In-vehicle Payments Set to Disrupt Existing Payments Systems

October 2020

Fintech & Payments

Nick Maynard

VP of Fintech Market Research

A key new development in the IoV (Internet of Vehicles) is the introduction of payments to the connected vehicles concept. Indeed, a new study from Juniper Research has found that the value of in-vehicle payments, where a payment is made via embedded vehicle systems, will reach $86 billion in 2025, up from just $543 million in 2020.

This dramatic growth will be driven by increased partnerships which are improving the availability of services, particularly in the fuel and smart parking segments.

In-vehicle payments are payments made by the vehicle, without requiring the use of a connected smartphone or other devices to handle the transaction. The three main use cases for in-vehicle payments are automated toll collection, where an account holder is charged the appropriate fee by transmission of information from the vehicle to the toll lane; smart parking, utilising sensors to ascertain the occupancy of a parking structure or level; and pay-at-the-pump, a fuel payment service where you can pay for fuel on your mobile or in-vehicle quickly and easily.

In-vehicle payments services crucially enable automobile drivers to purchase from their car dashboards without utilising smartphones or other devices: the vehicle will facilitate the payment itself. There are however several obstacles hindering large-scale adoption of in-vehicle payments. One of the main issues is the high cost of embedded systems, as opposed to integrated systems. But security as well is a concern, as vulnerability in the system could put at risk personal and financial data.

But the main obstacle is the lack of industry cooperation needed to turn in-vehicle payments into a profitable revenue stream. Indeed when industry cooperation does happen between car manufacturers, credit card payment companies and IT providers, their joint effort has proved successful. This is the case in North America, which is expected to see a large growth in terms of in-vehicle payments services, primarily due to the presence and cross industry collaboration of the two largest payment providers, Visa and Mastercard, and also to the presence of three large automobile companies, GM, Ford and FCA.

We therefore believe that, in order to support this rapid growth, established payments vendors must be included within collaborative ecosystems, to ensure that requirements such as security via tokenisation and integration with digital wallets are achieved effectively. These elements will be critical in establishing in-vehicle payments as a viable channel and, if ignored, will likely see initiatives fail to achieve widespread adoption.