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In-Vehicle Payments: The Need for Industry Collaborations in the Growth of the Market

A new study from Juniper Research has found that the value of in-vehicle payments, where a payment is made via embedded vehicle systems, will reach $86 billion in 2025. This dramatic growth will be driven by increased partnerships which are improving the availability of services, particularly in the fuel and smart parking segments.

Nick Maynard, lead analyst at Juniper Research, is the companies resident expert on fintech, payments and financial markets, with 6 years of experience working in the market research and utility sectors. Here, Nick discusses some of the risks associated with in-car payments, and why industry collaboration is needed to increase security and evolve the market. 

Over the last ten years, much of the technological change around cars has been focused on internal systems, but this has transitioned to include connected cars- where the vehicle has internet access enabling several different use cases.

In terms of the automotive industry, the IoT has enabled the creation of applications that can be integrated with cars and trucks. This has led to the development of the concept of the IoV (Internet of Vehicles). IoV can be used to collect, transfer, manage information, and integrate data from car/trucks. This is widely used in the haulage, trucking, freight delivery and shipping sectors. These business sectors need time identification, tracking, management software applications. It is within these sectors that IoV has significant applications and business uses.

A key new development is the introduction of payments to the connected vehicles concept. This new opportunity requires a new approach, with collaboration between vendors being highly important.

In-vehicle Payments: Market Landscape

In-vehicle payment services crucially enable automobile drivers to purchase from their car dashboards without utilising smartphones or other devices: the vehicle will facilitate the payment itself.

The high cost of embedded systems, as compared with integrated systems, is hindering the in-vehicle payment services market. Integrated systems are popular, with both Android Auto and CarPlay widely in service, and these both including wallets (Google Pay and Apple Pay), meaning that there is reduced impetus to introduce these services directly into the vehicle.

The in-vehicle payments landscape faces several security and vulnerability issues, which could put at risk personal data and financial information such as card number, PIN, and CVV (Card Verification Value). As this is a relatively unknown area for payments, this risk is highly important. This inherent risk aspect is likely to play an important factor in limiting or affecting the development and growth of in-vehicle payments. As such, this is why automotive manufacturers need the involvement of established payments companies like Visa and Mastercard, which are experienced in dealing with payment security and can introduce features such as tokenisation.

North America is expected to see a large growth in terms of in-vehicle payments services, primarily due to the presence and cross-industry collaboration of the two largest payment providers, Visa and Mastercard, and also to the presence of three large automobile companies, GM, Ford and FCA. These vendors are all already exploring in-vehicle payments; demonstrating that, despite the challenges, there is strong potential for in-vehicle payments services.

The Need for Industry Collaboration

In order to fully capture this revenue opportunity and develop in-vehicle payments use cases, industry participants need to provide automobile drivers/owners with a secure and seamless payment infrastructure by developing advanced in-vehicle payments technologies. This requires firm industry collaboration to explore fully.

The market landscape for in-vehicle payments has begun to develop, with major collaborations between car manufacturers, credit card payment companies and IT companies. For example, as early as 2016, Mastercard partnered with General Motors and IBM to integrate payments into OnStar Go, an AI-powered version of the General Motors’ OnStar system. This allows drivers/passengers to make payments for goods and services using credit and debit cards within their Masterpass wallet. In the in-vehicle payment industry, there have been several collaborations over the last few years in terms of actual in-vehicle payment services. In the current market landscape, main payment providers Visa and Mastercard, as part of their corporate strategy within IoT, have started to implement this process by forming extensive partnerships.

A major aspect of the main payment providers business strategy within connected cars payments is to integrate or create a more standardised in-vehicle payment infrastructure/system, as there are presently many different infrastructure systems available.

Evolving Payment Models in Automotive

The automotive payment industry has been evolving over the last five years, with a significant number of major petrol stations enabling consumers to pay for fuel with a mobile device while in their vehicle. An early pioneer of the above was developed by Shell in 2015, called Shell Fill Up & Go or Shell Pay at Pump, a mobile fuel payment service where drivers can pay for fuel on their mobile quickly and easily from inside their car. We should note that these developments cited above are not within in-vehicle payments, as most transactions are undertaken using a mobile device. However, they show that payment models within the automotive industry are changing, and further evolution towards in-vehicle payments is highly likely. Additionally, transitioning from a mobile app system to an in-vehicle one is largely dependent on merely changing APIs, which is not highly complex.

Current Industry Partnerships

There are currently several industry collaborations within the in-vehicle payments landscape to expand or develop new technologies into other forms of in-vehicle payments services. An example of one such collaboration in 2019 was between Visa and SiriusXM Connected Vehicles Services. The collaboration’s objective is to enhance the way customers spend their time in-vehicle. This included an in-vehicle payment solution, SiriusXM e-wallet, which is designed to integrate into the dashboard and allow drivers and their passengers to shop and pay for coffee, find and pre-pay for gas, locate and pay for parking, purchase movie tickets, and pay tolls. Users activate and authenticate payments with their Visa account using biometric authentication, which helps in eliminating driver distractions. This collaboration is being marketed to major automobile manufacturers within the connected car market, primarily in North America.

The current in-vehicle payments landscape is also bringing in other industry participants within an area that appears to be the most commercially viable, which is pay-at-the-pump. An example is the Honda and Visa partnership, which includes other firms such as Gilbarco Veeder-Root (a fuel pump manufacturer) and IPS Group (a parking products provider) to install beacons that will communicate with an equipped Honda vehicle via Bluetooth, in order to complete payments through a Visa Checkout integration or smart dashboard.

These industry collaborations will enable value to be unlocked in the market. The value of in-vehicle payments, where a payment is made via embedded vehicle systems, will reach $86 billion in 2025, up from just $543 million in 2020. This dramatic growth will be driven by partnerships which are improving the availability of services, particularly in the fuel and smart parking segments.

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