The evolving in-vehicle payments landscape
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Over the last few years, the automotive industry has started to intersect with multiple other verticals as it strives to deliver new experiences, and increasingly leverages software to achieve this. Building on this trend is the growing interest in enabling in-vehicle payments. This trend focuses on the vehicle’s capability to initiate a payment transaction either via credentials stored in the direct vehicle or through verification of a user to initiate a cloud-based payment. This blog builds on the in-vehicle payments article we published last year, exploring the growing interest around in-vehicle payments. In this blog, we explore why now is the right time for in-vehicle payments to become a mainstream automotive experience.
The concept of combining mobility and money is perhaps older than you would think. The first drive-through bank was opened in 1945, 5 years before the first credit card was issued. However, it has taken time for the use cases and technology to mature. This is due to the complexity of the solutions and the challenges of introducing new innovative technology into vehicles with the right level of safety and regulatory approval. A good example of this, is the time between the first proposed electronic tolls in 1959 and their first implementation in 1986. The same can be said of the banking industry, with contactless credit & debit cards first being introduced in 2005, but outside of selected Asian countries like Korea, it was 12-14 years before they really started to become dominant.
In terms of in-vehicle payments, the first initiatives started back in 2018. There was an initial flurry of activity between companies such as Honda and Visa and GM and Shell. This was focused on enabling a narrow set of use cases such as paying for fuel or pre-purchasing specific items. However, these early initiatives failed to overcome the challenges of usability, limited payment infrastructure, and the complexities of bringing radically difference ecosystems together. They couldn’t solve the challenges in a way that enabled all parties to create new revenue and opportunities.
So why is now the right time for in-vehicle payments to be successful?
Over the last 2-3 years, we have seen a number of significant changes in both how we live as well as the maturity of the solutions and the range of sensors inside a vehicle. Let’s start by looking at the concept of contactless payments. While contactless payments had been around for a number of years, the infrastructure was not yet universal. Due to the COVID-19 pandemic, the world has moved quickly to using contactless payment methods as default. Even to the point where it is now more unusual when you can’t pay using contactless methods. We have also seen a significant rise in the maximum value of a contactless transaction; making it much more viable for fuel payments or long stay parking for example.
Another important change has been the move towards placing sensors inside the vehicle, which can support driver and passenger identification and personalisation. We are now seeing a range, from voice recognition and fingerprint readers, to cameras that support face recognition. In many markets Driver Monitoring Systems will soon become a requirement for new vehicles. These technologies help to ensure that only an authorised user can initiate a payment, and therefore addresses concerns around the potential for fraud.
Building on this, we have also seen a move around the world to focus on cybersecurity for vehicles. Through standards such as ISO 21434 and regulations such as UNECE WP.29, most new vehicles will soon include advanced cybersecurity solutions. These standards and regulations provide an enhanced level of protection for sensitive data, such as user information or usernames and passwords.
Evolutions in the Human Machine Interface (HMI) within the Vehicle means that it is now possible to provide these new services, including multi-factor authentication, without causing driver distraction or requiring complex interaction flows.
Finally, vehicle users, consumer or commercial, are no longer just viewing the vehicle as a means to get from A to B. They are increasingly aware that modern vehicles contain sizable amounts of computing power, and are capable of delivering advanced experiences. As a result, they are more open to new services and solutions that will help to simplify or enrich their lives.
When you combine these social and technological developments, a very different landscape emerges to that which existed back in 2018. There are also a much wider set of use cases now within scope. These include paying for tolls and reserving slots at electric charging stations as well as using digital agents and content stores. The opportunities are further expanded when considering commercial vehicles, where the benefits of removing the need for individual credit cards or cash transactions can be significant.
Based on the above, perhaps the most significant challenge moving forwards, will not be that of user adoption, but rather the challenge of bringing together two radically different ecosystems. The automotive and financial services industries have different operating models, use different technology platforms and work at very different speeds.
Trustonic will be exploring these issues in our upcoming webinar on in-vehicle payments, where we will bring together experts from the automotive and payments industry. Register here to learn more.
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