The new challenger bank ethos: Why sustainability is fueling the next wave of disruption

If you were to take their marketing at face value, you’d assume that big banks were leading the finance sector’s charge regarding sustainability. And while they undoubtedly play an essential role, especially when financing major renewable energy projects and the like, the biggest disruption comes from challenger banks.

Increasingly, popular challenger banks such as Monzo and Starling, for example, are marketing themselves as more sustainable, capitalizing on a growing desire for banks to prioritize the environment. In fact, a recent report found that 67 percent of customers want their bank to be more sustainable.

Equipped with that knowledge, banks clearly need to adopt a more sustainability-focused ethos to stay competitive amongst consumers. But what approach should they take when it comes to centering sustainability? And how can they invest in sustainability while still pursuing global profits? The answer, at least in part, lies in taking lessons from the worlds of gaming and gamification.

Building trust beyond ESG

Before looking at how banks can apply innovative digital principles such as gaming to their organizations, it’s worth understanding exactly what they should be aiming for when it comes to sustainability and why it’s so important to their survival.

To understand the importance of sustainability, one need only consider the devastating impact of the climate crisis that is becoming increasingly evident every day. The effects of this are hugely significant, with government statistics showing that nearly three-quarters of Britons are somewhat or very anxious about climate change. People want to know that the companies who they hand their money over to recognize that anxiety and are committed to forging a sustainable path going forwards.

That’s especially true of banks, which probably have the most intimate relationship with our money and certainly have the largest say in how it’s used. Small wonder then that 92 percent of customers are more willing to trust a business that supports action on environmental issues. 

Within this current landscape, it’s important that banks go beyond environmental, social, and governance (ESG)-based investing. Although sustainable finance is pivotal through the distribution of capital for the global economy and critical to consumers, it’s not enough to ensure customer loyalty.

That’s because customers also want to feel that their bank is fully invested in the environment, including in its internal business model and practices. In other words, banks must view sustainability as a mindset rather than an afterthought. It should be positioned as an integral aspect of a bank’s delivery, operation, and overall success. Only by pivoting sustainability as a key purpose will banks be able to reflect to consumers a responsible business that addresses their expectations.

Communication and gamification as drivers of change

When it comes to actively being more sustainable, there are a number of practical steps that banks can take. For example, using cloud-based infrastructure reduces carbon footprints and emissions by up to 95 percent. While taking such action is crucial, to be truly effective, it must form part of a more holistic approach to sustainable change.

Part of this holistic approach is addressing the critical need to drive behavioral change across the entire organization. And for that to happen, both internal and external communications are vital (provided it’s transparent, of course). When it comes to traditional communication, they can be made significantly more effective with games and gamification tactics. In essence, games can enhance learning and empower individuals to be able to shift their behavior, creating space for a much broader impact on an organization itself.

One major challenge in this field is getting top-level individuals to understand how to incorporate sustainable practices into a profit-driven system. Technology, especially gamification, offers a powerful tool to educate key professionals and encourage the adoption of new habits. Gamification applies game mechanics and logic to motivate and engage users, utilizing gamification in such stimulating systems is therefore crucial for actively driving organizational change and achieving sustainability.

To address this, we recently collaborated with a financial institution in the UK to enhance its financial services training platform using gamification. The goal was to eliminate the potential for box-ticking, sloganeering, and greenwashing in the financial industry, providing sustainable financial skills training to drive impactful transformation in the UK’s banking sector.

Beyond the internal organization, gamification can also help bring customers along the bank’s environmental journey. Remember, customers won't simply trust that a bank is acting sustainably, they need to see and be part of it too.

Banks could integrate game mechanics into something like a carbon footprint calculator which, after an initial calculation, would provide users with suggestions for small changes that they could make to improve the sustainability of their day-to-day lives. Albeit relatively simple, it’s a tangible way of giving customers agency to shift their own behavior to create a positive impact in the world. This makes people feel that they’re part of an ongoing sustainability drive instead of some vague corporate initiative.

Banks can be the change

Ultimately, environmental sustainability is everyone’s concern. And if the financial sector is to follow the example of challenger banks that have put sustainability at the heart of their business operations, then it will need to bring all stakeholders (including employees and customers) along with it. Any attempts to do so would undoubtedly benefit from well-executed uses of games and gamification strategies.

Glenn Gillis is CEO, Sea Monster.