With more connected cars on the road, advances in payment technology, and expanding customer payment touchpoints, opportunities are emerging for the automobile industry.
As retailers and industries adapt to new customer expectations, the automobile industry is reimagining the potential of connected cars, in-car payments, and revenue opportunities.
New willingness to use digital wallets, such as QR wallets or contactless payments and higher customer experience expectations have emerged across demographics and continents. Today, consumers expect to interact with retailers when and where it suits them and pay in the way they prefer.
These trends are gradually transforming the automobile industry as new customer touchpoints emerge. The global in-car payment services market size was valued at USD 3,097 million in 2020 and is expected to grow at a CAGR of 16.3% between 2021 and 2028. The development of Internet of Things (IoT) technology has enabled this fast growth and changing customer behaviour during the pandemic continues to drive it. Now, car developers are integrating payment technology into cars and creating new experiences for their users.
Adding in-car payments
When the first internet-connected cars entered the market over a decade ago, in-car payments were centred around car-related purchases. Drivers needed easy ways to pay and prepay for car maintenance and repairs, parking, tolls, and electronic vehicle (EV) charging—which were logical payments to make from within the car itself.
Connected car lifestyle
With IoT advancements, today’s connected car has become part of broader lifestyle trends. Just as phones are rarely used for phone calls, it’s predicted that cars will become much more than transport.
During the pandemic, contactless curb-side pickups became the norm in some markets. As people resume commuting to work and travelling for leisure, drivers and passengers in connected cars will be buying groceries, goods, and services from their cars. And for consumers everywhere, the faster, safer, and more convenient their in-car purchases can be, the better.
By 2030, it’s estimated that 95% of new vehicles sold globally will be connected to the internet, compared with 50% today. Diverse companies are identifying the potential for connected car-related retail and are collaborating to create customer-centric services.
For example, Amazon recently introduced its ‘Key’ service for in-car deliveries, which allows US-based customers to “turn their car into a mobile locker.” Working with leading US car brands, users with a ‘Key’ can order online and Amazon delivery staff will locate their parked car in a public space, enter a security code, and leave their parcels in the car boot.
China’s technology companies are also looking at the potential for autonomous driving technology and in-vehicle app platforms to provide customers with infotainment systems that support voice communication, social media, and in-car shopping.
Potential for new revenue streams
For car manufacturers, the developing connected car ecosystem and in-car payments offer opportunities for new revenue streams.
According to Digital Drive Report 2019, 73% of commuters are connecting with the internet in their cars using a mix of digital devices and voice assistants to make purchases. With more than 135 million people in the US spending almost an hour a day in their car, Visa identified connected car commerce as a US $230 billion opportunity.
To capitalize on new trends and expand business revenue streams, car manufacturers and merchants alike are looking for comprehensive payment solutions that can connect their payment systems with IoT devices such as connected cars. Such cloud-based systems can consolidate and reflect transactions immediately, which allows the car brands to manage subscriptions and transactions for each driver conveniently. Looking ahead, companies with an open yet secured payment system are in a great position to embrace new business opportunities.
More recently, luxury carmakers including Audi, BMW, Cadillac, Porsche, and Tesla have introduced options for drivers to subscribe on a monthly or annual basis for certain in-built features, such as advanced driving assistance. The subscription-based model allows more customers to access self-driving technology. Drivers could choose to subscribe for a short time with a one-off payment for specific purposes, such as when taking a road trip, when leasing, or using a subscription model for the car itself.
1. Report: In-vehicle payment services market size, share& trends analysis report. July 2021. Grand View Research.
2. Insight article: Unlocking the full life-cycle value from connected-car data. February 2021. Mckinsey & Company