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The Green Sheet Online Edition

July 10, 2023 • Issue 23:07:01

Payments keep the cars running in the auto industry

By Jake Moore

The automotive industry has continually been a leading innovator, bringing together the latest technology and effective convenience for drivers and passengers. Whether through the acceleration of electric vehicle (EV) adoption or the connected car, the automotive industry is at the forefront of embracing innovations that power forward momentum.

The role of payments is an often-overlooked part of this innovation. According to McKinsey, banks and lenders are increasing their digital capabilities in order to stay competitive in the space (see https://tinyurl.com/anxsw78k). These types of payment capabilities are just a few of the ways the payments industry is making the car purchasing journey as seamless and innovative as possible.

According to a recent ABI survey, by 2030 the auto industry is expected to invest $238 billion annually into the transformation to EVs and digital transformation (see www.abiresearch.com/press/automotive-sector-leads-industrial-digital-transformation-charge-with-us238-billion-investment-followed-by-electronics-oil-gas-and-fmcg/' target="blank">tinyurl.com/3ffzks9w). With this investment, the auto industry will continue to improve on various payment capabilities including installment payments, in-vehicle payments, debit, ACH and crypto with the overall goal of helping the consumer have a better payment experience.

Creating a symbiotic auto dealer-customer relationship

As consumer payment preferences continue to change, it's imperative the auto industry similarly evolves its payment method options. Among the many ways the payments industry is helping the customer's car buying journey is through installment payments. With installment payments, the customer has the ability to pay for the car purchase over time by dividing the purchase amount into smaller equal payments.

This payment technology capability, while widely known, allows consumers to get what they want, when they want it. The evolution of consumers purchasing larger items and paying for them slowly over time has led to more big-ticket purchases. Installment payments also help auto dealers map out exactly what amount their customers owe over time for improved revenue forecasting.

In the same way, ACH helps enhance the overall experience for both the customer and the auto dealer, offering a faster and easier way to pay and a clear and verifiable transaction that can be referenced by dealers in the future. Using ACH to pay for a car streamlines the transfer of funds from the borrower, so car dealers can put those funds to use more quickly.

Perhaps the most unique way to purchase a car is through using cryptocurrency. With the growing popularity of crypto over the past few years, top car dealers such as Audi, BMW, Nissan, Tesla, and Toyota offer cars that customers can purchase with crypto. Multiple payment method options offer the customer the convenience of choosing the best options for them.

Convenience with in-vehicle payments

A recent survey from the American Automobile Association revealed that the average American spends over 61 minutes a day in their car; that's equivalent to more than three years of a person's life (see https://tinyurl.com/53rfkv5j). Therefore, being able to pay for purchases from the car has grown in popularity over the last few years all thanks to digital technology and the connected car.

Auto manufacturers identified a novel use case for payment technology that is rapidly accelerating in the industry, especially in EVs. The future of in-vehicle payments is endless, including partnerships with large retailer apps to purchase groceries from the front seat. This new frontier of payments will allow consumers to stay inside the car and purchase items outside of it, creating a frictionless purchase experience.

A recent study from Juniper Research found that by 2025 in-car payments could reach $86 billion, up from $543 million in 2020 (see homehttps://www.juniperresearch.com/home). With the market continuing to grow, car manufacturers should continue to invest in payment technologies that offer greater choice and services for customers to inspire greater loyalty and interest. With connected car manufacturing continuing to expand, the payment limit is endless. With payments in the auto industry rapidly accelerating, fintechs are constantly innovating to develop new solutions that meet consumers' evolving needs. Among these are ACH, installment payments and crypto. Payments continue to be woven into the fabric of everyday life, and the car is the next mile marker on this journey. end of article

Jake Moore is executive vice president of Consumer Payments at REPAY, https://repay.com. Contact him at linkedin.com/in/jake-moore-150a9024.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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