The in-vehicle payment market is considered relatively new with some of the first mentions of its potential in 2017 when researchers started tracking this business segment. The first signs of this new payment method appeared in 2016.
Current and Projected Growth
Now, according to research firm Technavio, the global in-vehicle payment services market is set to increase by over 195% during the period from 2017 to 2021. According to Juniper Research in a report on IoT in Finance, the largest segment of the IoT market will be automotive by 2021, “accounting for $63 billion in transactions that year, 55 percent of the overall market.” The U.S., China, and Germany are listed as the countries with the largest in-vehicle payment growth.
Trends Behind In-Vehicle Payments
The research firm has cited many reasons for the growth in in-vehicle payments. More consumers are looking for smartphone integration because they enjoy the convenience of pairing their smartphone with their vehicles for calls and texts, contact information, entertainment, and music playlists.
Ganesh Subramanian, a lead analyst at Technavio for automotive services research, noted, “Apple's car integration CarPlay and Android Auto are widely used by automobile OEMs. They allow drivers to connect their smartphones to the car infotainment system.”
Another trend is the demand for mobile payment methods. Consumers enjoy the flexibility of paying from their mobile devices through mobile wallets and on-demand apps. Thanks to Bluetooth and near-field communications (NFC), it’s become easier to offer mobile payment methods.
Also there is the continued progression of the connected vehicle and autonomous vehicle environments, which highlight the radical changes coming for the travel experience.
Now, take those trends and combine them, and you have the in-vehicle payment services marketing.
As with most new opportunities and technological advances, challenges also appear. Primarily, the challenges with in-vehicle payments is the complexity of the infrastructure design, technology issues, and security concerns.
Infrastructure design includes creating an accessible user interface for the vehicle that is simple to use and doesn’t distract from driving. It also must be discreet so that key information doesn’t appear visible to others who might use the payment data for criminal purposes.
The growth in connectivity solutions and integration capabilities have also made the overall system more complicated. This includes the addition of telematics technology and more sophisticated infotainment systems.
There is also the challenge of getting consumers to be on board with the idea of in-vehicle payments. Security concerns and overall confusion about how these payment methods work must be overcome to achieve mass adoption.
More Vendors and Partnerships
To address these challenges and grow the in-vehicle payment market, more vehicle manufacturers, original equipment manufacturers (OEMs), payment companies, fuel station companies, and tech firms are putting their heads together to develop solutions.
Partnerships include Jaguar Land Rover and Royal Dutch Shell, General Motors along with Mastercard and IBM, and Honda with Visa, Mastercard, and PayPal. Ford and other vehicle manufacturers are working toward their own strategic partnerships. These partnerships are also developing the educational content to help consumers understand the benefits.
One way to increase adoption is to provide more use cases that illustrate how in-vehicle payments work.
Let’s start with parking, including meters and parking garages. Thanks to in-vehicle payment capability, a driver won’t have to search for change to feed the parking meter. Rather than leave the car to pay at a central kiosk, a driver can remain securely in their vehicle while paying from their vehicle dashboard. This helps immensely with saving time and money while traveling.
When integrated with a mobile app, the driver can then add time to the meter from their smartphone rather than have to race back to the meter. Then, there is paying for fuel, which involves a similar dashboard payment process.
More opportunities arise for other business segments from the advancement of in-vehicle payments. The vehicle dashboard can become a combination of a billboard, eCommerce shopping center, and discounts, loyalty, and rewards tracking for consumers.
For example, Ford and other vehicle manufacturers are partnering with Amazon to phase in Alexa integration in its vehicles. In addition to the vehicle commands Alexa can execute, drivers can order Amazon Prime items from their Alexa-enabled vehicles. They can also receive recommendations as well as order from Amazon Restaurants. Other options include using in-vehicle payments at drive-through restaurants.
All these use cases and partnerships project a new payment market that is evolving and adding another layer of opportunity for a wide range of businesses and retailers to engage with their customers.