Monetizing Connected Vehicles with In-Vehicle Commerce

Today, vehicle connectivity is nearly imperative for carmakers, but they have not yet developed a sustainable business case for it. They often bundle three months to three years of connected services with the vehicle's price at the moment of purchase, but only a few car owners see value in renewing their subscriptions after the free trial period, opting to use smartphone projection. Instead of continuously extending the free trial periods, OEMs could monetize their connected vehicle installed based via in-vehicle payments enabled on the vehicle’s Human-Machine Interface (HMI). According to ABI's report Automotive In-Vehicle Advertising and Commerce, this strategy could lead to US$3.94 billion in revenue to OEMs by 2026.

With the use of commerce platforms, car owners benefit from the convenience of in-vehicle payments, and OEMs profit from each payment transaction performed using a vehicle’s HMI. These platforms combine payment capabilities with a passive promotion strategy—nearly unnoticeable to the consumer—activated by navigation entries. After entering information into the navigation search engine, the driver is presented with purchase suggestions related to their input from enabled merchants in the form of icons or points of interest. The entire payment process happens in the background without disturbing the driving experience. The technology learns from the driver's search history and, with time, provides smart personalization. Although GM and FCA offer basic forms of these platforms today, more advanced deployments are expected in production vehicles from 2022 to 2024.

One of the main benefits is that these platforms can be implemented with existing vehicle technologies and components without major investments, and even in low-adoption scenarios, they can generate high returns. In-vehicle commerce can potentially offset connectivity costs in scenarios with large end-user adoption, but that demands a compelling digital experience to drive revenue-generating touchpoints, including frictionless safe sign-up, safe and seamless payments, fully voice-enabled functionalities, personalization via Artificial Intelligence (AI) and Machine Learning (ML) algorithms, and a large number of merchants on board with the platform.

China's adoption of mobile payment has reached such a level that cash is no longer a viable payment instrument for everyday use in some areas of the country, even among the older population. Mobile and online payment and digital wallet platforms such as WeChat Pay (owned by Tencent) and Alipay are nearly ubiquitous. As a consequence, local carmakers started enabling them via in-vehicle HMI, especially for parking and EV charging. The deployment of these functionalities has been very fast due to the faster software deployment cycles in the country, but most importantly, due to the close relationship between OEMs and internet giants in China. This also fostered implementation of in-vehicle facial recognition to provide a seamless user experience and improved safety.

Considering the comparatively advanced stage of in-vehicle payment solutions in China and the large testing environment for local OEMs, Chinese carmakers expanding abroad are looking to use this expertise as differentiation. This will bring strong competition for European and American OEMs still at the early stages of deployment. The in-car payment solutions available today have considerable friction and safety flaws. Consumers must create an account with every merchant individually and link them with their OEM account before making their first purchase, and payment methods vary by merchant, with some requesting card details during the account linking and others requiring a certain amount of funds in a bank account. Moreover, everyone with access to the car can perform purchases.

Incumbent OEMs' commerce platforms will compete not only against Chinese startups but also with the several well-established remote payment solutions available today, such as contactless cards, smartphones, and wearables, as well as smartphone mirroring. Thus, they must offer a compelling user experience to achieve the high adherence levels required for reasonable profitability.