Investing sustainably means more than financing windmills, solar panels and electric vehicles. The growth in electronic payments and its broader impact on society provides a good example of a sustainability theme that many investors may not be familiar with.

The increase in digital transactions is driven by technology, consumer expectations regarding convenience and policy action. Electronic payments offers a number of advantages to businesses, including lower cash handling costs, streamlined operational costs and the opportunity to better understand customers via data analytics.

Governments also like electronic transactions. They provide greater transparency, which in turn leads to greater formalisation of the economy and higher tax revenues. In general the less cash-based a society the less corrupt it is – a fundamentally sustainable outcome.

Greater transparency was at the centre of India’s recent demonetisation efforts, when the government removed approximately 85% of the currency in circulation to reduce unaccounted and counterfeit money in circulation.

As well as reducing corruption, electronic transactions also enable financial inclusion. In India, there are now approximately a billion people who can transact via their smartphone, or if they don’t own a phone they can transact through biometric devices located in small stores across the country.

Similarly, in Sub-Saharan Africa, mobile money account ownership is driving a huge expansion of financial inclusion. As the World Bank Group states:


“When people can participate in the financial system, they are better able to start and expand businesses, invest in their children’s education and absorb financial shocks.”


Companies operating in this space include Vantiv, a US integrated payment processor that operates between merchants, customers and their respective banks. We also like Tencent, which operates China’s second largest online payment network. And although a relatively small part of its overall revenues, Google offers a peer-to-peer payments service through its Google Wallet product.

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