Evaluating the Environmental Impact of Debit Card Payments

33 Pages Posted: 11 Nov 2017

See all articles by Erik Roos Lindgreen

Erik Roos Lindgreen

CE Delft

Milan van Schendel

VU University Amsterdam

Nicole Jonker

De Nederlandsche Bank (DNB); De Nederlandsche Bank

Jorieke Kloek

De Nederlandsche Bank

Lonneke de Graaff

CE Delft

Marc D. Davidson

University of Amsterdam

Date Written: October 23, 2017

Abstract

Purpose: Consumers in the Netherlands made more than 3.2 billion debit card transactions at points-of-sale in 2015, corresponding to over half of all point-of-sale payments in that year. This study provides insights into the environmental impact of debit card transactions based on a life cycle assessment (LCA). In addition, it identifies several areas within the debit card payment chain where the environmental impact can be reduced.

Methods: The debit card payment system can be divided into three subsystems: debit cards, payment terminals, and datacentres used for transaction processing. Input data for all elements within each subsystem (manufacturing, transport, energy use, and disposal) were retrieved from interviews and literature study. Seven key companies and authorities within the debit card system such as the Dutch Payments Association, two banks, two datacentres, one payment terminal producer and a recycling company contributed data. The analysis is conducted using SimaPro, the Ecoinvent 3.0 database and the ReCiPe endpoint (H) impact assessment method.

Results and discussion: One Dutch debit card transaction in 2015 is estimated to have an absolute environmental impact of 470 ┬ÁPt. Within the process chain of a debit card transaction, the relative environmental impact of payment terminals is dominant, contributing 75% of the total impact. Terminal materials (37%) and terminal energy use (27%) are the largest contributors to this share, while the remaining impact comprises datacentre (11%) and debit card (15%) subsystems. For datacentres, this impact mainly stems from their energy use. Finally, scenario analyses show that a significant decrease (44%) in the environmental impact of the entire debit card payment system could be achieved by stimulating the use of renewable energy in payment terminals and datacentres, reducing the standby time of payment terminals, and by increasing the lifetimes of debit cards.

Conclusions: For the first time, the environmental consequences of electronic card payment systems are evaluated. The total environmental impact of debit card transactions in the Netherlands is relatively modest compared to the impact of cash payments, which are the closest substitute of debit card payments at the point-of-sale. Scenario analysis indicates that the environmental impact can be reduced by 44%.

Keywords: Datacentre, Debit Card Payment System, Debit Card, Environmental Impact, LCA, Payment Terminal

JEL Classification: E42, Q50

Suggested Citation

Roos Lindgreen, Erik and van Schendel, Milan and Jonker, Nicole and Kloek, Jorieke and de Graaff, Lonneke and Davidson, Marc D., Evaluating the Environmental Impact of Debit Card Payments (October 23, 2017). De Nederlandsche Bank Working Paper No. 574. Available at SSRN: https://ssrn.com/abstract=3057340 or http://dx.doi.org/10.2139/ssrn.3057340

Erik Roos Lindgreen

CE Delft

Oude Delft 180
2611 HH Delft
Netherlands

Milan Van Schendel

VU University Amsterdam

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Nicole Jonker (Contact Author)

De Nederlandsche Bank (DNB) ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Jorieke Kloek

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Lonneke De Graaff

CE Delft

Oude Delft 180
2611 HH Delft
Netherlands

Marc D. Davidson

University of Amsterdam

Spui 21
Amsterdam, 1018 WB
Netherlands

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