Could in-vehicle payments be the next payment frontier?

The average American spends over 61 minutes a day in their car, according to the American Automobile Association (AAA) – that’s more than three years of their life! Moreover, the number is growing, almost 6 minutes up from 2020 to 2021.

As we spend more time in our vehicles and new technology abounds, the possibility arises that the car’s front seats could become the new payment arena. As cars become increasingly sophisticated, consumers will be able to pay using on-board interfaces, saving the time and hassle of holding their credit card out the window or stopping and pulling out their phone. This new limit is known as “in-vehicle payments”.

What are the benefits of in-vehicle payments?

The scope is immediately apparent. If the car runs out of fuel, it can order the right amount of fuel at the nearest gas station and the driver simply has to confirm the action on the car screen. Similarly, the car can convey payments for parking, toll roads and even fines.

The growth in the potential for in-vehicle payments has really been pioneered by electric car manufacturers, who, faced with the need to design from the chassis up, were able to reinvent some of the embedded systems and rethink what a car is for. Over the past 5-10 years, some of the most exciting innovations in the automotive industry have been driven by the electric vehicle sector. As technology continues to evolve, OEMs will try to replicate the success of smartphone makers in understanding users and usage habits.

“Traditional internal combustion engine (ICE) vehicles have rigid dashboards, but electric cars are designed with several exciting offerings,” says Phaneendra Pulietikurthi, Technology Innovation Manager for EY. “Leading models are using tablet-style interfaces in their cars to offer increased accessibility and entertainment capabilities.”

Pulietikurthi continues: “User data will help car manufacturers create car profiles. Smartphones know everything about users, including where they shop, their habits and when they go out for recreational purposes. Similarly, connected cars will use consumer data to create a profile of users, including a financial profile of what you like and even help improve your time management.”

Barriers to adoption still need to be overcome

Nevertheless, despite the exciting possibilities, there are still hurdles to overcome before in-vehicle payments can truly be mainstreamed. In part, this is a side effect of the technology being such a nascent part of the fintech picture.

“There are consumer and industry-wide barriers to in-vehicle use, but many of them are already being demolished as the technology continues to mature and established payment processing companies integrate with outside companies,” says Pulietikurthi. “For example, we’ve recently seen established automakers partner with tech giants to integrate voice recognition and virtual assistants into their cars, bringing greater value and more personalization to customers.”

Igor Kosirevs, deputy head of customer relations at payment processor DECTA, says: “This type of payment is still in the early stages of development. The technology has not yet fully caught up with demand, and there are still difficulties in approving such transactions from a payment security point of view.

“In addition, the methods of payment identification, ways of selecting items (such as voice dialing), and the inability to concentrate on the screen for long periods due to traffic hazards are factors that prevent in-vehicle payments from overcoming conventional payment methods. Perhaps most of these problems will be solved with the development of more advanced autopilot systems.”

Payments in vehicles increase security concerns

As with any financial service, safety and security are paramount. Our money is our most important resource, which is why the integrity of our payment systems is incredibly important. Add to that mix the automotive industry – one of the most safety and security-conscious industries out there, with regular and thorough testing and strict regulations, although there has been a history of things going wrong – and you soon understand why the prospect of payments in vehicle begins to turn its head.

“Security has always been a concern – especially in areas related to financial services and payments,” explains Pulietikurthi. “But the industry continues to push forward, and just as hackers become more sophisticated, cybersecurity matures and becomes much more advanced.

“One step we can take is to implement the same basics for card transactions or mobile devices for in-vehicle purchases. The growth in authentication technologies, such as biometric scanning, can also be implemented in the cockpit to increase security. However, in cases of erroneous or fraudulent transactions, there be a streamlined process implemented by the seller for consumers to report, reverse and, if necessary, be refunded.”

Igor Kosirevs believes that the encryption existing in the payment industry is already sufficient to protect against any concerns: “Payment card data protection and fraud prevention technologies are far more advanced than car anti-theft systems, so current encryption protocols together with other methods used by payment systems provide a sufficient level of protection for payment data in vehicles.”

Exciting future applications for payments in vehicles

Despite the potential hurdles, both of our experts are excited about the future of in-vehicle payments – and specifically how paying through the car’s onboard interface can make our lives more convenient and our wallets more connected.

“The next step will be to integrate payment methods into the car itself, and we are already seeing increasing demand, especially for activities such as paying for groceries. This is all possible, says Phaneendra Pulietikurthi. “Apps associated with major retailers can be integrated into the dashboard experience. Likewise, new payment features will also be security-conscious, as consumers won’t be able to use them while driving, but passengers will.”

Igor Kosirevs adds: “Cars can become part of the integration of smart homes. In this case, we can talk about online grocery shopping for the home without leaving the car, through integration with the refrigerator using “pick up and drive; system, where a standard, pre-prepared set of groceries can be selected on the road and paid for by the car. When you drive up to the store, the employee simply puts the bag of groceries in the trunk and that’s it.”

Pulietikurthi continues, “These innovations will lead to more accessibility options for non-transit passengers and drivers that will be able to integrate with apps to place orders and make purchases. We’ve all used e-wallets, apps and micro-apps in our smartphones for payments, but the next evolutionary phase is to design new Human-Machine Interfaces (HMI) for seamless, frictionless and contactless payments powered by secure integrations with financial providers.”