Automakers Could Steer Fintech’s Role in the Connected Car

Today most people buy a car, pay for road tax and insurance, fill it up and then use their vehicle.

Mobility providers, governments and other players see this model changing, with some arguing that most people won’t need a car in the future. Instead of owning a car the vision is about offering integrated payments and mobility services, including ride-hailing and ride-sharing, that will operate using a pay-per-use model while enabling modal shift to different types of transportation.

With the involvement of fintech, this could shape how people use and pay for how they travel and have an impact on the delivery of value-added applications and services: e.g. for mobility and media and entertainment. More Uber-like apps are therefore likely to appear but with a difference because the future is about app experience aggregation “where different ecosystems are connected and channel, device or environment no longer create boundaries to how consumers use services,” says Darius Kumana, co-founder and chief product officer at Wrisk.

App experience aggregation

What won’t change is the need for apps to be instantly accessible. Yet the need for app experience aggregation will transform the app frame, leading to the nesting of apps. Thankfully, with 5G connectivity there will be smart web app frameworks, too, that he believes will offer rich experiences that won’t be limited to applications that have to be downloaded or pre-installed.

Edwin Kemp, associate director of mobility 2030 at KPMG comments: “Some of the OEMs have gone down the historic route of having a specific app for each customer use case, such as mapping, media and entertainment, car sharing, traffic etc. Yet They are discovering that for the consumer this doesn’t quite work, as it’s often confusing, unintegrated and inconvenient.

“Many of the OEMs are now looking to aggregate the services together as part of 1-2 consolidated apps, which is more convenient for the consumer.  There’s also much debate about in-house development of new apps (and products) versus partnering with a third party. Whilst OEMs are trying to capture some of this activity, they are increasingly cognizant that they can’t do everything themselves.”

Crossing channel boundaries

Kumana adds that “super-fast connectivity allows app-like experiences to be delivered as a continuum that crosses channel boundaries. The frontiers between different devices or platforms will fade away, allowing for a unified experience that moves with you and automatically adjusts to your environment, as you move between a desktop, tablet, smartphone, smartwatch or the display within your connected car.

“Services relating to the car, from scheduling general car maintenance to alerting the insurer in the case of an accident, to parts being ordered and service garages alerted, will all happen seamlessly through the connected car and interconnected ecosystems across providers. All this could happen from a simple tap of your smartphone, a voice prompt straight to your connected car or even just automatically behind the scenes.”  He also predicts that when autonomous cars become mainstream, the whole concept of car ownership will move from being about asset ownership to mobility-as-a-service.

App innovation

Yuan Zhang, also associate director of mobility 2030 at KPMG, explains that mobility-as-a-service is but one of the areas of app innovation. It allows the planning, routing, ticketing and payment of journeys across different transport types. He adds: “There is a push for this from a public policy perspective – to be able to promote public transport, reduce congestion, collect travel pattern data and ‘nudge’ consumers towards more sustainable ways of travelling. For consumers, it’s a way of conveniently paying for transport all in one place (potentially with cost savings) and routing around disruptions or complex transport infrastructure.”

Mark Couttie, PwC Automotive partner comments: “The ability to create and monetize connected vehicle data-based solutions such as using geo-fencing technology to ensure plug-in hybrid vehicles run in electric-drive mode in city center low-emission zones, will depend on who can access this data. Innovation is currently occurring in this space too, with companies like Otonomodo creating a cloud-based connected vehicle data marketplace.”

Monetization opportunities

“Looking forward, there are many potential monetization opportunities from connected services that will rely on advanced infrastructure. These include intelligent or automated parking with value-add services like pre-booked valeting, multi-model journeys where car travel is integrated with other modes of transport, and in-vehicle e-commerce opportunities with delivery-to-the-vehicle.”

How will e-wallets change how consumers buy and sell? Kumana responds: “As the saying goes, banks are dead – banking is not.” Yet financial services is dramatically changing, and he finds the mainstream banks and financial services organizations are only just waking up to the fact everyone can do much better “than trying to reconcile our sporadic interactions with the hole in the wall, and the paper bank statements that land in the post from time-to-time.”

Consumers’ expectations

Most consumers’ expectations have moved on. He explains they want to find better ways to ensure visibility and control of their financial wellness: “The widespread adoption of phone banking through e-wallets was the first step change followed by the internet banking revolution. Together, these services practically eliminated the need to actually visit a bank.

“Mobile payments through e-wallets will continue to grow in popularity; in fact, Worldpay estimates that 20% of the world’s population will be using e-wallet apps by 2022. As a country, the UK is processing around 5% of payments via mobile payment and is third in the world behind China (36%) and India (6%) based on data from 2017. Living in London, you can easily get by with just your phone in your hand, travelling the underground and paying for goods and services all through your phone.”

He says that in the automotive space, consumers in Asia are already using e-wallets to purchase high-value luxury items, even cars. As consumers in other markets become more confident in using e-wallet payments together with the high levels of security which come with it, the long-drawn out process of credit checks for car finance, for example, are sure to become processes of the past.”

Zhang adds: “Car companies are interested in in-car payments because they potentially offer access to massive future value pools (what people spend on their car, and in their car) but how consumers will pay in the future is still up in their air. Whether payments will be made through an account registered to the car, a car channel, e-Wallet, by using a smartphone or traditional card payments is still up for grabs.”

He, nevertheless, feels that the broader changes in the automotive industry will mean that the development of in-car payment systems may take a back-burner. This is because car manufacturers have many other strategic priorities to consider. “However, this is an opportunity for fintechs to partner with carmakers to develop something,” he believes.

Payments innovation

Rather than paying road tax, he and his colleague Edwin Kemp think that the voluminous amounts of data that will be collected from connected and autonomous vehicles, as well as from smart infrastructure, could lead to the create of usage-based payments for road. These could be facilitated by connected and autonomous cars, for example, by tracking the mileage of each journey. This would then require a payment to be made by those using them. One problem is that this could lead to less road tax being paid because they predict there would be fewer vehicles on the road.

Therefore, they say: “In order to control congestion and to make up the taxation revenue shortfall, you would potentially need to charge cars on the basis of how much they use the roads, rather than per car. So, there are issues still to sort out.”

New partnerships

The transformation of the future of transport infrastructure and the development of smart cities, in-car payment systems, mobility-as-a-service apps, and so on will be created by ecosystems that are developed across industries.

“We foresee key partnerships being forged between government and local authorities, highway agencies, roadside recovery and emergency services, and car manufacturers, car-sharing providers, cloud service providers and insurance companies”, says Kumana who believes the future models are about collaboration, “using development from other companies and start-ups to be able to move forward with greater speed and benefit from increased levels of innovation.”

Kemp and Zhang agree that success is about creating partnerships across the board. They feel that no single sector can do it all on its own. “There is now a need for OEMs to partner with insurance companies, utilities firms and charge point providers, tech and telcos – firms they didn’t previously interact with,” says Kemp. There is a need in the mobility space for access to new asset and capabilities, while permitting ecosystem players to share investment capital, other resources and risk.

New business model

Therefore, the new business model is about aggregation – a model within which fintechs can play a role as different companies will bundle together a diverse range of products and services. Much depends on who owns the customer interface though. Kemp and Zhang, therefore, advise companies to consider whether they want to play “the aggregator or ingredient role (with more value up for grabs with the former), as well as whether they have the assets and capabilities to truly be able to do so.” In many cases, the aggregator may be the automakers. Fintechs will nevertheless be able to play a role by providing a range of ‘ingredients’, from payments to finance and insurance services.