Payments and The Future of Mobility How can Payment Providers Create Value and Seize Opportunities in the Evolving Mobility Ecosystem?

Chris Allen, Managing Director, Deloitte and Alex Kostecki, Senior Consultant, Strategy & Operations

Leading retailers and technology companies have set a high bar for the financial services industry to create better experiences and simple, seamless integrations that make traditional banking, payment, and other related activities easier to accomplish. The advancement of omni-channel commerce and the presence of leading technology companies have specifically driven the industry to become more open and enable improved payments experiences. And payments are already becoming easier: Most commercial websites, browsers, and smartphones can store credit-card information and allow instant payments and transfers to merchants or contacts, and the first stores and restaurants are going cashless .

There’s no reason why consumers wouldn’t expect the same or better level of ease and convenience when engaging with the evolving mobility ecosystem that moves them and their goods move about. Someone who uses an app to navigate a trip through a bike rental, a taxi ride, a package pickup, and a food delivery would want an integrated, private, and secure way to pay for any trip and service.

In this article, we look at how the evolution of mobility is likely to affect payment providers, and what opportunities they have to be successful in this rapidly changing ecosystem. The goal is clear: Payments in the future mobility ecosystem should be transparent, seamless, integrated, and highly convenient.

Enabling the mobility business plan

Understandably, the more colorful elements of the emerging transportation ecosystem—from self-driving cars to airborne passenger drones —have drawn the most attention. But something more fundamental will likely underpin the future of mobility: building and servicing integrated, multimodal networks. Payment providers can play an important role in setting up the infrastructure that enables these new business plans, determining how the sources of network effects and ecosystem revenue pools—data and their flow—can be shared.

To enable this future state, payment providers should create stronger bonds with the mobility companies creating change: to become a preferred mobility manager supplier, to entwine providers’ technology with these growing companies, and, ideally, to develop a unique insight into what changes lie around the corner. We have outlined three major opportunities below. Ultimately, the winners will likely be those able to bring together multiple players who today might be reluctant to share data.

Enabling seamless intermodal mobility

The opportunity: Enabling users to make one transaction to set-off a sequence of multiple transactions across different services, e.g., across several modes of transport with added ancillary services, on demand (individually scheduled by the user, proposed by artificial intelligence or through saved historic preferences). This sequence could be managed via one defined interaction.

The product: A payment provider can aim to offer a mobility-as-a-service (MaaS)-specific platform that follows the value chain. When handling supplier transactions (fleet operators, fueling, bicycle rental and ancillary services), the platform could handle cost allocations across all of a given travel segment’s service providers (for instance, how much should the bicycle rental platform earn, given that a certain trip was loss-making?); on the customer side, a portal could integrate all payment options that a customer might need to purchase her fare, potentially including PayPal, a credit card, or a real-time payment. Data-sharing could occur by taking advantage of technologies such as blockchain to create conditional contracts or by using token-like information versus sharing actual data across infrastructure points.

This platform would need to integrate seamlessly with a mobility adviser’s ERP and invoicing systems. A payment provider could package the offering with implementation and consulting services, ultimately locking itself in as the preferred supplier of the MaaS company.

The next-gen “fleet” card: Payments facilitated by connected vehicles

The opportunity: As more vehicles become connected, there is an immediate opportunity to leverage the car as a platform to ease the payments process. The technology to do this is readily available, and many developers are already testing pilots in some vehicles. Applications could include tolling and congestion pricing, fueling and charging vehicles, vehicle maintenance, parking, basic consumer products, entertainment, and more, and some network players are already exploring this.

By championing the potential increases in sales of redirected customer traffic, payment providers could look to convince gas stations and consumer stores to install receptors or other required infrastructure to process the payments at their retail locations, in an effort to improve the consumer experience. Carmakers might view this as an opportunity to add vehicle features and attract market attention.

The product: Payment providers already play the role of the intermediary between, for instance, gas retailers and logistics companies. By owning this relationship, a payment provider can develop the customer-facing tools and data analytics that could give the company a strong advantage in their segment. This industry segment offers an opportunity for significant growth: As vehicles transition to autonomous and shared, having an effective automatic and vehicle-specific payment system for fleet operators could prove extremely practical for recurring, vehicle-specific transactions such as fueling and maintenance—and could potentially become standardized across networks.

Peer-to-peer shared mobility

The opportunity: Much of the sharing economy is predicated on repurposing underutilized assets, and the same model extends to peer-to-peer car sharing, where individual car owners rent out their vehicle for others to use. One such company, Turo, has signed up 10 million users and facilitates their transactions on its marketplace. And privately owned car sharing may well expand in coming years as autonomous vehicles become available to the general public, since self-driving cars could ease handoffs between renters and owners by traveling to pickup and drop off points. Indeed, Tesla and other automakers have explicitly discussed this model as a way to drive growth. This opportunity seems particularly promising in suburban and rural areas where density is insufficient to support rail transit or fleets of shared autonomous vehicles. For payment providers, it may offer an opportunity to pilot complex transactions that could become the norm with larger providers.

The product: No one has yet put into place payment solutions for a universal rental system. The problem to be solved, at its core, appears to be carrying value from the account of a person driving a vehicle to the account of the vehicle owner, without losing too much on the way. Take pricing: A vehicle owner could guarantee a profit on her rental given vehicle demand as well as her costs (vehicle maintenance, energy, parking, etc.). A front- to back-end payment processor could offer the visibility required to do this and, perhaps, suggest an ideal rental price, thereby becoming a source of value.

Planning for change: There are significant payments opportunities in the evolving mobility ecosystem

As the contours of the future mobility ecosystem begin to take shape in this innovative space, payment providers face at least two strategic choices:

1) Engaging with emerging mobility managers.

The crux of the challenge could be the way in which players negotiate the arrival of a new entrant: the mobility manager. This new actor would sit between consumers and suppliers, planning, booking, and ticketing all transactions related to mobility requested by its users, and becoming the market’s main consumer-facing entity, consolidating all those payment processes—for bike rentals, taxi rides, refueling, and more—into one. And some of the processes would require serious rethinking for operators. For instance, the costs associated with fueling, maintaining, and insuring vehicles, as well as costs linked with infrastructure (think tolls), will likely become broader B2B transactions as street traffic transitions to autonomous cars managed as fleets. This would require different business models and behavioral shifts in how data flows through the system and is shared.

2) Go big or focus.

To go big, consider becoming a platform provider or even take on the role of the mobility manager. For those payments providers considering to move into the mobility management role, however, such a shift could face stiff competition from a host of players likely better suited to that business, ranging from ride-hailing services to mobility-as-a-service operators and automakers.

Alternatively, payment providers can focus by identifying and serving new niche markets—such as servicing peer-to-peer car rentals or helping implement vehicle wallets—in the mobility ecosystem and designing better user experiences or creating white label offerings that can be used by other players.

Payment providers should be able to navigate the dramatic changes arriving soon by leveraging their current technology and expertise to partner with mobility companies and become a preferred supplier. As tomorrow’s passengers drop off rental bicycles and climb into self-driving taxis, they’ll need clean, intuitive interfaces to move seamlessly within the ecosystem. Taking baby steps to prototype businesses for problems that already exist in mobility today is how payment providers could get there.