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Cars the star: Connected cars sought after by consumers

Car makers, Big Tech and suppliers are all jostling to own customer relationships and data in the era of the connected car. Sound familiar?

Everything is miscellaneous but somehow connected. Nowhere is this more true than in the modern, connected car. This can transport the driver from A to B, but also act as a payment or authentication device and an infotainment centre on wheels. Behind the scenes, though, the auto industry is facing some stark choices, not dissimilar from those in the financial services and telecoms industries.


In the old days, car makers built vehicles and marketed them directly to consumers. Their factories were huge and their advertising budgets likewise. Manufacturing processes were vertically integrated, so OEMs had complete control over the production from raw materials to assembly. However, business models and the balance of power within the auto industry are undergoing a fundamental shift.

New competitors are emerging. Big Tech companies, such as Google and Apple, are investing heavily in self-driving vehicles and the artificial intelligence to power them. Their background gives them a fresh perspective on an industry long-dominated by hardware. They understand digital and data. And that data leads to functionality, to a better and more personalised customer experience — and ultimately to value.

The software for the average modern high-end car has around 100 million lines of code, according to Information is Beautiful. This is more than the Hubble space telescope at around a million lines and the total flight software of a Boeing 787 at 10.14 million lines. Cars are now computers on wheels. How long before the data they generate is worth more than the car itself?

Car-sharing and ride-hailing platforms have tapped into a new social trend. Mobility no longer relies on owning a vehicle or driving yourself. Borrowing is the new buying. Loaning the new owning. Meanwhile car makers sold off their parts suppliers. In a commoditised market where make and model are no longer as relevant, this changes the OEM supplier dynamic.

All in all, amid the diesel emissions scandal, car-sharing, ride-hailing, electric and autonomous vehicles, the auto industry is in an existential crisis. Car makers need to decide what business they are in and what they have the potential to become.


For those in telecoms, banking or payments, the angst of the auto industry is familiar. The former are undergoing digital transformations of their own. They are moving from pipelines to platforms and ecosystems. They are trying to make the most out of the app-based economy, the Internet of Things and new connectivity. They have had to.

“Previously telcos controlled everything from devices to the network. When mobile virtual network operators (MVNOs) got access to operator platforms, they branded their services directly to customers. This was the start of openness and MNO disintermediation from direct customer relationships,” says Patrik Centellini, head of business development, transaction banking, Tieto.

Similarly, banks controlled the entire value chain from issuing plastic cards to the back-end clearing and settlement of payments. New entrants, such as PayPal, Sofort and iDEAL, came and used existing payment rails. They branded their online payment services to customers, disintermediating banks, issuer and scheme brands.

“Access became a commodity in telecoms. It is heading that way in financial services with regard to bank account information and payment initiation. This creates a platform effect, where innovative, new entrants build services on top of the platform,” comments Centellini. For example, the world’s largest hotel and taxi companies, Airbnb and Uber, own no rooms or taxis. They rely on the platform effect and mobile devices to connect buyers and sellers.

No company can do it alone. Newness and value for the end-customer does not appear in isolation. Irrespective of the industry, companies are increasingly aware that they have to participate in open ecosystems, which include other verticals. The ecosystems must be digital, open, real-time and shared to work best. The partnerships must be collaborative and platform-orientated.

The ecosystems must be digital, open, real-time and shared to work best. The partnerships must be collaborative and platform-orientated.

“Open banking as a result of PSD2 is a big trend. Yet it is only a sub-set of open banking. If you think about the general trend of digital, different digital experiences are integrated into apps. We exist in an app-based economy, and different ecosystems are merging together,” says Centellini.

Companies have to know when to collaborate, for example on rules and rails to ensure interoperability. And when to compete, for example on apps and accounts to differentiate. There are technology challenges ahead. But changing business models, mindsets and silo cultures are just as important, if not more so. Companies must learn to partner better across the organisation as well as externally for business success.


Pockets of the future exist in the present. A number of new propositions and customer journeys around mobility have emerged as the shape of things to come. These are powered by new, sometimes cross-industry, partnerships.

Jaguar and Shell have agreed a tie-up to make the car a new payment form factor. Drivers can use their car’s touchscreen to pay for fuel at Shell service stations via a cashless payment app. When they pull up to Shell fuel pumps in the UK initially, drivers can select how much fuel they require directly from the vehicle’s touchscreen and pay using PayPal or Apple Pay. An electronic receipt is displayed on the touchscreen and e-mailed to the driver, so it can be added to accounting or expenses software.

Daimler Financial Services AG announced at the start of 2017 that it had acquired the electronic payment services provider PayCash Europe SA. Daimler plans to use this foothold in electronic payments to launch its own payment services, branded Mercedes Pay. Customers will provide their payment details once to be able to use a range of Daimler mobility services, including the car2go car-sharing service, mytaxi taxi-booking app and car financing.

“Mercedes Pay is a fundamental component of our mobility and digitisation strategy. Daimler’s new payment system underscores our ambition, as a leading provider of digital mobility services, to make the products and services we offer even more appealing,” said Bodo Uebber, Daimler Financial Services.

Numbers by country willing to purchase a connected car with payments capabilitiesIn a recent TNS survey on the subject of connected cars it notes, “Nearly half, 48%, of everyone surveyed said they would be eager to purchase a car with payment capabilities when available.

It would be reasonable to expect that adoption figures will rise for connected cars as they
become widely available and Numbers by gender willing to make payments via car dashboardconsumers recognise the benefits of these new capabilities.
Paying for fuel and/or parking via these cashless in-car payment systems could become
the norm offering consumers a simple, seamless payment experience even if they’ve left
home without their wallet. Payments can be made via an app on the car touchscreen
meaning you don’t even have to get out of your car.

Over half, 57%, of those that we surveyed agreed that if they owned a connected car they
would be willing to make a payment for the likes of fuel or parking via the dashboard.”

To combat the threat of falling car ownership, car brands have launched car-sharing services. BMW’s DriveNow features the Mini and electric cars. Meanwhile Daimler’s car2go service has recently expanded to include more luxury vehicles as well as lower-end smart cars. OEMs are also trying to re-position themselves as one-stop-shops for mobility. The moovel app from Daimler offers a mixture of different transport options from bicycles to cars, trains to taxis. It allows users to compare offers from different providers and plan their optimal route.

Elsewhere Amazon is diversifying into selling cars via tie-ups with Fiat and Seat. In November 2016, the Seattle behemoth began acting as a portal for Fiat in Italy. It acts as a funnel for consumers to established dealerships, each time collecting a small fee. The deal remains in a test phase and has been extended until the end of 2017. A similar arrangement is in place with Seat in France.


Carmakers, Big Tech and suppliers are all trying to re-define their roles in the connected car era. To deliver new propositions and improve the customer experience, participants will have to navigate new partnerships. They will also have to master new business and technology infrastructure models.

For those in telecoms, banking or payments, the existential angst of the auto industry is familiar.

There is a precedent of different industries coming together, which acts as a warning. Before HCE (host card emulation), there were various ways of replicating contactless NFC functionality on a mobile device. The roadblocks were thus less about technology and more about the commercials. Writing to the SIM card or element involved involved the cooperation of third parties. Banks and telcos needed each other, but could not agree on the commercials, and who owned the SIM and the customer. This delayed roll-out.

The move from pipeline to platform and ecosystems mirrors that currently underway in the telecoms and financial services industry around open ecosystems. To prevent the connected car stalling at the side of the road, the auto industry will need to navigate this new ‘co-petition’ landscape better, as well as address security, privacy and data ownership issues.

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