Financial Services Assignment-Writeup

Submitted by 21-UBH-002,006,039,041

Green banking

Green banking means promoting environmental friendly practices and reducing your carbon
footprints from your banking activities. Green banking aims at improving the operations and
technology along with making the clients habits environment friendly in the banking business.

Pros of Green Banking:

● Accelerating green projects:

A green bank can provide dedicated funding and financial support to green projects,
which may not receive adequate attention from traditional financial institutions. This acceleration
can lead to faster implementation of clean energy, energy efficiency, and other environmentally
friendly initiatives.

● Attracting private investment:

By demonstrating a commitment to sustainable projects, a green bank can attract
private investors who are increasingly interested in supporting environmentally responsible
ventures. This can help mobilize additional funds for green initiatives across the country.

● Job creation and economic growth:

Green projects often require skilled labor and create jobs in sectors like renewable
energy, energy efficiency, and sustainable infrastructure. A green bank can contribute to
economic growth while supporting a transition to a low-carbon economy.

● Mitigating climate change:

Increased funding for green projects can help reduce India's carbon footprint and
mitigate the impacts of climate change, including air pollution, extreme weather events, and
ecological degradation.

● Technology advancement:
The funding and support provided by a green bank can encourage the development
and adoption of innovative green technologies, making India a leader in sustainable solutions.

Cons of Green Banking :

● Initial funding challenges:

 Establishing and capitalizing a green bank requires significant financial resources. It
may be challenging to secure the necessary funds, especially if there is limited political will or
understanding of the long-term benefits.

● Market risks:
Green projects can face market uncertainties and regulatory challenges. If a green
bank heavily invests in specific sectors that do not perform as expected, it could face financial
losses.

● Political and bureaucratic hurdles:

Green banks may face bureaucratic challenges, delays, or inconsistent policies,
hindering their ability to function efficiently and effectively.

● Competition with traditional banks:

A green bank might face competition from traditional banks and financial institutions,
which may not prioritize green investments. This can limit the market share of the green bank
and its impact on funding green projects.

● Long-term sustainability:
The success of a green bank depends on its ability to maintain a long-term vision and
commitment to green financing. It needs to continuously adapt to changing market conditions
and policy dynamics to remain effective.

Overall, the establishment of a green bank in India could significantly contribute to the country's
sustainable development goals and climate change mitigation efforts. However, it would require
careful planning, robust funding, and strong political support to overcome potential challenges
and realize its full potential.

Pros on the implementation of Green Banking in India:

● Environmental Benefits:
Green banking focuses on financing and promoting environmentally sustainable
projects and initiatives. By supporting clean energy, renewable resources, and eco-friendly
businesses, green banking can help reduce India's carbon footprint and contribute to
environmental conservation.

● Climate Change Mitigation:

Green banking can play a vital role in India's efforts to combat climate change by
redirecting financial resources towards low-carbon and climate-resilient projects. This can aid in
meeting the country's commitments under international climate agreements.
 ● Social Impact:
Green banking can improve the overall well-being of communities by funding projects
that enhance access to clean energy, promote sustainable agriculture, and address
environmental challenges like water scarcity and pollution.

● Financial Stability:
By considering environmental risks and opportunities, green banking can enhance
the resilience of financial institutions against climate-related disruptions. This approach can lead
to better risk management and more stable financial systems.

● Market Leadership:
India's embrace of green banking can position the country as a leader in sustainable
finance and attract international investment and partnerships in the green sector.

Cons on the implementation of the Green Banking in India:

● Initial Costs and Investments:

Transitioning towards green banking practices may require significant investments in
technology, staff training, and system upgrades. These initial costs could pose challenges,
especially for smaller financial institutions.

● Limited Awareness:
Green banking is a relatively new concept, and not all customers may be aware of its benefits.
Raising awareness and educating stakeholders about green banking may take time and effort.

● Regulatory and Policy Framework:

The lack of comprehensive and consistent regulatory frameworks for green banking
could create uncertainty for financial institutions. Clear and supportive policies are essential to
facilitate a smooth transition.

● Risk Management Challenges:

Evaluating the risks associated with green projects can be complex, as these
initiatives may have longer payback periods or face regulatory uncertainties. Proper risk
assessment and mitigation strategies are necessary.

● Market Competition:
Traditional banking practices may still dominate the market, and green banking
initiatives could face competition or resistance from conventional financial institutions.

● Greenwashing Risks:
Some institutions may attempt to create a green image without genuinely adopting
green practices. This "greenwashing" phenomenon can mislead customers and investors,
undermining the credibility of genuine green banks.
 ● Limited Green Project Pipeline:
The success of green banking depends on the availability of viable green projects
and initiatives. If there is a shortage of such projects, it can impede the growth of green banking
in India.

Overall, while implementing green banking in India can bring numerous benefits in
terms of environmental conservation and sustainable development, there are also challenges
that need to be addressed. Policymakers, financial institutions, and stakeholders must work
together to create a conducive environment for green banking to flourish and achieve its
intended goals.

Embedded finance

Embedded finance, simply put, is when a non-financial company offers financial

products and services through APIs and platforms. Embedded finance allows
companies to access and utilize financial services provided by third parties.
Quick and easy integration into easy-to-access digital interfaces, such as apps,
digital wallets, rewards programs, insurance, and more is making embedded
finance highly attractive to businesses and consumers alike.

There are several specific types of embedded finance:

● Embedded banking (also called Banking as a Service or BaaS - more on

that here/below) is when non-financial companies offer banking services.
● Embedded payments is when non-financial companies offer payment
services, such as Shopify Payments which allows online retailers to accept
payments
● Branded payment cards are (also called co-branded cards)
company-branded debit, credit or pre-paid credit cards from non-financial
companies, mainly for loyalty programs

Embedded lending when non-financial companies offer access to lending such

as buy now, pay later (BNPL) companies like Amazon and Embedded insurance
is when non-financial companies offer insurance services, usually at checkout,
such as when purchasing concert or flight tickets.

Examples - My Starbucks loyalty app

My Starbucks, the Starbucks loyalty app, is a prime example of embedded

payments due to its successful in-app mobile payments system.The program
rewards customers with “stars” or points that can be redeemed for gifts like
complimentary coffee, bakery items and retail merchandise. Every time a
customer spends $1 through the app, he/she gains 1 star. If a customer
pre-loads money onto the Starbucks app and uses it to pay, he/she gains 2 stars.
This incentive has resulted in a US$1.628 billion source of free lending for
Starbucks, outperforming 85% of U.S. banks.
Use Cases of Embedded Finance:

There are a number of use cases of embedded finance because it solves multiple
problems for industries to offer enhanced solutions.

Education

Global policies have made educational loans easily available for one and all. At times,
students take up loans with much higher interest rates affecting their financial health.
This can lead to bad loans. With embedded finance platforms, the EdTech sector can
use in-depth analysis to evaluate a student’s potential capacity to repay loans and lend
accordingly.

Real Estate

A significant challenge of the real estate sector is its lengthy documentation. With
embedded finance, insurance, mortgage processes as well as lending can all be
integrated enabling seamless buying of houses. This can vastly transform the house
mortgage market.