Visa Gets Sirius About In-Car Payments

Even the most casual observer of the connected car space realizes that fully featured in-car payment technology isn’t an if, it’s a when.

What’s more a question is, what company or companies are going to dominate the segment? Perhaps the answer is Visa and SiriusXM. The payment processing giant and the satellite radio purveyor announced a collaboration at this year’s Consumer Electronics Show.

The two will team up to offer the SiriusXM e-wallet, a payment platform accessed through the SiriusXM interface in a user’s car. This user can pay in advance for a multitude of goods and services, including the usual suspects (gas, coffee, drive-thru food, concert tickets, parking, etc. etc. etc.). Ordering is done by voice recognition, while Visa’s biometric authentication technology verifies the user’s identity. Once the transaction is closed, a brief animation on the interface’s screen and a set of audio chimes inform the buyer that they now own something new.

Underlying the system is token technology from Visa. A token replaces confidential account information with a one-of-a-kind digital identifier that allows payments to be processed without exposing sensitive account details. Teaming up with SiriusXM was a smart move for Visa. SiriusXM radios are largely model-and-make agnostic, so the collaboration is a neat way to sidestep the painful automaker-by-automaker process of integrating its payment solution into every model.

Also, “SiriusXM makes sense [as a Visa partner] because their technology is OEM in so many vehicles it is close to ubiquitous,” says Adam Hollis of payment facilitation specialist Infinicept. “It is connected technology that works in the majority of vehicles currently on the road regardless of manufacture.”

Visa is an open-loop payments processor, which means that the company acts as purely the middle man between the cardholder and the merchant. In contrast to a closed-loop operator (American Express is the most prominent example), Visa does not actually loan money through its branded credit cards – the issuer, typically a bank, is responsible for this. Since Visa can’t charge annual fees, interest on unpaid balances or late penalties for same, the company depends on collecting a small percentage of every transaction it facilitates. As a result, the name of its game is volume; the more cards it has in circulation and the more transactions it middle-mans, the more money it makes.

The SiriusXM tie-up isn’t its first time at the rodeo and it won’t be the last. Visa is already well down the carmaker collaboration road. For example it has made a marriage with Honda for the manufacturer’s Honda Dream Drive – a payment system roughly similar to SiriusXM’s e-wallet. Honda’s system is integrated with a host of retailers, including gas station operator Phillips 66, food delivery service GrubHub, and Atom Tickets. Honda claims that this makes it simple for a user to order products and services from these companies from the comfort of the driver’s seat.

In short, Visa wants volume and as such it wants to be everywhere – hence its willingness to connect with both SiriusXM and Honda. We can expect to see more such alliances; just as Visa needs presence, vehicle makers and suppliers need to work with as many popular transactions facilitators as possible in order to provide extensive in-car commerce solutions.

As a result, there is still plenty of room at the table for ambitious payment processors. Lisa Ellis, a partner at research boutique Moffett Nathanson, believes that “Visa and Mastercard will certainly play a major role, as it is their technology that enables these types of payments to work.” She added: “In addition to Visa and Mastercard, I would expect PayPal could also play a role, and one or more of the major merchant-facing payments players like Worldpay, First Data, and Global Payments.”

There are numerous official relationships between payment facilitators and manufacturers and/or connected car solutions providers. Mastercard, for example, is very active in car payment tie-ups. Like arch-rival Visa it has an alliance with Honda, while some of its purchasing capabilities are baked into General Motors’ OnStar Go system.

There is certainly a lot of capital, brainpower and effort being put into vehicle-based payment platforms. Visa and SiriusXM clearly feel theirs is more than ready for the road; the two are planning on introducing it to SiriusXM’s many auto industry partners over the course of this year.

It might not be wise to get excited that we’ll be able to pre-order hamburgers, lattes, and gasoline-fill-ups on our next highway trek, however. After all, says David Huen, associate editor of industry website PaymentsSource, “there are many other Internet of Things development that interest the payments providers. In-car payments is only one of them”.

Regardless, assuming in-car commerce starts building momentum it has real potential to enter unexplored commercial territory. “If the segment takes off with car manufacturers and consumers alike, there will be plenty of opportunities for all types of partnerships for services we can’t even foresee at the moment,” Huen said.