
Stated interest in green spending products is high (52% of UK adults, according to our research; two-thirds, according to Tandem Bank), but inevitably there will be a range of interests and motivations within that group. The existential marketing question for green fintechs in the scale-up phase will be: how do we start to bring in people who don’t self-identify as eco-conscious, without alienating early users?
Although this question is purely hypothetical for now, it’s important to think about because it affects early product development. At Tred we’re emphatic that we need to offer users sustainability without compromise: our product has to be as good as, if not better than the non-sustainable alternatives out there. If we ask customers to sacrifice functionality for ethics, we’ll only ever attract the most fervent environmentalists and our impact will be limited.
5. Staying competitive – as more brands enter the space, how can we continue to win?
Green fintech is a rapidly growing space. Alongside a host of sustainable startups, ‘non-green’ brands are starting to enter the space too (e.g. Starling Bank’s recent announcement of recycled debit cards), which brings with it two risks.
The first risk is that a wave of green innovation across all retail finance brands would see green brands like Tred lose our advantage, becoming just another brand offering the same range of features. While the levelling of the space might pose a threat to Tred individually, it would at least be a win for people and the planet if green finance became the default.
However, the second, bigger risk is that the pressure posed by green startups like Tred will see incumbents adopting surface-level but ultimately flawed sustainable practices in an attempt to compete – i.e. greenwashing. There’s a real risk that bad-faith competitors could tarnish the credibility of legitimate green brands, making consumers cynical towards the space as a whole. Tred might win the moral high ground here, but the planet loses in the long run if people are put off engaging with green finance entirely.
At Tred, we can defend against the first risk by staying true to our underlying green principles: we run a profit-for-purpose model that commits part of our revenue to reforestation projects. It’s a lot harder for big competitors to pivot to a truly sustainable business model than it is for them to simply start using recycled plastic in their debit cards, so this is a defensible USP for the medium-term.
Defending against the second risk is a bigger challenge. We can’t control the market. As sustainability in finance goes mainstream, incumbent brands will have to choose between doing the right thing for the planet, or the expedient thing for their bottom line. The choices they make will influence the future viability of the green finance space, for better or worse.