Alibaba marries carbon reduction with China’s ‘cashless’ trends

Local governments across China are pushing to adopt more smart infrastructure to leverage big data and improve efficiencies. Online retail giant Alibaba has established a reputation for itself as an important smart city and data platform partner for bringing government services into the digital age. But the company’s  financial technology arm, called Ant Financial, is tackling climate change and smart city development with its mobile payment platform, Alipay. To date, the Alipay app has some 450 million registered users.

As Chinese consumers have embraced mobile payments in lieu of exchanging cash, Alibaba has come up against rival Tencent in the mobile payment market. But while Tencent’s WeChat mobile payment app rules over consumer services like shopping, taxis, and restaurants, Alibaba is maneuvering to make its Alipay app integral to its smart city solutions adopted by governments. Mobile payments and other forms of “fintech” can deliver significant savings to governments and businesses, according to a recent report from World Bank.

But Alibaba is betting fintech can also be leveraged to encourage consumers to adopt more sustainable “green” behaviors. To prove that hypothesis, Ant Financial has partnered with the UN’s Environment arm to launch what’s been described as the world’s first — and largest — pilot program to scale sustainable consumption behavior through the use of mobile payment platforms, big data and social media.

Ant Financial has launched a reforestation program that ties consumers’ use of mobile payments to carbon reduction efforts. The program awards points to users for making environmentally friendly choices in purchases, like paying a bill online, or buying a metro card rather than taking a car. Those small, bottom-up decisions can add up, Alibaba says, into tangible carbon savings.

“This is essential to complement top-down action, such as the Paris Agreement and the 2030 Agenda on sustainable development,” said Eric Jing, CEO of Ant Financial. “The success of the program is a sign of the powerful change we can create when people are provided with the opportunity to live a greener life.”

When a user wins enough points, Ant Financial will plant a tree in Inner Mongolia, which is suffering from desertification. Over 200 million consumers now using the reforestation program, accounting for 3% of the world’s population. As of January 2017, Alipay users’ smart purchase decisions saved up to 150,000 tonnes of carbon dioxide emissions, and over a million trees have been planted, according to Ant Financial.

“The exciting thing about the Ant Forest Program is that it makes carbon relevant in online identities,” said Simon Zadek, co-director of UN Environment’s Inquiry into the Design of Sustainable Financial System, which serves as the secretariat for the Cashless Alliance. “It is a whole new way of thinking about carbon markets, and is incredibly relevant for young people and generations going forward.”

Ant Financial is working with a whopping 352 cities across 25 provinces in China on smart city projects focused on bringing public services, such as paying utility bills and traffic tickets, to its mobile payment app. Doing so helps improve the quality of life for residents, Alibaba claims, and helps increase non-tax revenue for local government. Ant Financial has set up a “Cashless Alliance” across metro areas in China as part of a push to make Alipay a universal mobile payment app, and has pledged to invest some RMB 3 billion ($450 million) per year over the next two years to the cause. It has now partnered with four city governments to transition these communities to cashless societies.

“This shows that digital finance holds a huge untapped power to mobilize people in support of sustainable development and the fight against climate change,” said Erik Solheim, head of UN Environment. “And this power is literally at our fingertips through our mobile devices.”

While the program’s reception has been encouraging, there’s more work to be done to determine just how much of an impact these types of solutions can deliver in battling climate change. Ant Financial’s Jang said an important line of inquiry is whether the “greening” of consumer behaviors through incentivized social media games can be sustained once the novelty of the app, for example, wears off.

To further study these types of fintech solutions, Ant Financial and UN Environment have teamed up to launch Green Digital Finance Alliance, charged with enabling engagement between fintech providers, stakeholders and policymakers in advancing digital finance solutions to environmental issues.

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