The connected car as a payment device
I clearly remember the time when cars had a dedicated space for coins to put into the parking meter.
Not only are the traditional coin-swallowing parking meters a rare sight today, but inflation and congestion has put parking fees way beyond the capability of coins.
Even the tipping of the self-appointed and notorious parking space pointers – unique to South Africa – is beyond coins.
Our world has become a fast-paced place where people do not have the time to stop at tolls or parking meters and count their coins. For most people, the old adage is true that “time is money”.
And time is, unfortunately, not an unlimited resource. In an era of perpetual technological advancements, the automotive industry constantly pursues innovation.
Beyond the conventional role of transporting people from one place to another, cars are emerging as the next frontier in digital payments.
The concept of cars becoming payment devices is not merely a futuristic fantasy; it’s a tangible reality that may transform the future of how we make transport-related payments.
It is all about convenience in a fast-paced world where people demand streamlined and efficient processes.
Mercedes-Benz as payment device
As part of Mercedes-Benz’s endeavour to enhance the overall customer experience, it is making its vehicles more useful by allowing customers to make payments directly from their car.
Mercedes-Benz has built an e-commerce platform into the MBUX infotainment system of some of its models since 2020 and partnered with Mastercard to allow customers with a Mercedes Me account to pay for gas or toll via the car’s infotainment system.
In fact, when the customer enters a “connected Fuel & Pay” gas station, the system starts automatically. At designated pumps, sensors calculate the total amount based on the number of litres and fuel price.
Tolls work in exactly the same way. As the car nears a tollgate, it automatically communicates with the system to calculate the costs.
In the case of parking, the car communicates with the system and calculates the costs when the car leaves the parking.
All the driver need do is use a pre-registered finger on a biometric fingerprint sensor for authentication and to confirm the payment of the calculated total.
No further interaction is needed with a person, banking app, credit card or vending machine.
The nifty feature makes the life of the driver much easier. It is widely known that vending machine at parking garages often refuse to take credit cards, in which case (possibly limited) cash must be used.
With the car as payment device and biometric authentication, the driver does not need to memorise a pin number.
Although the system was developed in partnership with Mastercard, Visa cards will apparently also work seamlessly with the system.
Connectivity as driver
The driving force behind this transformative shift is that vehicles are increasingly connected. Modern cars are equipped with sophisticated technology that extends far beyond the traditional mechanical, electronic and safety features.
Connected cars, often referred to as smart or intelligent vehicles, are embedded with sensors, GPS systems, LiDar (Light Detection and Ranging), artificial intelligence, and advanced communication platforms.
The elements allow cars to communicate with one another, with infrastructure and with external devices, creating a sophisticated network of connectivity.
The connectivity is not limited to the car’s internal systems. Many vehicles are equipped with advanced infotainment systems, touch screens and in-car internet connectivity.
The features enhance the driving experience and turn the car into a hub for various digital activities such as electronic payments.
Leveraging the connectivity
The idea of turning cars into payment devices revolves around leveraging the connectivity for financial transactions and commerce purposes.
In addition to paying for fuel, toll and parking, imagine driving up to a drive-through coffee shop or restaurant, and instead of handing over cash or a credit card, your car initiates the payment seamlessly.
And it is not only Mercedes-Benz that will be implementing the concept of the car as payment device. It is being explored by several automakers and technology companies.
The integration of payment systems directly into the vehicle’s dashboard or infotainment system will soon be a reality in most cars. Users will be able to link their bank accounts or digital wallets to their cars, enabling a frictionless payment experience.
The impact of the car as payment device
The implications of cars becoming payment devices extend beyond individual convenience.
The transformation has the potential to reshape the socio-economic fabric in profound ways. Some of the key areas that may be impacted are:
- Financial inclusion: In regions where traditional banking infrastructure is limited, connected cars could serve as a bridge to financial inclusion. People who previously had limited access to banking services could engage in digital transactions through their vehicles. However, it will not include the poor who cannot afford a car.
- Urban mobility: As smart cities evolve across the world, the integration of payment systems into cars aligns with the vision of seamless urban mobility. Parking fees, congestion charges and tolls can be automatically processed, contributing to more efficient traffic flow and management.
- Consumer behaviour: The convenience of seamless in-car payments could influence consumer behaviour and lead to impulse purchases, such as drive-through meals or coffee.
- Data monetisation: The enormous amount of data generated by connected cars could become a valuable asset. With user consent, this data could be anonymised and aggregated to provide insights for businesses and urban planners, leading to more informed decision- making and better planning.
A more cashless future?
Despite concerns about data privacy and surveillance due to the increased digitisation of transactions with cars enabled as payment devices, the concept of cars as payment devices holds immense promise.
In fact, the privacy and security issues are not very different from the use of a credit card or electronic wallet. In both cases, the collection of data related to individuals’ spending habits and travel patterns is possible.
As cars evolve from mechanical and electronic wonders to intelligent, connected entities, their role in our lives is expanding.
The prospect of cars becoming payment devices is a significant step towards a cashless future where transactions seamlessly integrate into our daily life.
The journey of innovation, however, is in its early stages. The industry must navigate through technological, financial, regulatory and societal challenges to ensure the responsible and widespread adoption of in-car payment systems.
As the automotive and technology sectors increasingly collaborate, the future of commerce may partly be driven by the vehicles we are driving.
Our cars are becoming much more than just a means of transportation; it is becoming a credit card on wheels.
Buckle up; in a sense the ride to a cashless economy has begun.
Prof Louis C H Fourie is the Extraordinary Professor in Information Systems University of the Western Cape.
BUSINESS REPORT