Payments Companies Urged to Lead the Charge Towards Sustainability
E-waste looms as a financial crisis on the horizon, and it is imperative for players in the financial sector to step up and support a circular economy, with payments companies taking a pivotal role in this endeavor, as highlighted in The Fintech Times.
E-waste not only poses a direct threat to the environment due to valuable materials ending up in landfills, but it also affects consumers and their financial plans. The practice of planned obsolescence, where devices are intentionally designed to break, drives profits for companies but generates a significant amount of e-waste. Furthermore, it perpetuates modern slavery in manufacturing and material extraction processes.
Tess Buckley, a member of The Payments Association’s ESG (Environmental, Social, and Governance) working group, sheds light on these pressing issues and outlines how the industry can move forward.
In today’s landscape, with tech giants venturing into the banking sector, payments companies must take a proactive stance to address the culture of «software sabotage» to protect consumers, supply chains, and reduce electronic waste.
Planned obsolescence is a well-known business model in the big-tech industry. Devices are deliberately designed to fail, compelling consumers to frequently upgrade. While this maximizes profits, it contributes significantly to the problem of e-waste. This issue goes beyond environmental concerns; it places an unfair financial burden on consumers and raises ethical questions about corporate product management.
For instance, Slack’s «software sabotage» strategy rendered its messaging app unsupported on older computers, severely limiting access to basic functionalities.
The consequences of planned obsolescence extend beyond inconvenience and financial burden, as e-waste is an impending environmental crisis. It encompasses discarded hardware, which often ends up in landfills, and the proliferation of various device chargers. Recently, the European Union took steps to address this issue by mandating the adoption of USB-C chargers for mobile devices. Although initially met with resistance, companies like Apple have now committed to transitioning to USB-C chargers for their upcoming iPhone models to comply with the EU mandate starting in 2024.
Planned obsolescence also has a significant human cost, involving the extraction of raw materials and facilitating modern slavery practices. Cobalt, a crucial component in lithium-ion rechargeable batteries, is a prime example. Approximately 75% of the world’s cobalt comes from the Democratic Republic of the Congo (DRC), where the artisanal production sector operates informally with limited health and safety standards. The miners, often working in slave-like conditions, form the initial link in a supply chain that benefits influential corporations with multi-billion-dollar valuations.
Cobalt, along with traces of radioactive uranium and other heavy metals, poses serious health risks to miners and their children. Extending the lifespan of electronic devices and reducing e-waste can help alleviate the human and environmental toll of such labor practices.
The dilemma lies in distinguishing between software updates designed for planned obsolescence and those meant to enhance payment security. In 2022, the EU Directive 2019/771 introduced an obligation for sellers of goods with digital elements to provide security updates to consumers. In contrast, the United States lacks specific federal laws in this regard. However, the Federal Trade Commission has been working on managing consumer expectations for security updates in IoT devices.
To pave the way forward, it is essential for the payments sector to consider how new initiatives, like Apple’s entry into the open banking space with an iPhone Wallet app integration, align with sustainability practices. While expecting tech giants to prioritize the environment over profits may be idealistic, a cultural shift away from a disposable mindset and challenging profit-driven strategies is necessary.
Educating consumers and forming alliances with activists are two strategies the payments industry can adopt to push for stricter regulations that safeguard payment security while challenging unsustainable business models. Planned obsolescence and the impending e-waste crisis require our collective attention as consumers, businesses in the payments sector, and advocates for a more sustainable future.
To facilitate this transition, the payments industry should provide the necessary tools and support for companies to adopt sustainable and progressive strategies that benefit the environment, society, and their own governance.