In-vehicle financing: New paths, new opportunities

Connected cars are changing the relationship between OEMs and consumers, potentially to the benefit of auto lenders. Today, cars are no longer just a means of transportation, they are an integral part of a driver’s busy life. Modern cars are expected to provide entertainment, navigation technology and the ability to seamlessly connect to mobile devices. As cars become digitally equipped, the role OEMs play is evolving. Cars: The new mobile computer Cue connected cars and in-vehicle technology. Vehicles equipped with internet connectivity are not new to the industry; roadside assistance and navigation tools have long been integrated into cars. General Motors , for one, has for many years been able to send turn-by-turn navigation instructions to customers directly in their vehicles through its subsidiary OnStar , Scott Goddard , senior manager of marketplace at GM, told Auto Finance News . OnStar, launched in 1996, also provides services for emergency response, hands-free calling, remote vehicle diagnostics, in-vehicle security and insurance. Car manufacturers know drivers want to be safe and entertained while they travel, Goddard said, adding that OEMs “prepare for all of those pieces.” “If you’re thinking about how OEMs focus their attention, there’s obviously the manufacturing and selling of vehicles, and then the next biggest thing would be the maintenance of those vehicles,” he said. “When you look outside of that, we look at how you could also improve the experience for the driver.” OEMs today are expanding beyond basic connectivity in vehicles as cars become a hub for consumers’ everyday purchases. Customers already make purchases directly from their mobile devices, and the touchscreen in their vehicle dashboards is shaping up to be no different. If vehicle manufacturers can keep up with consumers’ desire for connectivity, OEMs stand to build a path to brand loyalty, also benefiting their captives. General Motors now provides an example of the opportunities that await car manufacturers who capitalize on in-vehicle technology. A path to finance loyalty Providing connectivity allows OEMs to market to consumers, keeping them loyal to certain brands by sharing details on current finance and lease deals, Goddard said. “We’re looking at the different opportunities there are to provide the best content at the right moment for the customer. These types of in-vehicle platforms are just another channel through which we can do that,” he noted. “We could say, ‘we noticed you just pulled into a GM dealership. We just sent you some more information about what’s going on today’ or ‘click here to see a tutorial of what we’re doing for new buyers today.’” Connected cars can generate customer-centric data that OEMs and auto lenders can use to identify key trends, optimize experiences for users, troubleshoot car issues and target specific customers for new services, according to a Jan. 9, 2020 study by Qualcomm Technologies . Qualcomm provides car-to-cloud technology for OEMs and suppliers. “Using these insights, automakers are well positioned to design unique experiences that are personalized for the driver, the passenger and the car. And by better understanding and segmenting the customer, manufacturers can create new revenue opportunities with targeted services,” the study said. Cars as payment vehicles Beyond their interactions with OEMs via the dashboard, consumers are beginning to make purchases directly from their vehicles. Drivers often stop by restaurants or gas stations to make purchases on their daily commute, opening the door for OEMs to provide a service. “As somebody’s driving, it’s paramount to anything we do that we keep the driver focused on the road and being safe,” Goddard said. In-vehicle payments are the next step in that evolution. The global in-vehicle payment services market, estimated at $2 billion in 2019, is expected to grow 20% by 2027, according to a September 2020 report by Grand View Research . North America held 39% of the in-vehicle payment services market in 2019, largely because it has the highest penetration of connected cars. General Motors is joined by Ford , Mercedes-Benz , BMW , Honda and Jaguar Land Rover , which all recently adopted in-vehicle payment services, according to Grand View. “If you look at where people are driving and what they’re doing, you want them to know that they’re prepared for their arrival to wherever they’re going,” Goddard noted. “There’s this natural synergy between our motivation to do that, and what the actual merchants or retailers were looking to do in creating a digital ecosystem as well.” Connecting retailers’ mobile apps with customers’ in-vehicle systems then becomes crucial to creating a safe, productive experience on the road, Goddard said. Connected cars can, for example, offer menus and ordering capabilities directly on digital dashboard screens, allowing customers to have their food orders ready before they arrive at a restaurant, Goddard told AFN . It’s an option especially important in the age of COVID, when customers do not want to dine indoors. Payment service providers such as PayPal , MasterCard and Visa are partnering with OEMs to integrate payment methods in vehicles for services such as parking, dinner reservations and hotel stays, according to Grand View. Still, the payment liability remains with the merchant, Goddard said, adding that General Motors allows customers to connect their car’s digital interface with merchant apps. “GM is not in the payment world, we’re just facilitating that connection,” he said. “As a company, we’re staying out of all that payment liability.” Need gas? Pay from your car While dining is a top spend for in-vehicle payments, fuel service is also growing, Goddard said. “Fuel, as an industry, was primed for innovation and technical transformation, because there is a gas station on every corner. Fuel companies were really trying to figure out how they could drive loyalty and create a better experience than the gas station across the street,” Goddard noted. “From a customer experience standpoint, the experience itself is a bit archaic.” By connecting their preferred gas station app to their car’s interface, General Motors drivers can pay for gas right from their cars, without paying at a pump or inside a store, Goddard said. Many fuel providers already offer the ability to pay for gas from their own mobile apps, setting the stage for OEMs like General Motors to bring that step right into the car. “We took the same technology that they would use for their mobile app and enabled that in GM vehicles,” Goddard said. “You’re basically using your car as payment.” For example, if a driver has already connected their gas station app to their car’s app interface, an alert will pop up asking to pay for fuel when the driver pulls into a gas station, Goddard said. Once the driver confirms the payment and pump number, the payment is processed, and the driver can begin fueling. “You’re paying for fuel with maybe two taps on the dashboard. It’s a better experience than what you get if you’re using your mobile app or putting in a credit card,” Goddard said. “It’s safer, it’s faster.” Eventually, General Motors hopes to allow users to pay for fuel simply by driving up to the station, with the car automatically processing the payment, Goddard said. “We’re constantly looking at the data and trying to build these services,” he added. Mercedes-Benz, too, is working this year to integrate fuel payment options into cars, and allow all payments to be done via the digital store within the vehicle, Mathias Vaitl , head of Mercedes me and digital service business, told AFN . “Our vision is that when you sit in your car, you don’t need your mobile phone anymore. Whatever you do, you can do within your car,” he said. Adopting in-vehicle services is not without challenges. Manufacturers must factor in data storage and security risks, according to Grand View. The lure, however, is in the opportunity to connect directly with consumers. “Merchants want new customers; they want a better experience. And we want to provide the best possible, safest experience in our vehicles. It’s a good marrying of the two,” Goddard said. This feature originally appeared in the February issue of Auto Finance News , available here . Auto Finance Innovation Summit, the premier event for technology in auto finance, returns March 16-17, 2021, as a virtual experience. The virtual experience will offer the quality networking and education of past events, all through an online platform. To learn more about the 2021 event and register, visit www.AutoFinanceInnovation.com .

In-vehicle financing: New paths, new opportunities

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