When we think of digital transformation within the automotive industry, we tend to consider it in terms of the omni-channel buying experience – making it easier to buy a car online and at the dealership.
But what about cars themselves becoming digital, and crucially, transactional platforms? In recent months, we have started to see vehicle commerce further emerge, with both automotive and finance companies making investments in the space.
Connected cars = commerce opportunity
According to new research from Ptolemus Consulting Group, 600 million vehicles are predicted to generate in-car transactions of $500 billion by 2030.
Of course, the widespread popularity of mobile payment means that the automotive experience is already heavily tied to commerce, with many drivers also connecting their smartphones to in-car dashboards.
In 2019, Pymts and P97’s ‘Digital Drive’ research found that motorists are driving $230 billion in commerce on their daily commutes. Approximately 35.3% of the commuters surveyed in the report used connected devices to order food from their vehicles to pick up from a drive-through, while 33.4% ordered coffee to similarly pick up. These commuters engaged in both activities approximately 65 times a year.
Alongside existing behaviour like this, consumers are also showing willingness to expand how they spend on the road through connected cars. Nearly 30 percent of survey respondents in the ‘Digital Drive 2019’ report said they would make purchases online during and autonomous vehicle commute.
Realistically, in the short-term at least, Ptolemus’ research suggests that fuel and parking is likely to take up the majority of the v-commerce market. However, there are also expectations that content subscriptions, and food and beverage and grocery purchases will also help to aid growth. Research Director for Ptolemus, Andrew Jackson, commented that, “17 car makers are already developing embedded payment solutions. Furthermore, Covid-19 is triggering a take-off in electronic payments, which OEMs can benefit from.” Combined, this means that that connected vehicles are emerging as a viable way for drivers to increase consumer spend.
Innovative payment solutions are emerging
In-vehicle payment is not an entirely new concept, with some payment providers partnering with automotive brands as early as 2016 (when Mastercard and General Motors teamed up integrate payments into GM’s OnStar Go system). More recently, in 2019, Honda unveiled its ‘Honda Dream Drive’ in-car experience in partnership with Visa, which it has since expanded to include MasterCard and PayPal.
In 2021, we are now seeing further high-profile investments in the space, and companies creating technology that can be easily integrated into connected vehicles – and through all payment networks, banks, and service providers. Fintech start-up, Car IQ, for example, recently raised $15 million in Series B funding, also announcing partnerships with financial services company Discover and Blackberry.
Essentially, this means that any vehicle connected to the Car IQ platform can be turned into a payment mechanism that will enable it to initiate and complete payments for a range of services such as service, tolls, fuel, insurance, and parking. The payments will be verified through the Discover Commercial Payments Network, while Blackberry will create a “digital fingerprint” for the vehicle to ensure security.
Elsewhere, global corporations are also showing interest in the concept. BP Ventures has just invested €10 million in Ryd – a German in-car digital payments provider – in a move that will help the company expand its position as a market-leader in Europe. Currently, Ryd is accepted at 3,000 partner service stations across seven countries, whereby drivers are able to pay from their vehicles at service stations for fuel, EV charging, and car washing through the connected Ryd app.
In doing so, Ryd’s founder and chairman Oliver Goetz, explained in a statement that the aim is for payments to become “hassle free and secure”. Further explaining the benefits of partnership, he said: “BP expects tens of millions of car drivers to move to direct digital payment systems, which are both connected to car data and to payment systems at gas stations and beyond. This new payment form is much faster, easier and more comfortable.”
Lastly, while there have recently been rumours of new in-car payment options from Tesla, other automotive brands have already developed and integrated the technology.
One prominent example is Hyundai, which is set to integrate payments into its upcoming all-electric Ioniq 5 crossover vehicle via its connected car system, Bluelink. Describing the payment system as a feature that “puts your wallet on wheels”, it enables drivers to find as well as pay for services such as EV charging, food or coffee to go, and parking. Partnering brands so far include Dominoes, ParkWhiz and Chargehub, but new merchants are expected to be added as time goes on, highlighting slow but steady uptake from both retailers and automotive brands.
Enhancing the in-car experience
So, what are the over-arching benefits? Of course, in-vehicle payments offer a step-up in convenience for drivers, but for brands, the benefits also look to be much greater.
Data is the most obvious result, with in-car payment systems giving automotive and finance brands further insight into customer behaviour (through the services they buy), which in turn, could help them determine how to better deliver services. Indeed, McKinsey predicts that, by 2030, connected-car data could add $400 billion in value for industry players.
The notion of a vehicle as a ‘digital wallet’ – meaning it has a wider and more integrated role in a person’s life – could also help to improve customer loyalty to car brands. Crucially, however, in-car transactions need to be seamless and highly automated in order to benefit the user. As Parkopedia states, success will “depend on the customer focus at the automakers. Will they put the driver first and create compelling user experiences – frictionless, ubiquitous, intuitive?”
If so, vehicle payments could help automotive brands to elevate the in-car experience, which could, in turn, create new revenue streams and improve the long-term loyalty of customers.