Integrating Digital Payments into Vehicles

The next major step for connected cars is about integrating payments.

By essentially making the car a payments platform, people – both drivers and their passengers – will have the ability to pay for their groceries, fuel, parking and for drive-throughs without leaving their car seats. This also means that there will be no more winding down car windows to stretch over to pay for a parking ticket or to give money to an attendant at a road toll, or even to a machine at one. Moreover, the digitalization of in-vehicle payments will also end the need to fumble around for one’s wallet or smartphone.

The aim is to use the increasing intelligence and connectivity of vehicles to create a seamless experience for drivers and their passengers. So, from a driver’s perspective, this could include knowing that your car is running low on fuel and the ordering the right amount at the nearest gas station, and then being able to automatically pay for it (albeit with the safeguard of using a button to confirm the transaction on the driver-interface to prevent fraudulent or mistaken transactions).

EV market opportunity

Wejo says this potential opportunity have been driven by the EV car markets because it suggests that automakers are being forced to build to re-design vehicles from the chassis up. Subsequently, they are having to reinvent onboard systems to be more driver focused.

Eric Tyree, senior vice-president of product at Wejo, says it is occurring because of the move from cash to contactless cards and then to the ability to pay for almost everything through our smartphones. He argues that digital payment capabilities in connected vehicles are a natural extension of this trend, saying: “Why can’t automatic number plate recognition (ANPR) be used for transactions?” That is already possible but payments may also be taken for parking when, for example, car park charges have been dropped. This could be resolved by putting safeguards in place.

More to the point, he highlights that while in-vehicle digital payments represent a major opportunity, progress towards them will be different between EVs and ICE vehicles. Each vehicle type, he says, is focused on different users and manufacturers. Payments started with Tesla, which has created an in-car payments standard for the EV market. Owners and users spend much time charging their cars, creating an opportunity to have the ability to make payments for things beyond charging and parking. After all, it takes much longer to ‘fill up’ an EV.

ICE payments contrast

In contrast, because of the speed of filling up a gas tank, the same opportunity doesn’t exist – certainly not in the same fashion. However, there are still opportunities to have in-vehicle payments for paying for tolls. For example, Tyree says there could be an opportunity to pay for a toll through the windshield, or automatically, upon passing it on an express lane. “These are types of transactions that are very natural for a car to be able to handle,” he says before providing another example whereby you want to order a pizza while refueling. With the right system in place, he believes the car should be able to purchase it and direct the vehicle through navigation without entering location details.

He adds: “Transactional systems that go through the car without having to go through a phone will become a feature people look for in a car as part of a more frictionless experience. Drivers need to be able to perform an action on a car screen in two clicks. Typing on the screens is fiddly, so transactions must be very simple. EV designers have more of an advantage starting from scratch to design a platform that allows drivers to easily interact with the interface.

“Whereas ICE designers, who are more likely working with existing platforms, are going to retrofit to some extent. Both ICE and EV still have to think about what kind of software they need for a frictionless and more convenient transaction interaction to compete with a mobile phone. In-car payments are only a convenience if more useful than a smartphone.”

Payments convenience

Nico Kersten, CEO of Mercedes Pay thinks this could be called revolutionary, or simply the next evolutionary step: “According to the study Global Trends in Automotive & Financial Services, customers see the greatest advantage of in-car payment in the convenience and ease of everyday life. More than half of the potential users see in-car payment as a brand’s significant competitive advantage compared to other market participants (USA: 68%, Germany: 55%; China: 76%). This shows the demand for features like native in-car payments.”

Maintaining control

Oleksandr Odukha, vice-president of delivery of automotive at Intellias, says in-vehicle payments need to be seen as a whole because there is a need for control in the way that Google and Apple have through their app stores. This is because there is a need to optimize purchases, allowing both drivers, for example, to pay by clicking one button on their smartphone or in-car screen. This works very much in the same you can complete a transaction with Amazon.  He comments: “You ideally want integration with charging stations and gas stations. Revolution is when you throw away everything you had, and then build something new. Concept-wise it’s a revolution for automakers but, for you and me, it’s an evolution. It depends on perspective.”

Kersten also stresses that it’s not entirely true to say that the opportunities for in-vehicle payments depend on which powertrain the vehicle has, stating that all these vehicles permit the purchase of digital services in the in the Mercedes me Connect Store with Mercedes pay+. “In the course of the year, payment by fingerprint for fueling will also be possible for these vehicles with combustion engines,” he claims.

Fast updates

Despite this Odukha, who doesn’t like to use the term ‘payment platforms’ about connected and autonomous vehicles because they are in his view payments devices, adds that the integration of payments requires an ability to make fast updates if you want to sell something. He suggests that online shopping experiences are more straightforward than offline shopping experiences because it just involves a few clicks.

He adds: “With the cars that are currently on the road, you often don’t have over-the-air updates. That can’t be done in an evolutionary way. Major OEMs have been working on new platforms to allow over-the-air updates and to create a payments platform. To achieve this, you need to re-design the approach to get what Tesla has with two-way updates. However, Tesla hasn’t managed to convert the car to a revenue stream yet. So, OEMs have been forced to build a new platform to permit OTA updates.”

Payments ecosystem

While it’s also quite easy to focus on screen dynamics and usability, or streamlining the user interactions, it’s worth remembering the need to consider how drivers and their passengers can interact with the payments ecosystem. Automakers may choose to own their relationships with each supplier or interact through a broker. Tyree believes that’s where the real thinking needs to be.

“The organizations that are going to win are those that design the payments and monetization well to be able to quickly scale it to meet changing demand,” he explains before commenting that it’s about the commercial relationships with ecosystem participants and how you deliver value to the passengers and customers.

Future of payments

How important will in-vehicle payments integration be over the next few years to automakers and their partners? Odukha thinks such a prediction is much like gambling because we don’t know when the integration of in-vehicle payments will become significantly important. However, from a strategic perspective it will become vital and even more so within the next 20 years. In a decade’s time he sees vehicles being able to offer integrated in-vehicle payments in cars. Nevertheless, he doesn’t foresee that there will be any worldwide in-vehicle payments integration.

Although in-vehicle payments integration will be seen as a big plus in developed countries, he assumes that it will be delivered in specific countries and then, incrementally, more counties will be added. Over the next three to five years he doesn’t think they will be critical, although they will eventually become so.

He concludes by suggesting that digital payments aren’t the goal. Instead, the goal is to create a revenue stream through in-vehicle digital payments integration. So, the long-term trend is definitely in favor of them and this leaves the questions of how and when they will be integrated. Different approaches may emerge initially. However, there will be a need for increasing consolidation and integration, so that if a vehicle is driven in a different country to its own, the driver can still pay.

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