With the chip shortage fading, in-car payments gain speed | PaymentsSource

After a lull during the chip shortage, payment companies are looking to boost in-car commerce.

Dania Maxwell/Bloomberg

After the global chip shortage put the brakes on technology that would allow drivers and passengers to shop from their dashboards, banks and payment companies are taking another shot at in-car commerce.

JPMorgan Chase, for example, plans to expand in-car shopping beyond the parking and fuel payments. The bank’s new special strategic report on overall financial services says that “once drivers and passengers become used to buying driver-related services from their car,” they will begin to view the car as a “twin” for their smartphone and begin using their automobile for broader travel-related purchases. 

The idea is that a fully connected vehicle would allow the driver to order and pay for food, lodging, or other travel needs while using payment credentials stored within the car. In time, as vehicles become autonomous, drivers will be able to conduct any business from behind the wheel.

“With cars being a digital device, they also form the basis for data collection, with a potential of expanding into leveraging data for monetization and turning the car into a ‘living device’,” said Ali Almakky, global head of mobility payment solutions at JPMorgan Payments. 

JPMorgan is motivated by the end of the chip shortage that challenged the auto industry over the past few years. The bank in April led an auto industry outlook that said the chip shortage is “all but over,” and projected auto manufacturing will increase 3% over the next year. 

Auto manufacturing got caught in the pandemic’s rush to buy devices. As consumers bought more personal digital devices, that demand soaked up the supply of computer chips. This hurt the auto industry, slowing both the production of cars and the development and deployment of in-car technology such as web connections. 

“The chip shortage had a huge impact on the growth of in-vehicle commerce. However, the consumer adoption of these experiences grew tremendously,” said Julius Alexander III, head of emerging payments at Discover.

As a result, the momentum toward adding digital commerce to web-connected cars in the late 2010s suffered, but consumers were still interested in the concept, Alexander said. 

JPMorgan, which acquired a 75% stake in Volkswagen Payments in 2021, is offering a sandbox for clients to develop new use cases for in-car commerce and application programming interfaces to connect the car’s technology to the client’s infrastructure. JPMorgan partner Shell, for example, is determining how to mix in-car payments with other digital payment types and non-fuel services such as restaurant ordering and entertainment downloads depending on consumer preferences in different markets. 

Other emerging use cases include remote software upgrades, enhancing headlights or locating and accessing chargers for electric vehicles. 

“What we see as a result is that equipment manufacturers are building propositions in which they find multiple ways of direct customer engagement and various services that they can offer,” Almakky said. 

In-car payments are part of a progression away from static points of sale toward phones and other web-connected devices. The migration includes paying with watches, for example, which is already commonplace today, according to Zil Bareisis, a senior analyst at Celent.

“Think of Apple Watch, Fitbit Pay, or Garmin Pay, all of which rely on the same tokenization technology that powers mobile wallets,” said Zil Bareisis, a senior analyst at Celent. “And while in-car, ‘connected fridge,’ and other types of [Internet of Things] payments are being adopted slower than some predicted, there are unique and powerful payment experiences being developed all the time.”

To facilitate more payment options, Discover is increasing its focus on authentication and risk management by integrating the car’s security system with payment authorization, Alexander said.

“We are working on ensuring the cardholder is actually the person completing the transaction,” Alexander said. “We can connect with a lot of partners, but we’re also trying to keep up with the pace of new entrants.” 

The automotive digital cockpit market, which measures the sales of technology for in-car usage, is expected to grow from $23.8 billion in 2023 to more than $50 billion in 2030, according to SNS Insider. The growth is being driven by the features that vehicle manufacturers add as differentiators, as well as the anticipation of autonomous driving technology, SNS reports. Self-driving systems free up the driver to shop and make purchases while the car is in motion. 

The in-car commerce market, which more closely measures payments from inside vehicles, is expected to grow even faster. About $1.5 billion in payments were made from inside cars in 2021, a volume that’s expected to hit $89 billion by 2026, according to Juniper Research

“The simplicity of digital payment acceptance is driving immersive shopping experiences, and in-car commerce is no exception,” said Rob Cameron, Visa’s global head of acceptance solutions.

Bank technology company Fiserv recently entered into a partnership with Sunoco that uses an API to connect different digital payment types at gas stations, including in-store, in-app, at the pump and inside the car. 

“We are also on the cusp of fully autonomous driving, which will present merchants new opportunities as consumer behavior and new commerce models arise within autonomous vehicles,” said Scott Mackay, vice president of Carat Connected Commerce at Fiserv. 

As the auto industry evolves and electric vehicles become more commonplace, their ability to purchase power digitally will be a stepping stone to other forms of commerce, MacKay said. “Digital payments and apps will create a canvas to further loyalty, embedded financial tools, EV charging and other solutions through the car.”

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