Connected Cars and their payments will bring about a revolution

The proliferation of the Internet-of-Things (IoT) in recent years has been explosive, especially with smart home devices becoming commonplace and IoT moving into B2B use cases. IoT Analytics estimates that by 2025, there will be 30.9B IoT devices – an average of more than 4 IoT devices per person in addition all the smartphones and laptops that already enable our connectivity.¹

Of the connected devices, connected cars have become a major area of exploration for many industries – from manufacturers and software providers to enable connectivity through to ancillary industries like insurance providers and retailers whose interactions with consumers relies on the car. Not a surprise as the connected car market is said to hit $166B, with in-vehicle payments volume of $86B by 2025.^2 3

The car has gone through many evolutions as a product: Traditionally, automakers sell their cars through physical dealerships, and the cars also serve as a conduit for auxiliary businesses like insurance, gas stations, car servicing and accessories. Today, the car can help enable a new source of revenue as a ride-sharing and gig-economy tool via business models with the likes of Uber and Grab that has transformed the sharing economy industry.

Tomorrow, the Connected Car will again reshape our landscape, with implications for payments.

Consumers are looking for more convenient digital solutions to spending and this has only been heightened by the impact of the current pandemic.  Carvana has revolutionized the used car buying experience in North America by providing an online ecosystem that allows customers to browse for used vehicles, get an offer for their trade-in, secure financing and schedule the delivery of their vehicle, all from the comfort of their home.   Other solutions such as WePay, a Chase company, enables new car dealerships to sign up under their respective auto manufacturer’s WePay platform, so that consumers can go directly to the auto manufacturer’s website and make a contactless down-payment directly to the dealership. 

For additional products and services such as routine vehicle maintenance, loaner vehicles, parts and accessories can all be made on the auto manufacture’s website and the payments sent directly to the dealership.

• What strategies do you have for online virtual showrooms and do they offer the ability for consumers to make a down payments online to dealers?
• What shifts have you noticed in your consumer shopping behaviors and how are you adjusting to these changes?
• How can you further cross sell to your customers and expand your product suite?

This concept is one of the earliest explorations about the connected car – for example, Jaguar and Shell partnered up to allow drivers to use their vehicle’s touchscreen to select how much fuel they require and pay via PayPal or Apple Pay.

With its connectivity, the car can be thought of as a ‘wallet’ on four wheels.

In B2C cases, it can allow drivers to pay retailers like coffee stores, for parking space or to their bank for car installments. Manufacturers and dealerships may even consider allowing electrical charging deposits and trade-in credits to be deposited into the car’s wallet to encourage drivers to use these dollars in the same ecosystem. 

On the B2B front, the car wallet can be used by businesses to pay for their employees’ Travel & Expenses (T&E) via streamlined process, whereby employees no longer have to report their expenses separately. This could help mitigate fraud by only authorizing payments to certain types of merchants.

If you are exploring the Connected Car as a Mobile Wallet…

• How will you manage and have visibility across the different third parties in your ecosystem?
• How can you capture and optimize the in-vehicle payments data to draw insights on consumer behavior?
• What are the regulatory and compliance implications of creating a digital wallet to store your drivers’ funds?

Just as the mobile phone became a key source of eCommerce and Marketplaces, a Connected Car could serve as a marketplace and connector to multiple parties. General Motors’ Marketplace service partnership is an example of what this marketplace could look like: Drivers in connected GM vehicles can pre-purchase coffee and gas or even make restaurant reservations straight from their car.

The Connected Car’s role as a connector extends beyond the model where drivers are connected to retailers, gas stations and service providers via their dashboard. For example, media, as it looks for various avenues to deliver content to consumers, could use the car as an outlet, offering opportunities to purchase the goods displayed on the screen via contextual commerce. The car could also connect third-party suppliers to each other- similar to an Apple App Store - who can then collaborate and sell their services on the car’s marketplace.

Food for thought if you are exploring the Connected Car as a Marketplace

• How can you quickly and easily onboard different vendors to scale and encourage adoption from drivers?
• What can you deliver as part of the vendor experience to entice vendors to join?
• How will you ensure that payments in the marketplace flow easily from a payments perspective?

With more auto manufactures building vehicles that have over 100 sensors inside and around the vehicle⁴, data monetization offers auto manufacturers the ability to provide additional services to their drivers and monetize the data they collect from the driver.

Using the real-time, on-demand data from the cars, manufacturers can provide greater insights and advisory services to dealerships and drivers, helping to curate a better user experience that could lead to greater revenues, such as proactively proposing maintenance or servicing.

This monetization is not just limited to the auto industry, other ancillary industries – such as insurance, oil & gas, and retail, can leverage the car data to help generate new revenue streams and business models.

For instance, insurance companies could use this data to provide a Pay-as-You-Go insurance model, which InsurTech companies like MetroMile are exploring for a more personalized insurance service for drivers.  Insurance services (GM recently announced a service called OnStar Insurance) mapping companies and tire vendors are able to use vehicle data to offer additional services that are projected to reach an estimated volume of $450bn globally by 2030⁵.

• What strategies have you explored with the data collection via sensors in and around the vehicle?
• What security protocols do you currently have in place with the data you have collected, and have you considered monetizing vehicle data with third-party vendors?
• How has the potential for data collection and monetization factored into the vehicle owner experience i.e. customized insurance, aftermarket upgrades based on driving performance, etc?

Shared mobility provides consumers with options ranging from short-term rentals to car-sharing and car subscriptions. The current market size in the US, Europe and China is $60 billion, and is expected to grow at a compounded annual growth rate (CAGR) of >20% through 2030.⁶  As upcoming generations lean more towards usership vs. ownership, shorter term vehicle subscriptions will increase in demand.  Major auto manufactures like Toyota, Subaru, Audi and Jaguar Land Rover all offer options for car subscriptions, bypassing the traditional purchase or long-term lease options that are currently popular. Additionally, other companies such as Turo or HyreCar are offering options for vehicle owners to rent their vehicles to other drivers. 

• With younger generations favoring usership vs. ownership, what strategies have you considered to adapt to this market shift?
• How will shared mobility impact your cash flow forecasting with the receipt of lower-value payments at a more frequent reoccurrence?
• What considerations will you factor into the user experience with a mobility D2C model?

Keeping an eye on the horizon

The Connected Car economy could be a critical change agent for many industries in the next few years, especially as one thinks about the implications beyond cars to trucks and other transportation vehicles like buses and ambulances, and the impacts on logistics, smart cities and the healthcare industries. We have outlined examples of where we already see the early stages of the connected car models, and it’s important to ensure that your organization – from marketing, product, treasury, finance, to procurement - comes together to look at your connected car strategy holistically.

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