Ralph Dangelmaier explores what the possibilities of in-vehicle payments mean for the customer experience and brand differentiation
Almost nine in ten Europeans own a car in their household. Furthermore, it’s estimated that the typical UK driver spends a total of four years of their life in their vehicle. With that in mind, it’s fair to say that cars represent valuable real estate for brands looking to make consumers’ lives easier while ensuring their purchases stay within the branded ecosystem.
In a connected economy, automotive manufacturers are seeking to capitalise on this opportunity. They’re on the hunt to find new ways to sell services to customers through their vehicles. And the Fords, BMWs, and Mercedes of the world are all stepping up their game when it comes to in-car payments.
Long gone are the days of paying with physical cards for services such as roadside assistance, on-demand hardware upgrades, and refuelling. Drivers can now pay for all the add-ons and after-sales services that come with car ownership through a manufacturer’s app on their phone or via the touch-screen dashboards in their vehicles.
Increasingly, cars are coming kitted out with payment capabilities already built into the vehicle software or infotainment system. This intersection between fintech and the automotive industry forms part of a wider macro-trend towards ‘embedded payments’. This doesn’t mean that the average Ford pick-up is going to become the next Knight Rider. But automotive software with embedded payments does allow drivers to pay for automotive services, without ever having to leave the comfort of their own vehicle.
The impact on customer experience
In today’s hyper-connected society, one of the biggest pain points for drivers is payments. From financing a car to paying for fuel, the payment processes used within the automotive industry are clunky and in need of a makeover. The ability to pay for all the maintenance that comes with driving, from within one’s own vehicle, is now possible. This is thanks to the advancements of in-car interfaces. Technological developments have turned cars into connected devices just like a computer or mobile phone. This means that car manufacturers can now collaborate with payment technology companies to integrate payments into their in-car systems and accompanying mobile apps.
The connection between smartphones and in-car dashboards is generally the first view of vehicles and commerce. Since 2001, drivers have been able to phone friends or use GPS services via Bluetooth. But the evolution of car software today opens the door to a much wider range of customer experiences. For example, large manufacturers like Ford are already tapping into this opportunity. The automotive giant has connected its FordPass app—which is integrated into Ford vehicles—with other information such as food and drink locations and roadside assistance contacts. This means Ford drivers can now easily access a range of value-added services, while still in the driving seat. Other use cases include locating the nearest EV charging station and, thanks to embedded payments, the ability to pay for subscriptions and add-ons chosen at their dealership.
This is a huge time saver for those who commute to work every day. Drivers are often in a hurry, and when someone spends so much of the day behind the wheel, the interconnected nature of paying through the vehicle provides both speed and convenience. For manufacturers that make this process as seamless and intuitive as possible, it can pay dividends. Not only by increasing brand loyalty but by providing carmakers with a key source of competitive difference.
The benefits for carmakers
Embedded payments allows automotive manufacturers to incorporate payment systems into their products (i.e., in-vehicle software). This streamlines payment services so that drivers can order and pay for any add-ons using one central channel such as an app or the in-car infotainment system. Critically, customers no longer have to be rerouted to another payment gateway at the point of sale. This both encourages and makes it easier for drivers to purchase on-demand hardware upgrades, roadside assistance, regular maintenance checks and more.
The interconnected nature of paying through the vehicle provides both speed and convenience
This might not sound like a big deal, but the market value of embedded payments in the US is expected to reach US$$2.6tr by 2026. That’s a three-fold increase on today’s levels.
BlueSnap research shows that of the non-financial companies already taking advantage of embedded payments, nearly half (48%) are doing so to gain a competitive advantage over their counterparts. Others are embedding payments to have better control over payment efficiencies and open the door to profit from new revenue streams.
The challenges of embedding payments
As manufacturers move to process or facilitate their own transactions, carmakers can bring the entire customer journey under one hood. This is the big selling point. Redirecting customers to a separate channel can create an overwhelming level of friction that can derail consumers’ intention to buy. Convenience and ease are the name of the game and businesses that offer this will earn customer loyalty.
That said, becoming a registered payment facilitator is no easy feat. It means building the required infrastructure, developing the software and acquiring the associated banking licenses. This is a complex process that requires detailed institutional knowledge and millions of dollars to succeed. Rather than taking on this sizeable administrative and financial risk burden, there is another way. Automotive firms can choose to work with a pre-licensed payment partner to embed payments into their interfaces. By doing so, they can earn revenue off payments faster, with zero hassle as the payment partner manages all the technical underwriting required in the background.
Looking ahead
So far, embedded payments have already take off in industries such as education, the charity sectors and healthcare as firms look to digitise their operations and improve the user experience. Undoubtedly, in-car software and the automotive world are the next frontier as vehicles become smarter and make up an increasing part of our digital footprint.
As embedded payments start to give carmakers a competitive edge, more manufacturers will race to adopt the technology and collectively drive the customer experience forward. In-vehicle payments might seem like a far-out concept. But with leading brands like Ford and others releasing intelligently-connected vehicles—and partnering with paytech firms to accelerate innovation—the future is already here.
About the author: Ralph Dangelmaier is Global Chief Executive of BlueSnap