How connected cars will catapult growth in mobile payments

Dheeraj (Raj) Soni, President – Payments

The rapid acceleration in the number of connected vehicles travelling the world’s roads over the next ten years brings a wealth of opportunities for mobile payment providers which can successfully embed their solutions into the dashboard.

Gartner estimates there will be 60m connected cars a year produced by 2020 while Counterpoint calculates 286m will hit the road between 2019 and 2015. Most business and consumer buyers will initially be attracted by vehicle diagnosis, safety and security improvements, and predictive maintenance capabilities. Counterpoint Research estimates that global revenue from connected car OEM services – included navigation, infotainment (music, social media, news etc.), emergency assistance and diagnostic services - will exceed US$24bn by 2025.

But the same cellular network connectivity that underpins those features can also be harnessed for a range of other services. Those include access to mobile payment platforms that allow drivers to buy fuel, parking and other products on the move, facilitate payments on ride-hailing apps like Uber and Lyft, or manage charges for car-sharing services. Other suggested use cases involve embedding medical sensors in seats that monitor the health of the driver during the course of the journey which can be monetised by insurance companies and healthcare providers.

Over the long term, mobile networks may also deliver the intelligent transportation systems which power autonomous electric vehicles leading to further opportunities around mapping, recharging and other services such as taxi hire fees and location-based advertising.

The total value of transactions purchased through connected cars will inevitably increase as more drivers discover the convenience of being able to buy goods from behind the wheel. According to Juniper Research’s IoT in Finance: Payments, Insurance & Banking Opportunities, Transaction Forecasts 2018-2023 report, in-vehicle payments for fuel and tolls, as well as navigation, multimedia content and features on-demand will total roughly US$63bn or 55% of the US$114bn total by 2023.

Research compiled by PYMNTS and Visa published last year found that estimated that 135m commuters in the US already spend a collective US$212bn a year as they travel between their homes and workplaces, mostly via voice assistants like Amazon Alexa or Google Home installed on their smartphones or other portable digital devices.

Multiple suppliers in the ecosystem – including vehicle manufacturers themselves – are already working hard to develop solutions designed to source and expand ancillary revenue from OTT content services. Jaguar introduced an in-car payment system in 2017, allowing drivers to pay for fuel through an embedded Shell payment app, later adding support for other mobile payment methods including PayPal, Apple Pay and Android Pay. British Petroleum has its own mobile payment app too, that allows customers to purchase fuel through linked Visa, Mastercard and AMEX accounts.

Honda’s forthcoming Dream Drive in-car infotainment system will give drivers access to a range of voice-controlled services through the vehicle dashboard, including the ability to pay for fuel, parking fees, cinema tickets and take way food and drinks. The Japanese car manufacturer originally teamed up with Visa on mobile payments and has since expanded the ecosystem to include Mastercard and PayPal whilst signing additional merchants up to the platform.

Hyundai is also working to develop a connected car platform through a partnership with software company Xevo that will initially test mobile payments through Google’s Android Auto smartphone interface before embedding the same software functionality in its Blue Link infotainment system.

Banks, online retailers and content providers are also preparing to make the most of anticipated market expansion. Visa introduced its Connected Car platform in 2016 and has forged a partnership with General Motors (which owns Buick, Cadillac, GMC and Chevrolet). Apple is collaborating with SiriusXM to develop a connected car eWallet, while Google intends to connect Google Assistant and Google Pay into car systems.

Amazon’s Alexa Auto software development kit (SDK) will allow users to connect Alexa skills to their car using its audio jack or Bluetooth connection so that drivers can make purchases in the same way they do now using Echo smart speakers in the home. The company is already working with automakers including Ford, BMW and Toyota to embed the capability in their vehicles.

Mobile phone makers are jumping in the fray, with Samsung’s acquisition of Harman International in 2017 providing a way to integrate the Samsung Pay eWallet app available on its Galaxy smartphones and wearables into the Harman Ignite connected car platform.

In contrast, the use of direct carrier billing (DCB) for in-car mobile payments is currently limited and still anchored to the smartphone. One example is the partnership between Paythru and Fonix in the UK that allows drivers to pay for parking via DCB. In Poland Digital Virgo connects mobile operator Play and SkyCash to its DCB solution DV Pass, allowing users to order parking via SMS and pay through their mobile phone bill.

If they are going to build on that opportunity and stake their claim on a market poised for rapid growth, telcos and mobile network operators need to quickly foster close relationships with vehicle manufacturers, merchants and specialist mobile payment platform providers, and work out ways to sell their own digital content into connected car dashboards and infotainment systems.