The automotive industry is at the cusp of a significant transformation, positioning cars as vital gateways to the ever-expanding world of data, smart devices, and the resulting consumer benefits. Among the notable shifts in this paradigm is the emergence of in-vehicle payment services.
In-vehicle payment services encompass a wide array of applications, including shopping, parking, dining, fueling, toll collection, and various other transactions. Across the globe, these services predominantly rely on four payment modes: app/e-wallets, credit/debit cards, RFID, and NFC.
RFID, or Radio Frequency Identification, is a pivotal technology within this landscape, prominently utilized for FASTag, a system facilitating toll payments. FASTag is affixed to a vehicle’s windscreen and is linked to a prepaid account. But how exactly does RFID operate?
At its core, RFID represents a wireless communication method employing electromagnetic coupling in the radio frequency spectrum. This technology is employed to uniquely identify objects or individuals. RFID devices can be either permanently attached or portable, harnessing radio signals to activate tags. Once activated, these tags transmit signals back to the antenna, where the information is decoded. An RFID tag comprises an antenna, a substrate, and integrated circuits, with the portion responsible for encoding information termed the RFID inlay.
Two main types of RFID tags exist: passive RFID and active RFID. Passive RFID tags draw power from the reading antenna, which generates electromagnetic waves to induce a current in the tag’s antenna. In contrast, active RFID tags possess their own power source in the form of a battery.
Another prevalent payment mode is through apps and e-wallets, where these digital payment platforms are seamlessly integrated into car dashboards, authorized by banks to enable contactless purchases and drive-through transactions. The United States, for instance, has witnessed a surge in drive-through services, driven by consumer preferences for convenience.
Many prominent e-wallet and app providers employ Near-Field Communication (NFC) technology to facilitate contactless payments. NFC transmissions have a short range, typically requiring devices to be in close proximity for successful transactions.
In today’s thriving automotive market, global sales have soared to 66.1 million units worldwide, with expectations of surpassing 69.5 million units by 2023. The automotive sector’s exponential growth has spurred major industry leaders to introduce advanced technologies, including digital payment options, to enhance convenience for consumers.
Global automotive manufacturers are increasingly partnering with financial service providers to incorporate contactless payment features into their vehicles, enhancing their overall capabilities. For instance, on March 9, 2023, Mercedes-Benz, a renowned German luxury and commercial vehicle manufacturer, launched an in-car payment system in collaboration with Visa. This innovation allows car owners to make digital service and hardware upgrades via a fingerprint sensor within the vehicle, eliminating the need for additional devices like smartphones or PIN entries.
Similarly, Honda has joined forces with Visa to develop an in-car payment service that facilitates contactless transactions at gas stations, for parking, and at drive-through restaurants.
Back in September 2019, Xevo, an automotive software company, forged a partnership with Hyundai Motor Company, aiming to integrate Xevo Market capabilities into Hyundai vehicles across the United States and Europe. This collaboration promises a connected car experience, complete with a payment component that empowers drivers to pay for fuel, parking, and other goods and services.
Market Insights reveal that the global in-vehicle payment services market was valued at USD 2.90 billion in 2022 and is projected to expand significantly, reaching USD 15.72 billion by 2031. This remarkable growth is fueled by the increasing global fleet of commercial and passenger vehicles, thereby driving the demand for parking solutions.
Leading companies vying for supremacy in the market for advanced and convenient in-car payment technologies include Mastercard, Ford Motor Company, Mercedes-Benz Group AG, General Motors, Hyundai Motor Company, Honda Motor Co., Ltd., Volkswagen AG, JAGUAR LAND ROVER AUTOMOTIVE PLC, ZF Friedrichshafen AG, Amazon.com, Inc., Google Inc., and PayPal Holdings, Inc.