Evolution of the Automotive Industry Creates New Roles for Payments

By Lisa Kim and Param Iyer

Automotive and mobility companies are increasingly evolving into digital organizations, resulting in additional touch points to their end customers. Key to this evolution are banking providers capable of supporting this change, and TxB is well-positioned to serve these companies and their growing needs.

First and foremost, we are seeing electric vehicle manufacturers shift sales towards a direct-to-consumer-model. For initial vehicle purchases, trips to the dealer are increasingly replaced by online interactions. Some people now prefer an on-demand mobility offering to buying a car, bike, or scooter outright, especially in urban environments like the UK and Europe where governments have begun to discourage private usage (e.g., congestion tax on vehicles in London).

This evolution is contributing to collaborations across a broad range of products and services, ranging from stops at charging stations to frictionless payments for tolls or insurance. Indeed, 39 percent of consumers report they are interested in unlocking additional digital features after purchasing a vehicle, and the number rises to 47 percent among premium brand customers.1

Across the connected-car ecosystem, up-to-date banking services and seamless payments technology are vital. In addition, it’s imperative that the connected car value chain be real time, instant, and API-driven. Three use cases underscore these points.

1. Making Customer Payments

The offerings that automakers and other participants are bringing to the dashboard of new vehicles demand simple, seamless payment processes. This puts a premium on near real-time access to banking services built on a modern, flexible API-first platform.

Consider the drivers who need to charge their vehicles. The navigation system identifies a charging station 10 minutes away, the driver books a slot, and an instant payment from a bank completes the transaction. This is straightforward and frictionless. Upon arrival at the charging station, all that’s left is to plug in the vehicle.

The driver gets convenience and low cost, and the ecosystem experiences numerous advantages. Real-time in-car payments using open banking protocols can be immediate and irrevocable, providing marketplaces and their participants with cash flow certainty. In other situations, pre-populated payment solutions can also enable customers to manage installment payments.

2. Secure Payouts

Auto manufacturers and other companies will also need the ability to pay funds out as direct-to-consumer models gain in popularity and transaction volumes increase. Manufacturers might be paying green vehicle rebates or loyalty credits, or perhaps they need to disburse tax refunds, goodwill payments, or insurance settlements to customers. For these situations, TxB’s single payments workflow provides clients with the ability to make secure, efficient, and cost-effective mass/batch pay-outs to multiple jurisdictions via local clearing rails.

3. Invoicing and Reconciliation

The vehicle sales process is moving online. The long dominant dealership model is giving way as new entrants in the electric vehicle segment force change. With the direct-to-consumer model, some manufacturers are collecting payments from consumers instead of receiving draft payments from dealers.

The goal now is flexibility and simplicity in purchasing or leasing — as well as for new business models such as vehicle subscriptions. Invoicing, accounting, and reconciliation processes need to accommodate each step in the sales journey, from the payment of an initial reservation fee for a car that may not be delivered for weeks or months, to the final payment and the transfer of ownership. Streamlined banking and payments processes are replacing what used to happen in complex reconciliation and paperwork at the corporate level. By leveraging solutions like Goldman Sachs Virtual Integrated Accounts (VIA)™, automotive companies can create a global sub-ledgering system, streamlining the outdated reconciliation and cash application process.

Modern Banking Technology

The innovative banking offerings we have created from scratch at TxB are purpose-built for the kind of change the auto industry is experiencing. Our technology stack is entirely cloud based, allowing us to offer APIs that are nimble and fully scalable — fit for new uses in the auto industry and other sectors. Our digital-first approach allows us to stay at the industry forefront as real-time payments, including new request-for-payment capabilities, become more prevalent.

When looking at the future of the auto industry and the rapid change coming to vehicles and how we use them, modern banking technology is one of the key pieces that makes it all happen.

 


Source: McKinsey & Co.