The automotive industry is experiencing a tech revolution. Digital showrooms and virtual reality (VR) technologies allow buyers to customise and explore cars online. The rise of electric vehicles (EVs) continues to gain momentum, driven by advancements in battery technology and eco-awareness.
Additionally, connectivity is a ‘must-have’ as smart cars seamlessly integrate into the Internet of Things (IoT), while augmented reality (AR) enhances the driving experience, from navigation to in-car entertainment. As a result, self-driving dreams become reality as companies invest heavily in AI and sensors.
The global in-vehicle payment system market is projected to grow from 1.53 billion USD in 2023 to 6.18 billion USD by 2030. Now, we can cover all driving costs – parking, tolls, fuel – and on-the-go expenses like grabbing a coffee directly from our cars, thanks to advanced in-vehicle interfaces.
Tech has made cars as smart as our tablets and smartphones. Yet the process of buying a car is still clunky and long overdue for a makeover.
Many dealerships still wrestle with cumbersome manual bank transfers, drafts, or cheques. For those accepting cards, high processing fees and transaction limits add to the administrative hassle of splitting payments. As a result, cards are often used for deposits, but not for purchase.
But customer expectations are changing – and the bar is higher. There’s a growing call for fast and frictionless buying experiences, coupled with robust protection against evolving fraud tactics. Enter open banking, a game-changer for high-value payments. Customers can enjoy a quick, secure, and seamless way to pay directly from their bank accounts.
According to a Prommt report, automotive is the top-performing industry for open banking payments, with the highest single transaction value of €72,714.25. Typically, the average transaction value (ATV) for an open banking payment (€4,679) is four times higher than the ATV for a card transaction (€1,147) on the Prommt platform.
Using open banking, which enables the secure sharing of financial data between banks and third-party financial service providers – car dealerships can cut costs and protect margins by significantly reducing high transaction fees, card fraud, and chargebacks, as well as payment operation costs associated with tedious manual bank transfers, drafts, or cheques.
Payments are instant, and all parties are immediately notified, so deals can be completed more quickly.
Here are five ways open banking payments are revolutionising how we buy cars:
1. Payment orchestration and reduced costs
With smart payment orchestration controls, car dealers can automate thresholds to present their desired payment method, depending on factors such as value, location, or transaction type. This strategy allows them to achieve substantial savings on transaction fees and operational costs, while also mitigating card fraud and minimising chargebacks.
2. Faster payments for a ‘drive away today’ service
Open banking accelerates payments. A simple pay-by-bank link or embedded button on the merchant website enables customers to swiftly make deposits and pay for services and parts. Funds land in the dealership’s account within seconds, allowing customers to drive away with their cars on the same day.
3. Reducing fraud
Open banking significantly reduces fraud, chargebacks, and unauthorised access to or misuse of sensitive financial information. Studies indicate a 60 per cent reduction in fraud by 2024, thanks to advanced encryption and real-time authentication through open banking APIs. Additionally, open banking is backed by the EU Payment Services Directive and is designed to ensure safe transactions.
4. More data privacy and control
Open banking transforms how businesses and customers interact with financial data. Customers authenticate payments directly from their banking app, and their personal information is encrypted and safeguarded by industry-standard banking security. They have more control over who has access to their personal data and greater visibility of their transactions and account balance.
5. Better customer experience
Since buying a car is often the second most significant purchase after a house, providing a luxury experience that extends to the checkout is essential. By offering flexible, convenient, and user-friendly payment options, dealerships can set themselves apart from competitors tethered to traditional, less adaptable models. In a crowded market, differentiation is key.
Payment success
Open banking streamlines the process of accepting bank payments with a slick, fast, and seamless buying experience. Dealerships can slash high-value card processing fees and greatly reduce chargebacks, card fraud, and payments admin.
With advanced paytech solutions, businesses can increase payment success by easily following up on failed or late payments with automatic chasers through different channels and alternate payment methods.
They can receive instant notifications when payments hit their beneficiary bank account and easily initiate full or partial refunds, with restricted access for added security.
