Greasing the Wheels: Creating Frictionless In-Vehicle Payment Experiences on a Global Scale
The automotive industry is undergoing a significant transformation with the rise of electric vehicles (EVs) and software-defined vehicles (SDVs). In-vehicle payment systems are emerging as a critical component of this transformation by enabling drivers to seamlessly purchase features, subscriptions and services directly from their vehicles, all while providing vehicle manufacturers access to new profit pools. However, building a secure, frictionless, and globally scalable in-vehicle payment system presents a unique set of challenges for vehicle manufacturers that extend beyond technological expertise. It entails the alignment of a highly matrixed organisation on product and service portfolio, monetisation strategy, technology architecture enablement, local and global compliance and effective adoption and engagement methods for new in-vehicle payment experience.?
In-vehicle payments are not just a fad; they're a strategic necessity for vehicle manufacturers in today's rapidly changing automotive landscape. By offering seamless and secure payment solutions, they can unlock new revenue streams, create more convenient and enriching driving experiences, collect valuable data and lay the foundation for a future-proof business model. It's about staying ahead of the curve, meeting changing consumer preferences and shaping the future of mobility.??
In-vehicle payment systems can enable a frictionless experience for drivers, eliminating the need to visit external platforms or dealerships to make purchases. As detailed in our previous series of blogs, this convenience can drive impulse purchases and unlock new and recurring revenue streams for vehicle manufacturers through microtransactions and subscriptions for many ownership- and trip-related services. Additionally, in-vehicle payments can facilitate data monetisation by integrating with telematics data to offer usage-based insurance, pre-emptive maintenance or location-based services like nearby charging, coffee shop or restaurant recommendations.?
One thing is clear. Many are betting that in-vehicle payments are a huge opportunity and represent a strategic control point for surviving the tectonic shift of how vehicle manufacturers will generate profits in the future. Consequently, since 2021, both incumbent players and new entrants have begun building new organisations focused on in-vehicle payment solutions.?
However, given the early stage of in-vehicle payment platform development, most vehicle manufacturers seem to put their payment eggs into just one or two baskets, with Mercedes and Stellantis being notable exceptions (figure 1).??
This initial lock-in might make sense for kicking off the learning curve for this complex undertaking. But it also comes with significant long-term risks and potential operational problems that can be difficult to resolve and costly. ?
Payment is an ecosystem play ?
Designing, building, and operating global in-vehicle payment systems that are user-friendly, compliant, secure, sufficiently flexible, globally scalable, and economically viable. This requires deep expertise, careful planning, innovative solutions, and collaborative efforts across the own organisation and integrations with multiple payment partners. ?
Pick the right partners but avoid early vendor lock-in. To reach their full customers potential and to differentiate themselves, vehicle manufacturers must select reliable global and local partners that offer sufficient customer reach, and innovative features. At the same time, the architecture of a global in-vehicle payment system must be designed to allow for the integration and potential replacement of global and local payment providers, to allow negotiation of competitive fee and enable innovation over time. ?
No one has it all covered as no single global PSP offers the full spectrum of countries, currencies, payment methods, local systems, marketplaces and merchants, points-of-sale, tools, integrations, and customization options. Hence, vehicle manufacturers must collaborate and integrate with multiple players in the highly complex global payment ecosystem (figure 2). ?
Patchwork of local payment preferences (figure 3): Digital payments account for less than 40% in Vietnam or Germany and over 90% in the United Kingdom or the Netherlands. Similarly, the predominant local payment methods vary widely across countries and a global payment system must integrate with a wide range of local payment systems to reach their global customer potential.?
Digital and physical POS partnerships: Depending on use cases and planned revenue streams, the in-vehicle payment platform may require integrations with online marketplaces, in-app purchases, point-of-sale card reader hardware, near-field communication (NFC), and automatic number plate recognition (ANPR). Collaborate with leading POS system providers to drive standards, ensure smooth integration, and develop solutions that address specific regional requirements.?
Independent expertise: The global payment ecosystem is increasingly complex, opaque, competitive, and highly fluid. In a market, where even payment experts are struggling to stay ahead of global and local innovation roadmaps and legislation, new entrants that are betting on building a global in-vehicle payment platform primarily with in-house resources and maybe with one (or two) payment providers are bound to make costly mistakes and are potentially putting the profitability of critically important future revenue streams at risk.?
Organising for success?
Vehicle manufacturers are global and highly matrixed organizations with multiple traditional and emerging revenue streams that can benefit from in-vehicle payment capabilities. When developing an in-vehicle payment system, job one is to develop joint business goals across organisational stakeholders in regions, vehicle line management, vehicle sales, parts & accessories, infotainment, SDV features, finance and insurance, sales and marketing and managers of key ecosystem partners that augment the automaker’s own product and service offering. ?
Failure to establish a payment business strategy as a joint foundation would lead to disjointed efforts across departments and regions, and create multiple systems with higher costs, inefficient operations, high complexity to maintain or upgrade, and the risk to delay or even fail the launch of new profit pools. ?
Governance and decisions are managed by the chief payment officer, in partnership with his technology peers and the chief procurement officer. Expert advisors prepare the decisions for roadmaps and designing, building, or purchasing of the sub-systems in collaboration with key internal and external subject matter experts (figure 4).?
This organisation delivers the integrated business plan and establishes clarity on own and 3rd party products and services, pricing strategy, target countries, timelines and the associated financial goals and is the foundation for the functional and performance requirements of an in-vehicle payment system. ?
Based on the agreed business plan and technology requirements, the chief architect can design the overall technology architecture of the global in-vehicle payment platform, following critical design principles like future scalability, interoperability, compatibility, and the appropriate make, buy or partner decisions for the sub-systems, modules, and components. ?
Based on Endava’s experience from numerous previous engagements, building a frictionless payment system typically requires careful consideration of design options for nearly twenty decision domains and sub-systems, which we will address in a series of future publications.
Stay tuned for the series’ next instalment to learn more.?
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