What makes a fintech truly green? New standards draw the line

Global finance is undergoing a twin transformation, digital acceleration on one front and climate-conscious investment on the other. Yet at this intersection, the term “green fintech” has become a buzzword often applied loosely, lacking clear benchmarks or definitional rigor. The result: a crowded field where genuine innovation risks being drowned out by greenwashed claims.

Addressing this growing ambiguity, a new peer-reviewed study titled “What Is Green Fintech?”, published in the Journal of Risk and Financial Management, introduces a formal conceptual framework to evaluate what qualifies as genuine green fintech. The paper delivers both a precise definition and a six-step litmus test designed to diagnose the environmental, technological, and regulatory credibility of self-declared green fintech initiatives.

What makes a Fintech product ‘green’?

The authors identify a critical gap in the sustainable finance ecosystem: the term "green fintech" is widely used but seldom rigorously defined. It is frequently conflated with broader concepts such as green finance or sustainable finance, despite important differences in intent, technological innovation, and compliance expectations. According to the study, this conceptual void hinders transparency and undermines the potential of digital finance to support real environmental progress.

The authors propose that for any fintech activity to be categorized as "green fintech," it must meet a specific threshold: the initiative must apply financial technology, such as blockchain, algorithmic lending, or digital investment platforms, with an explicitly stated and demonstrable environmental objective. Simply adopting digital financial tools or operating in the sustainability space is not sufficient.

To bring clarity, the researchers developed a diagnostic framework, a six-step litmus test, that evaluates whether an initiative genuinely aligns with green fintech principles. The test assesses environmental intention, technological application, regulatory compliance, transparency, verifiability, and climate impact integrity. This evaluative model serves as both a definitional tool and a credibility check, addressing the void of formal criteria in the current marketplace.

How does the six-step test protect against greenwashing?

In the rapidly expanding fintech sector, where innovation often outpaces regulation, greenwashing, a trend in which firms exaggerate or misrepresent their sustainability credentials to gain reputational or financial advantages, can be particularly difficult to detect.

The six-step litmus test includes rigorous screening for green claims, requiring initiatives to demonstrate measurable environmental impact rather than rely on vague sustainability branding. The framework mandates that projects have verifiable environmental goals, use financial technologies that are integral to achieving those goals, and comply with emerging regulatory expectations, particularly within the European Union’s sustainable finance regulations.

Furthermore, the test emphasizes transparency in data reporting and validation, urging green fintech developers to prioritize open disclosures and independent verification. By aligning with principles of scientific rigor and legal accountability, the framework aims to prevent the exploitation of the green label and protect investors, consumers, and policymakers from misleading practices.

This marks a significant departure from current industry norms, where self-designation often goes unchallenged. In doing so, the study not only adds methodological clarity but also positions itself as a safeguard for both the financial system and environmental integrity.

What are the implications for regulation and market growth?

As governments and regulators around the world work to integrate sustainability standards into financial systems, green fintech is increasingly viewed as a powerful lever for climate action. However, without a shared definition and verifiable standards, this potential remains undercut by uncertainty.

By formalizing a definition and providing a diagnostic method, the paper equips regulators with tools to better oversee green digital finance initiatives. It also enables institutional investors and consumers to more confidently evaluate the legitimacy of green fintech products. In a market saturated with ESG branding, such discernment is essential to allocate capital effectively and ethically.

Moreover, the framework proposed by Broby and Yang can support the European Union’s efforts to align fintech innovation with the Green Deal and Taxonomy Regulation.