Legacy Logic Is Breaking the Promise of In-Car Payments

In-car commerce offers huge potential revenue for OEMs, but many automakers are at risk of missing out on this by assuming that the proven ways of working of the past for developing and selling vehicles will work in a digital future where in-car services must generate a rapidly increasing share of their revenues. However, brands that recognise that the market has changed and adapt their monetisation approach stand to gain a significant share of the revenue pool and leapfrog those that try to monetise the services just like they sold cars in the past, states Parkopedia COO, Hans Puvogel. 

The automotive industry is in a massive strategic pivot: the shift from monetising hardware to monetising digital services. The core of this future is in-car commerce - the seamless and ideally invisible ability for drivers to pay for products and services through the vehicle. The opportunity is enormous, but many OEMs are facing a critical challenge that does not stem from a lack of talent or effort, but from their successful business models of the past. It is a classic case of Clayton Christensen’s Innovator’s Dilemma: a successful organisation’s core operating logic - the very thing that made it thrive - prevents it from succeeding in a disruptive new market. 

Missing the driver and focusing on the wrong metrics

The most common strategic misstep is the pressure to ensure that every connected feature - from navigation data to basic connectivity - is made self-sustaining by immediately covering its internal cost through mandatory subscriptions. This is a direct result of optimising for an internal metric (cost recovery) derived from the previously successful legacy model. However, this logic is entirely disconnected from the reality of today’s digital consumer market. 

The subscription services that emerge from this approach are costly to the driver - often priced around $10 or €10 per month - and fail to deliver new value. Why? Because drivers can already access connected navigation, media and connectivity for free via Apple CarPlay, Android Auto and unlimited data plans. Asking a customer to pay a premium for a service that feels like a downgrade leads to predictable results: conversion rates as low as 5% for free trials into paid subscriptions. And even those subscriptions come at a very high customer acquisition cost (CAC). The consequence? Many OEMs are wrongfully optimising for internal cost-allocation, not for user purchasing behaviour. However, the legacy logic of the ‘Bill of Materials’ (BOM) does not work in the dynamic world of e-commerce.

The Monumental Misstep: Gating Access to Habit

This same legacy logic is what causes some automakers to lock the fundamental in-car commerce functionality (the ability to pay for parking, charging, fuel or tolling) behind a subscription paywall. In the old model, value is only given away when paid for. In the new model, access must be universal to build an active user base and create demand. Gating payments is similar to Amazon telling a consumer they must be a Prime member before they are even allowed to make their first purchase. It shrinks the addressable market and creates maximum friction, dissuading drivers from using the service from the outset.

Many automotive services ask customers to provide their credit card details before they understand the functionality, or benefits of the service. This is starkly different to the typical e-commerce format, where customers can see the product they want to buy, go through the purchase process and only then are asked for their card details, at which point they are more committed to making the purchase. In comparison, the automotive format puts off many consumers by failing to sell them on the product benefits before raising the paywall. 

Delayed enrolment increases transaction and conversion rates, and if drivers are able to save their card details on file or link from companion apps, the likelihood of them using premium services for subsequent purchases increases significantly. It’s important for automakers to recognise that legacy processes often don’t work in the environment of continuous in-car interaction with consumers. Proven e-commerce retail techniques are far more effective than the traditional ‘ship-and-forget’. OEMs need to reverse their thinking and ensure that “this is how we always do it” isn’t prioritised over usability and buying insights from today’s drivers.

Applying ship-and-forget formats to in-car commerce is a clear example of ‘putting the cart before the horse’, which effectively forces merchants to prioritise their own smartphone apps where adoption is easier, in turn significantly reducing the attractiveness of the OEM's in-car embedded proposition. Unlocking true, recurring revenue requires a fundamental shift in perspective. OEMs must stop treating connected services like hardware add-ons and start acting like modern retail platforms. This strategy prioritises building trust and habit before earning the subscription and can be split into three stages:

1. Open the Gate, Build the Habit: High-frequency transaction capabilities (parking, charging, fueling and tolling, for instance) must be universal and easily available to all drivers of the vehicle brand. This builds a user base and gets drivers used to the service and functionality.
2. Make enrolment natural and frictionless: Don’t force drivers to provide payment details upfront, but allow them to enter their payment details at checkout, or better still, sync with companion apps containing payment and vehicle details set up at vehicle collection. Once they have an in-car wallet, ‘one-click’ transactions create the habit. 
3. Earn the Subscription with Tangible Value: Once drivers are engaged, convert them to a premium subscription tier that offers an additional clear, financial advantage or other tangible benefit. This is the Costco pitch: the customer pays a fee to access superior value for money. It could mean waiving convenience fees for parking, offering exclusive discounts or providing priority EV charging access - benefits that are frequent, quantifiable and easy to justify. 

Objection, your honour

A typical objection to this is, “Yes, that’s all nice, but in-car payments need connectivity - so who is going to pay for it?” This can appear to be a valid objection, but there are usually two types of connectivity available in the vehicle: one that the OEM uses for telematics and one that the consumer pays for separately. It is absolutely possible to set up the architecture in a smart way, and in-car payments do not need significant bandwidth, nor do they create notable payloads. 

“Yes, but we can’t spend on marcomm for such a small activity,” is another objection. Short term marketing ROI is conflicted with building successful in-car-commerce. Not communicating the service to drivers will not expedite the growth of in-car payments. If drivers are unaware of the service, they will continue to use their smartphones and won’t get into the habit of using the OEM’s superior vehicle-centric services.

Legacy thinking in in-car payments is a self-fulfilling prophecy: doing it the old way will not be successful. This will then be used by the individuals with past successes and hence internal legitimacy to demonstrate that it cannot work. Ask the music, camera and newspaper industries what happens when historically successful leadership sticks to legacy thinking in times of tectonic disruption. 

The User Experience makes the difference

It is all about the User Experience, or - as Jeff Bezos calls it - “customer delight”. To operationalise this, the focus must be on the “Four Es” of successful e-commerce:

• Enrolment: Make it frictionless, using delayed payment prompts and a minimised card registration flow.
• Engagement: Create reasons to return with smart, real-time "nudging" to show service availability.
• Ease of Use: Minimise friction with simple, two-click transaction processes.
• Entrepreneurship: Treat the platform as a dynamic ecosystem, continuously iterating based on driver behaviour.

The transition from a highly successful hardware company to a successful digital services company is a difficult one that requires overcoming the ‘old proven ways of working’. Doing this can be risky for the individuals, particularly in organisations that reward continuity with more of the same, rather than promoting the disruptive entrepreneur. However, not making this change will be risky for the organisation as a whole, as opposed to individuals or teams. Recent history is full of examples of companies whose legacy successes led them right into disaster. The future of in-car commerce will belong to the OEMs that master the customer journey and champion the disruptive entrepreneurs, not those that allow a legacy logic to stall their future growth.