Banking on Green: Responding to Consumer Concerns about the Environment

Managers in the financial services sector may ponder the relevance of the “green movement” to their own business.  Many might agree that it makes sense financially and ethically to promote conservation, but is there such a thing as a green value proposition for customers of a bank, a credit union, a credit card provider, or like business?  It turns out that consumers really do care, according to Rockbridge’s recent research on green attitudes.  Not only is green sentiment strong, but there is receptiveness to green-oriented products and services.  An opportunity exists for building a brand and solidifying customer loyalty through a carefully targeted marketing program that is based on a sincere desire to partner with customers.

  • “I want to protect the environment for the benefit of future generations” resonates strongly among 56% of U.S. adults
  • 69% of U.S. adults disagree that “the earth belongs to humanity to do with as it pleases”

Consumers not only care about the environment, but believe that there are real threats that need to be addressed.  Examples of opinions include…

  • 69% agree strongly or somewhat that the evidence about global warming is real
  • 85% agree similarly that more needs to be done to curb air and water pollution in our country

While consumers are concerned about problems with the environment, they are also optimistic that the problems can be solved through individual and collective action.  For example, 77% believe that “society can solve big problems with the environment by getting lots of people to do just a little bit.”

The most fundamental change in the financial sector in recent years has been the increasing use of technology in the services relationship, which raises the question of how consumers feel about technology in causing or solving environmental problems.  Technology is more often seen as part of the solution than the problem.  For instance, two out of three consumers (67%) believe that “the internet gives people a way to work together to save the environment.”  Green technologies are seen as good for the economy and creating jobs, and products and services that conserve energy are viewed as paying for themselves by saving money.

A Vast Market Awaits.  In our recent study, we identified a latent market potential of $104 Billion per year for green products.  This estimate is based on the gap between ownership and interest in a wide variety of products, and the cost of acquiring or retrofitting.  Before we discuss green financial services specifically,
green2 we should note that these green products represent a lucrative opportunity for lenders.  First, much of this potential is in energy-efficient transportation options, such as hybrid fuel cars, high mileage vehicles, and alternative fuel vehicles.  Second, there are opportunities in home improvements, such as solar home and water heating, high efficiency heating and cooling systems, eco-friendly homes, programmable thermostats, trash compactors, and water purification systems.  In a credit market dampened by a consumer hangover from years of spending on discretionary items, such as SUVs or oversized homes, there is an opportunity to create a green value proposition.

green1The Opportunity: 
Respond to changing values by financing energy-saving technologies that consumers will view as investments that pay for themselves.  Savvy bankers should push forward in creating new products and programs, such as a favorable auto loan that accounts for the higher collateral value of greener vehicles, or a home improvement loan that is co-marketed with a local utility and includes an energy audit to identify energy-saving investments.  Green mortgages have been around for some time, but their potential can be realized now given changes in consumer sentiment.

Our research also examined green opportunities directly related to financial services businesses.  An obvious opportunity is convincing customers to save paper by relying on online transactions.  Last year, 66% of online adults checked a bank account online and 44% paid a bill online through their financial institution.  After years of steady growth, these behaviors have recently stabilized, and there is even evidence of a directional shift from bill pay services to paying bills directly at the site of the vendor.  With rising energy costs, these services save fuel and paper.

green1The Opportunity: Financial institutions can save by cutting back paper and postage, so there is an opportunity to promote this to customers based on green benefits (avoiding waste) and personal advantages, including speed, convenience and the security of keeping personal records out of the postal system.

Once consumers are online, there is also an opportunity to enlist them in saving by canceling paper in favor of electronic communication.  This can include account statements and notifications, ranging from routine policy changes to urgent matters such as overdrafts, that are emailed or posted online.  In our most recent survey, 58% of consumers indicated they have either shifted some of their financial statements from paper to online, or expressed a high degree of interest in doing so.  When asked their motives in stopping paper, 18% who stopped paper indicated they did so to benefit themselves personally, 13% did so to help the environment, and 69% did so for personal benefits and the environment.

Another opportunity area is in green investments.  Only 4% of consumers hold investments in green industries such as green mutual funds.  However, another 13% express a high degree of interest in these kinds of investments.  A fifth of consumers who have such investments hold them because of a green commitment.

green1The Opportunity: 
Include green funds as featured offerings for customers, promoting them on the basis of contributing to environmental stewardship as well as a way of profiting from the multi-billion dollar green marketplace.  Financial institutions themselves may profit by providing capital to emerging green businesses, or helping customers invest in these enterprises.  Another area to consider is securitizing the green credit and offering these assets to green investors.

Tapping the Green Market Requires a Targeted Strategy.  While most consumers are receptive to green issues, the greatest opportunity is among a handful of segments whose members possess a combination of environmental zeal and innovative tendencies.  We know from our research that consumers can be divided into six segments with different beliefs and behaviors in the green space (see below).

Based on this market segmentation, it is clear that a misguided strategy would waste resources on reaching out to consumers with limited potential because (a) they respond to environmental issues by avoiding consumption and shunning technology, (b) are eking by a living and lack the time and resources for green services, or (c) are among the minority of the public that views the green movement as hype.  Three types of consumers represent the greatest opportunity for a green strategy:

Green Tech Leaders – deeply committed consumers who also happen to be innovative.  They believe in technology, think green is “cool,” like doing business with green companies and believe that green products and services benefit their wallets.

green1The Opportunity:
 These consumers only represent 10% of the market, but tend to influence others, making them a prime target for expanding awareness of your products and brand.  They are heavier than average users of social networking media, so it is important to give them informational resources to help your cause (e.g., an RSS Feed to a newsletter on green investments).

Green Tech Followers – similar to the “leaders” in their commitment and innovative tendencies, the major difference being that they do not readily influence others.  They think green is “fun.”

green1The Opportunity:
 These consumers represent 18% of the market, and with the Leaders, are a logical target for green initiatives.

Tech-Savvy Green Sympathizers – not as zealous as the other two above, but they are environmentally aware, would like to do business with green companies and believe that green products and services will benefit their bottom-line.

green1The Opportunity: These consumers make up 31% of the market.  They are technology geeks, and an ideal target for replacing paper solutions with online ones.

Take Advantage of the Trend and Go Green, but Be Sincere.  While there are segments of consumers who are especially receptive to green issues, consumers in general are looking to do business with companies with a green philosophy — 68% of consumers agree that they “like to do business with companies that are environmentally responsible.”  However, companies need to be sincere in their message, as 72% of consumers “resent companies that say they care about the environment but don’t mean it.”  Showing a company’s commitment to the environment through its actions, such as planting trees and donating to environmental groups, goes a long way in proving a commitment, but a company should also address how its business operations affect the environment.  For example, does a financial institution promote energy efficiency, recycling and telecommuting?

The bottom line is that many consumers are waiting for financial services providers to create opportunities to help them achieve their green dreams.  Companies need to create or re-market green financial products and services and communicate their value to key segments of consumers, but do it with sincerity in purpose.  Taking advantage of the green trend can earn financial services companies new customers, save them money, and make a difference to us all.