new models to win the in-vehicle technology race · connected car and in-vehicle payments space....

How mastering in-vehicle commerce can help automakers stay in the driver’s seat of mobility

NEW MODELS TO WIN THE IN-VEHICLE TECHNOLOGY RACE

INTRODUCTIONIn-vehicle commerce is gaining momentum in the Mobility X.0 era. Gas stations, quick-service restaurants, parking garages, and other vehicle-related services are going digital. Meanwhile, customers want the convenience and safety of low- or no-contact interactions. Original equipment manufacturers (OEMs) and their captive finance companies can seize the moment to own the in-vehicle experience. However, so can competitors from outside the auto industry.

OEMs and tech giants alike want to dominate in this market. As we saw at the Consumer Electronics Show (CES 2020), Amazon launched a branded customer experience on an in-vehicle digital platform that incorporates Alexa home-to-car and car-to-home integrations and enables commercial transactionsi and are unlikely to scare off competitors.

As presented in Mobility as a Service: Mapping a route towards future success in the new automotive ecosystem, “OEMs will have to put their future customers’ needs around mobility, services, and experiences front and center.” With new market competitors entering the race, the time for concepts, pilots, and experiments is over. Now is the time for OEMs to focus on capturing and maximizing customer lifetime value through connected commerce, with their auto finance captives as the enablers.

Using Open Banking APIs and next-generation payments capabilities, captives are uniquely positioned to help transform the vehicle into a method of payment and create new revenue streams. In this report, we explore how OEMs can work with their captives to pivot from the narrow role of hardware supplier to become true platform owners in the in-vehicle commerce ecosystem.

NEW MODELS TO WIN THE IN-VEHICLE TECHNOLOGY RACE2


IN-VEHICLE COMMERCE PLATFORMS: A HOTBED OF INNOVATION

Over the past decade, technology has increasingly become part of the in-vehicle experience. Traditional means of wayfinding have been gradually replaced with third-party navigation apps. The radio dial and CD wallets have given way to streamed music, with many customers paying subscription fees for a highly personalized, commercial-free experience. But today’s in-vehicle experience extends beyond navigation and infotainment. Tech companies have used their vast stores of customer insights—from location and social to transaction data—to experiment with and scale new propositions.

A decade ago, Apple collaborated with BMW to offer iPod Out. Today, that has evolved into CarPlay, which brings Siri and the rest of the iPhone user experience onto the driver’s dashboard.ii CarPlay or Google’s Android Auto are now available in more than 500 car models from 50-plus automobile brands.iii

In 2015, Accenture helped Visa turn the car into a card. The connected car proof-of-concept

demonstrated the scenario of customers ordering food from the car using cellular connectivity. From the project’s genesis, Accenture helped Visa design, build, and test the proof-of-concept.iv The initiative helped position Visa and Accenture as trailblazers in the connected car and in-vehicle payments space.

And now there’s Amazon. For $50, drivers can plug in the Echo Auto, hear Alexa through the vehicle’s sound system, and speak directly to the voice-activated virtual assistant for messages, music, and navigation.v Voice-activated payments for fuel purchases are also in development with a simple “Alexa, pay for gas” in lieu of a credit card for pay-at-the-pump service.vi Notably, Amazon’s commerce platform will be compatible with almost any vehicle make or model.

Some OEMs have entered the in-vehicle commerce market, especially those with touchscreen dashboard capabilities. In 2017, Jaguar and Shell launched an in-car payments system using PayPal and Apple Pay for Shell fuel purchases in Jaguar and Land Rover models that have installed Jaguar’s InControl Apps.vii Fiat Chrysler has also allowed Shell onto its Uconnect Market platform to offer Chrysler, Dodge, Jeep, and Ram customers Shell Pay & Save rewards.viii GM’s Marketplace also allows drivers to buy food and fuel through its dashboard interfaces.ix

Consumer spending on connected-car platforms is expected to reach $265 billion by 2023.x However, questions remain: Will this activity benefit everyone? Or only those few that create a truly customer-centric experience?


IT’S TIME TO RETHINK THE POSSIBILITIESPersonalizing the in-vehicle experience means evolving from the role of a manufacturer to a provider of relevant and tailored customer experiences. The Accenture 2019 Global Financial Services Consumer Study found that consumers value tailored offerings that meet their core needs in one place. And more than three in four are willing to share their data in return for these personalized services.xi

OEMs and their captives can seize these opportunities and meet new customer demands for integrated propositions. By creating a more structured and holistic platform, they can tailor in-vehicle experiences to meet each customer’s individual wants and needs. Increasingly, that means meeting expectations for single sign-on capabilities, where logging into the vehicle provides access to an ecosystem of apps and third-party providers. It also means enabling contactless interactions as an important feature of in-vehicle transactions.

• New owners can get a car purchase package that includes insurance, financing, and maintenance. They can also get pricing and recommendations for service locations and real-time offers for alternative vehicles or insurance that may better suit their evolving ownership needs.

• Lessees can get proactive end-of-term or early termination offers.

• Drivers can take advantage of fueling or charging services, pay for parking and tolls, and get help with navigation, dining, and entertainment options. Importantly, in-vehicle transactions can include contactless or low-touch interactions—for example, curbside pick-up from quick-service restaurants —and address consumers’ desire for both convenience and safety. Drivers can also get easy access to roadside assistance or ride sharing should the need arise.

• Passengers—whether riding with a driver or in an autonomous vehicle— can be recognized by the in-vehicle platform, to take advantage of streaming, other infotainment services, or productivity apps to manage things back at home, at school, or at the office.


The big takeaway? Personalizing the in-vehicle experience will require auto manufacturers to rethink the slate of possibilities. Currently, many OEMs emphasize personalized vehicle interiors, such as account-based seat adjustment or personalized climate control, and see these as core differentiators. However, as outlined in Mobility Services: The customer perspective, only 11 percent of consumers rank these features as a top-three criterion.

API-connected omni-channel platforms can enable OEMs to maximize customer lifetime value and defend market share. APIs provide access to a wider network of partners that might blend services to target specific moments in a customer’s life, such as offering money-saving tips for the daily commute. These network effects help businesses grow revenue by either integrating or building custom functionality on top of existing products. The partner network effectively automates new sales channels that otherwise could not exist.

For that vision to become reality, OEMs and captives must choose an open platform model consistent with their strategic priorities and market positioning. They need to look at how best to develop incentives that appeal to third-party vendors, aggregate account data, and present contextual offers to consumers in the moment. In the next section, we examine the business models that can help OEMs and captives equip themselves for the road ahead.

BUSINESS MODELS ENABLING IN-VEHICLE COMMERCEWhile a few tech companies and OEMs have entered the space, the in-vehicle commerce race is just starting to pick up speed.

To date, first-mover OEMs have effectively outsourced the operation of the in-vehicle commerce platform and the creation of a differentiated customer experience to third parties. With the entirety of the customer experience on that third party’s proprietary platform, there is little (if any) opportunity for the OEM or the captive finance business to profit from processing payments or capturing data to enable new revenue streams.

We believe that if OEMs allow themselves to be relegated to the limited role of hardware supplier in a rapidly expanding, data-driven market, their profit potential will inevitably be constrained. It is logical that they would lose market share, as exemplified by Motorola’s experience in the smartphone market (see sidebar on page 8).

As mentioned earlier, some OEMs offer in-vehicle commerce capabilities that provide a glimpse of the possibilities and the available network effects. However, they also reveal how payments intermediation and loyalty programs can be lost to new market entrants or competitors through in-app capabilities.

That raises the question: what are the business models that can enable OEMs and their captives to capture a bigger slice of the in-vehicle commerce market?



Proprietary Model

In the proprietary model, the OEM sponsors a platform through a provider that it owns, and that cultivates a unique ecosystem of merchants. The OEM delivers all aspects of the connected vehicle experience. As a result, it profits optimally from the monetization of the transactions and data and from the potential for a differentiated experience. An OEM employing the proprietary model could create radical new incentives, like offering 20 cents off a gallon of fuel for the life of the vehicle. This creates a win-win scenario: happier customers and higher revenues, not to mention merchant loyalty.

This level of ownership has the biggest sticker price. OEMs that follow the proprietary model can expect an upfront investment. In addition, continued research and development investments will be needed to stay ahead of traditional automotive and new market competitors who may be teaming up.

Owning and driving the platform may seem appealing, but for many OEMs it will be cost-prohibitive. And in this barrier to entry lies the opportunity. For those with the capital and risk appetite, the proprietary model can enable them to define the future of the customer experience and to gain a significant and durable competitive advantage.

Licensing Model

In the licensing model, the OEM sponsors the platform and enables partners to deliver crucial elements such as the user experience (UX) and a payments capability. For example, General Motors has partnered with Xevo, an automotive commerce platform, and Sionic Mobile, a payment processor, to create GM Marketplace, which enables in-vehicle purchases from popular food, fuel, hotel, dining, and parking companies.xii GM Marketplace provides a link between a customer’s bank accounts and the in-vehicle dashboard, and tokenizes transactions so that no payment information is stored within telematics.xiii GM Marketplace is available to eligible Chevrolet, Buick, GMC, and Cadillac customers in the US.xiv

The lower upfront investment and network effects offered by the licensing model may be appealing to many. However, there are risks.

First, the OEM is responsible for delivering a secure experience, customer support, and regulatory compliance. Meanwhile, the customer experience is delivered through multiple partners: the merchant aggregator provides the portal, the payment processor manages the transactions, and the merchant provides the buyer experience.

Second, by surrendering data from in-vehicle purchases to the merchant aggregator, the OEM could inadvertently create competition for its future revenue streams. This is the case with GM Marketplace: while GM sponsors the platform, it cedes the customer experience and loyalty to its partners, reducing its ability to monetize transactions.xv


These business models each bring their own unique benefits and price tags. An OEM with enough capital may be inclined to go with the proprietary model. If executed properly, this could be a bold and fruitful venture that creates a competitive advantage.

While attractive, this model may be cost-prohibitive, particularly for smaller manufacturers with less capital to invest. These OEMs may do well to consider a licensing model for its lower cost, speed to market, and first-mover advantage. In the long term, however, it will be no more than table stakes.

OEMs and captives will need to work together to analyze the costs and benefits of each direction to determine which may best enable them for success. For some, a hybrid approach may yield the best result.

PROPRIETARY LICENSING

LOWER UPFRONT INVESTMENT

OWNERSHIP OF CUSTOMER RELATIONSHIP

BRANDED CUSTOMER EXPERIENCE

SPEED TO MARKET

TECHNICAL SCALABILITY

RETENTION OF INTELLECTUAL CAPITAL

PRODUCT AGILITY

LIGHT STAFFING REQUIREMENT

The costs and benefits of the proprietary and licensing models

Source: Accenture analysis

WHICH BUSINESS MODEL IS RIGHT FOR YOU?


LESSONS LEARNED FROM THE SMARTPHONE MARKETWe can take a few lessons from similar technology advances that ushered in the digital economy. For example, as the telcom giants and appliance vendors of the last century invested in handheld mobile phone hardware and software, they found themselves among the first drivers of the storied “information superhighway.” Some made adjustments to their business models that led to sustained growth and profitability. Others struggled, lost market share, and saw their valuations diminish.

Motorola: A cautionary tale

In 1994, Motorola supplied 60 percent of the US market with handheld mobile phones. By 2018, it supplied less than 6 percent.xvi xvii Certainly, there were a few factors that contributed to Motorola’s decline, among them a shifting business model and adverse macroeconomic conditions that made the company an acquisition target. Importantly, however, it also outsourced the UX and payments capabilities for its smartphones to Google.

The Motorola story serves as a cautionary tale for OEMs and captive finance companies that are content to outsource in-vehicle commerce capabilities to third parties.

Apple: Proprietary model

Apple’s iPhone is an example of an end-to-end platform that includes the hardware, UX, operating system, and now the Apple Pay capabillity. App producers gain access to the iOS platform and sandbox testing for apps and Apple Pay through the Apple Developer Program.xviii Apple also created an API called Shortcuts. With the help of the Siri voice assistant, consumers can customize their UX by pulling commonly used functions out of their existing apps.xix For their efforts, Apple embeds itself in the lives of customers, profits from purchases and transaction processing, and maximizes customer lifetime value.

Samsung: Licensing model

Samsung is an example of a company that applied the licensing model to its smartphone business. In so doing, it became the number-one mobile phone vendor worldwide.xx Like Motorola, Samsung was an innovator in early handheld mobile phones, but its continued innovation and investment in wireless internet would lead to the launch of the Galaxy smartphone series using Google’s Android operating system.xxi

Samsung continues to develop and control the hardware supply chain and installs many of its own apps, including Samsung Pay with its customer loyalty program, but Google provides the UX through its Android operating system. Consumers download new apps from the Google Play Store, where producers publish apps that include a wide range of payments capabilities, such as Google Pay, credit and gift cards, direct billing, and PayPal.xxii


To seize the opportunities in the connected commerce market and meet new customer demands for integrated propositions, automotive OEMs and their captives should assess and invest in a few key areas. OEMs pursuing the proprietary model will need all of these capabilities. Those adopting the licensing model can focus on security and data and analytics and look to their partners to provide the other capabilities.

KEY CAPABILITIES CAN SMOOTH THE ROAD AHEAD


API enablement & integrationsAPIs are the bridge that make it possible for one product or service to connect to another—to create better value for the customer. To prepare for this new world, OEMs and captives should develop a new framework based on agile delivery and operating models. By opening up and enabling APIs, you can easily connect to other APIs in the market and gather real-time, 360-degree customer information. Initially this can generate indirect revenue through better customer acquisition and retention, as well as increased brand awareness. In the long term, some players may capitalize by charging third-party-provider fees or implementing pay-per-use models based on customer data.

Partner onboardingAs highlighted earlier, some manufacturers have started to augment their in-vehicle experience. But the competition also includes tech titans like Apple and Amazon, which have vast ecosystems of service partners eager to contribute to an in-vehicle experience. OEMs need to ask: how easy is it for a partner to work with me? With streamlined, low-friction onboarding processes—enabled by APIs—you can carve out space as the partner of choice. In turn, smart partnerships can enable you to access new customer bases, generate new income streams, and reduce costs quickly.

One way OEMs and captives can achieve first-mover advantage is by onboarding insurers first. Insurers have increased their API usage significantly since 2016.xxiii Together, captives and insurers can combine auto buying or leasing and insuring a vehicle into one seamless experience. Integrating the vehicle insurer into the in-vehicle platform from the start also creates opportunities for on-demand trip insurance, pay-as-you-go

models, and faster claims processing. Existing home and auto insurance bundling could also provide an avenue to home-to-vehicle integrations.

Data & analyticsData is the fuel that makes connected commerce such a potent opportunity, and analytics is the engine that can get your business into the fast lane. Analytics capabilities don’t just help you price offers appropriately—they also provide confidence that you’re actually making the right decisions around pricing and customer offers.

Robust data insights go far beyond descriptive analytics that focus on what has happened, and even predictive analytics that aim to anticipate future customer behavior and help build strategies for target customer segments. Prescriptive analytics is about answering the question, “Out of all the things I could do at this moment, given these customer characteristics and this data, what is the right choice?” Run at scale, these real-time optimizations can help you make the right offer, at the right price, for the right customer.

PaymentsRegulatory changes and profitability concerns in payments have put OEMs and captives at a crossroad. Maintaining legacy systems requires high investment with no incremental revenues. Doing nothing means surrendering the customer relationship—and market share—to competitors and technology players.

There is another option: partnering with a payments service provider that can offer access to a modern, scalable payments platform at a competitive price. Tapping into a payments-platform-as-a-service (PPaaS) model can help you protect revenue, reduce costs, and improve

efficiency at a time of greater pressure and smaller margins. Reputable service providers take on the responsibility of keeping the platform compliant and up to date, freeing you to enable value-added services and innovate for the payment processing needs of today and the future.

Wallet services

Digital wallets, such as Apple Pay, have become more popular as they offer an easier customer experience that removes the need to enter details or PINs. Particularly for point-of-sale interactions, digital wallets require less interaction between customers and public touchpoints, and can enable contactless interactions.

Customers expect payment experiences that provide convenience, control, and safety. Particularly given Amazon’s entry to the connected commerce market, OEMs should strive to offer single-sign-on capabilities, rather than requiring customers to manually log into each of their merchant accounts.

SecurityThe convenience of in-vehicle transactions must also be balanced with security and privacy. For example, a best practice is to tokenize transactions so that sensitive data is not stored in the vehicle or its telematics.

In Accenture’s Banking Technology Vision 2019 survey, only about 30 percent of business executive respondents said they were comfortable with the level of effort their partners were putting into data security. As you think about your brand—how you build it and how easily you can lose it—it’s important to consider the trustworthiness of your partners and what they do with your customers’ data. Ultimately, it is your reputation and your customers’ trust that is at stake.


HOW TO DRIVE THE IN-VEHICLE EXPERIENCE How much is your business willing to invest in shaping the in-vehicle customer experience, controlling and processing in-vehicle transactions, and facilitating in-vehicle commerce? Here are the opportunities and trade-offs to consider.Pick a team with the talent required to enable an in-vehicle commerce experience. The workforce of the future brings a wealth of digital skills to bear.

Know the rules and develop a plan for continued regulatory compliance. Payment and balance sheet regulations change fast, and the parties responsible will need to remain vigilant and responsive.

Identify partners who can help achieve the desired model and best accelerate to market.

Be true to your brand in determining the ideal in-vehicle customer experience and developing offerings and capabilities such as an infotainment unit, voice activation, or other innovations.

Follow the leader, be it the OEM or the captive, that ultimately takes responsibility for and delivers the in-vehicle commerce experience.


THE IN-VEHICLE TECHNOLOGY RACE IS ON. WILL YOU LEAD OR FOLLOW?OEMs and captives need to act quickly, but not hastily, to secure their positon in the era of Mobility X.0. The ripples of activity we are seeing reveal the opportunities that are attracting new market entrants. While many OEMs continue to pilot test and admire a range of options, technology companies are already developing and executing plans to create value for their shareholders with inexpensive, customer-centric solutions.

Pressure to enter this space and compete is mounting and this can lead to quick-fix decisions that may lack future scalability and flexibility. At Accenture, we believe that once an in-vehicle commerce platform becomes the platform pace car, consumer expectations will quickly fall in line. We welcome the opportunity to talk with you and your team about how you can compete and win in Mobility X.0.


REFERENCESi. https://aws.amazon.com/blogs/aws/amazon-at-ces-2020-

connectivity-mobility/

ii. https://developer.apple.com/carplay/

iii. https://techcrunch.com/2019/07/30/googles-new-version-of-android-auto-focuses-on-assistant/

iv. https://newsroom.accenture.com/industries/financial-services/accenture-helps-visa-build-connected-car-commerce-proof-of-concept.htm

v. https://www.amazon.com/Echo-Auto-Add-Alexa-your/dp/B07VTK654B

vi. https://www.geekwire.com/2020/alexa-pay-gas-amazon-unveils-voice-control-feature-buy-fuel-mobil-exxon-stations/

vii. https://media.jaguar.com/news/2017/02/jaguar-and-shell-launch-worlds-first-car-payment-system-just-fill-and-go-your-car-pays

viii. https://www.finextra.com/pressarticle/81170/shell-connects-to-chrysler-in-car-fuel-payment-system

ix. https://www.cnet.com/roadshow/news/gm-marketplace-lets-your-car-buy-donuts-and-coffee/

x. https://www.juniperresearch.com/press/press-releases/in-vehicle-commerce-opportunities-exceed-775mn

xi. https://www.accenture.com/_acnmedia/pdf-95/accenture-2019-global-financial-services-consumer-study.pdf

xii. https://www.wardsauto.com/technology/gm-likes-early-marketplace-results -20-version-coming

xiii. https://www.digitaltransactions.net/magazine_articles/hitting-the-accelerator/

xiv. https://www.prnewswire.com/news-releases/xevo-delivers-major-merchant-brands-to-general-motors-in-car-commerce-platform-300566531.html

xv. https://www.forbes.com/sites/enroute/2018/04/18/gms-marketplace-allows-gas-purchase-and-starts-to-create-car-retail-ecosystem/#64f201612c03

xvi. https://www.chicagomag.com/Chicago-Magazine/September-2014/What-Happened-to-Motorola/

xvii. https://www.counterpointresearch.com/us-market-smartphone-share/

xviii. https://developer.apple.com/programs/

xix. https://support.apple.com/en-us/HT208309

xx. https://gs.statcounter.com/vendor-market-share/mobile

xxi. https://www.samsung.com/us/aboutsamsung/company/history/

xxii. https://developer.android.com/distribute/google-play

xxiii. https://www.accenture.com/us-en/insights/insurance/open-insurance

AUTHOR

Ryan Meagher Senior Manager – Strategy & Consulting, Banking [email protected]

Casey Hughes Senior Manager – Strategy & Consulting, Banking [email protected]

Rahul Abraham Management Consultant – Banking [email protected]

CONTRIBUTORS

Cameron Krueger Managing Director – Specialty Finance Lead [email protected]

Brian Irwin Managing Director – North America Automotive and Mobility Lead [email protected]


ABOUT ACCENTURE

Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions – underpinned by the world’s largest delivery network – Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 509,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives.

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new models to win the in-vehicle technology race · connected car and in-vehicle payments space....

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