Even as mobile wallets continue to struggle with consumer adoption, yet another iteration of payments technology is rapidly coming over the horizon: the Connected Car.
Arguably the next frontier for the industry, there’s only one problem – finding the right combination of offers and benefits that will persuade consumers to get connected from their vehicles.
Like the mobile phone, the car remains a constant feature in most of our daily lives, and though it does not follow us everywhere, it certainly takes us to most of the places we need to be. The world we live in is increasingly connected, and the intelligence of moving, doing, and paying is increasingly relegated to the things through which we conduct these activities. So it’s hardly a stretch of imagination to think that one day our cars will allow us to pay for purchases without taking out our wallet.
Imagination may be the seed of innovation, but as seen with other payment technologies, innovation does not always lead to adoption. In order for new payment technologies to gain consumer traction there are hurdles of collective experience and human habit to overcome.
Mobile wallets are a great example of a payment technology that holds enormous promise, but is still struggling for widespread adoption. In a recent survey conducted by our firm we found that only 23% of those queried have used a mobile wallet to make a purchase at a brick and mortar retail location. For most (59%) it comes down to a simple matter of convenience – consumers aren’t convinced that the new technologies are easier or more convenient to use than cash, credit or debit cards.
With all of the marketing and advertising spend, the industry somehow fell flat in promoting the convenience and explaining the functionality of mobile payments.
In part, this reflects the difficulty of changing ingrained habits. Incremental improvements are not always sufficient to provoke fundamental change. The Connected Car has the potential of addressing this failing head on. For example, when it comes to paying for gas – the most obvious application – 35% of those surveyed feel that this way of paying for gas is more convenient than the traditional way of taking out a credit or debit card. In a survey we conducted of 50 potential new payment options of all sorts, this application ranked #15.
One of the key reasons for why this idea has a high potential of success is because it integrates with a highly relevant day-to-day task and makes the task easier. In fact, 50% of affluent consumers and 55% of millennials indicate that a with a Pay for Gas payment option is a highly relevant idea that can improve their day-to-day life.
Interestingly, paying for fast food, another intuitively obvious Connected Car application, placed much further down the list, ranking 44th. With this, security concerns and lack of perceived convenience prevent widespread appeal. One can infer that the fast food window already delivers sufficient convenience where the incremental advantage of expediting your payment is not that attractive or as relevant.
As may be expected, response to the potential of the Connected Car is not monolithic across the consumer landscape. For example, among customers of one big box retailer, the pay for gas application was the best received of all new payments concepts. This retailer happens to offer fuel discounts to their loyalty members and a Connected Car that allows expedited gas purchases resonates well with the unique needs of their shoppers. This highlights the critical role to be played by research in identifying the factors that will lead to widespread activation.
The idea of the Connected Car was actually introduced some 20 years ago, with OnStar from General Motors. While OnStar was an amazing breakthrough for the automotive industry, it was not a service that redefined how we went about our day-to-day lives.
It was the introduction of onboard Wi-Fi in 2008 that reintroduced the concept to the consumer and the realization that what you do in your vehicle and with your vehicle was no longer limited to getting from point A to point B.
Fast-forward seven years, to 2015, and there were 25 million cars around the globe with Internet connectivity. That number is expected to rise to 75% of all vehicles by 2020, according to Gartner. The technology to support car-based payments is here, but drivers still need to be sold. In a world where just 23% of consumers have used a mobile wallet to make a purchase at a brick and mortar retail location, there remains much missionary work to be done to make the Connected Car a reality.
With Visa piloting Connected Car concepts in partnership with Pizza Hut, Hyundai and GM, the industry is poised to explore functionality and strong partnerships that will capture consumers’ attention. The opportunity for Connected Car payments will be bright as long as the industry builds on the lessons learned from mobile payments. The winning offers will need to integrate with relevant day-to-day tasks and will clearly explain and educate the consumer on the convenience, security and ease of use over current status quo payment options.
Demitry Estrin is managing director at MARU VCR&C.