The Environmental Impact of Cash vs. Digital Payments

With unprecedented climate change on our doorsteps, running an energy-efficient business with a small carbon footprint is no longer an option—it’s a must-do. In fact, it’s in the best interests of the environment, your customers, and your business to invest in solid Environmental, Social, and Governance (ESG) strategies to mitigate the impact. This isn’t the only benefit.

Research shows that businesses prioritizing sustainability initiatives are more profitable than those that don’t. So, when it comes to which payment methods to offer your customers, it’s vital to determine if one type of method is more sustainable than another. However, the reality is, every payment method has its own unique ecological footprint. While physical currency takes energy and resources for printing and distribution, digital payment methods rely on electricity and other resources to function in the first place.

In this article, we’ll cover the environmental impact of cash and digital payment methods. We’ll also reveal how your business can reduce its carbon footprint with inclusive and sustainable digital payment solutions.

How Cash Affects the Environment

Producing, transporting, and eventually destroying paper currency and metal coins requires several raw materials and energy resources. For instance, cultivating the cotton necessary for paper bills and mining the metal for coins involves heavy machinery, water and electric, and manual labor. Ink production and printing also require massive energy consumption, which, in turn, emits greenhouse gases.

Since physical currency continuously circulates throughout its lifecycle, handling and transporting it don’t stop once it’s created. For starters, on-site cash handling takes time and electricity, while making deposit runs or armored transport pickups can be fuel-intensive, giving its total lifecycle a large carbon footprint. 

The Environmental Footprint of Digital Payments

Unlike physical currency that requires physical production and fuel-heavy transport, digital payment methods rely on continuous energy consumption to function. As for producing them, rare-earth minerals are used to create hardware and payment servers. Not to mention the plastic and other materials it takes to produce and transport payment cards, terminals, and more.

Since digital payment methods rely on mobile data or an Internet connection, it’s important to factor in the energy used by payment processors and data centers, in addition to end-user devices, such as mobile phones for digital wallet payments, etc.  Payment terminals and personal cell phones can malfunction or be replaced, consuming more energy and resources.

Fortunately, there are several ways to mitigate the environmental impact. Committing to greener data center practices and using renewable energy sources are worthy endeavors. Next, getting as much life out of payment processors and ensuring all coding is as efficient as possible will reduce CO2 emissions, resulting in a more energy-efficient business over the long haul.

Comparing Cash and Digital: Key Environmental Metrics

When weighing cash vs. digital payments for their environmental impact, it’s best to consider multiple factors that are a part of their total life cycle. Besides emissions, water consumption, and waste that you’ll compare below, you’ll also want to weigh the resources required to create and maintain each payment system, energy expended for circulation and disposal, and even recycling or infrastructure/device replacement costs. 

Cash-Based Payment Systems vs. Digital Payment Systems

Emissions

Cash emits more CO2 Equivalent (CO2e) per transaction (2.8g), whereas digital payments emit 2.45g of CO2e/transaction.

Water Consumption

Digital payments require less water (used mainly to cool down data centers), which is offset by a digital payment system’s efficiency.

Waste

Digital payments cause less waste per transaction, especially when digital receipts replace paper receipts, etc.

How Sustainable Payment Solutions Can Lower Impact

Cash-to-Card® Kiosks, digital wallets, and other sustainable payment solutions are helping businesses across most industries shrink their carbon footprint and reach their ESG goals. These inclusive digital payment solutions not only eliminate in-house cash handling, saving businesses energy and labor costs, but they also accommodate their unbanked and cash-preferred guests.

Businesses can also power their digital payment solutions (and their infrastructure) with renewable energy sources and optimized networks (i.e., low-energy blockchain) to further save on electricity and other associated energy costs. Deploying simple eco-friendly business practices like swapping paper receipts for digital alternatives and integrating low-emission payment gateways are low-cost, high-impact ways to make a difference.

Practical Steps for Businesses and Consumers

Businesses and consumers can join forces to create a more efficient and sustainable future in simple yet impactful ways. 

Steps for Businesses

First, businesses can adopt a hybrid, cashless-first payment system that accommodates unbanked and cash-preferred guests. 

Consider this scenario: By placing Cash-to-Card Kiosks on site, cash-only customers can securely and conveniently convert their cash into a prepaid debit card on the spot. This way, they can easily pay their preferred way. At the same time, the business eliminates all manual cash handling responsibilities, avoiding unnecessary energy costs and wasting resources.

Next, rather than expending energy and increasing CO2 emissions via multiple cash deposits or daily armoured transport, consolidating cash pickups is an effective way to reduce your carbon footprint. With Cash-to-Card Kiosks on site, businesses can simply delegate cash pickups to a single source, saving on energy costs and labor expenses while reducing CO2 emissions from daily cash transports.

Committing to quarterly or semi-annual sustainability audits is another effective way to track (and ultimately reduce carbon emissions) related to your payment infrastructure and practices. Such accountability will also keep your team on track toward meeting your short and long-term ESG goals.   

Steps for Consumers

Customers can seek out vendors and establishments that accommodate all guests, specifically venues offering inclusive payment methods.  

Another way is to choose vendors who invest in green data centers and other eco-friendly initiatives, like offering digital receipts instead of paper copies, etc.

Finally, consumers can always inquire about a vendor’s sustainable practices and initiatives to determine if their values align with theirs. 

Moving Toward Greener Financial Transactions

When it comes to modern financial transactions, going green is no longer optional—it’s a priority. Maintaining sustainable financial infrastructure, reducing operational footprint, and committing to other green initiatives like using carbon-neutral or low-emission data centers are just a few ways businesses can do their part. 

Government entities and regulators worldwide are also stepping up to the plate, driving long-term, sustainable financial innovation and inclusion through:

• Supporting and incentivizing investments in ESG initiatives
• Encouraging eco-friendly and sustainable innovation
• State and federal policies, like the National Strategy for Financial Inclusion, centering on financial inclusion and consumer protections.
• Advocating for and incentivizing financial inclusion
• Minting biodegradable (aka, end-of-life) banknotes made from polymer in countries like the United Kingdom and Australia

How Ready Credit Supports Sustainable Payments

Every payment method has its own unique impact on the environment. The good news is that there are clear measures every business can take to mitigate that impact while still accommodating all of their customers.

Businesses must do their part to offer guests the most inclusive and sustainable payment methods available. Ones that not only meet modern demands for convenience and security but are also energy efficient and sustainable long term.

Ready Credit’s Cash-to-Card® Kiosks and digital payment solutions eliminate manual cash handling duties, saving electricity and staff labor costs and daily bank deposits or armored vehicle pickups, significantly lowering operational emissions. 

Efficient and inclusive digital payment systems allow your business to meet its sustainability goals and other ESG targets without sacrificing payment accessibility for your cash-carrying customers.