How cars are driving financial innovation
From the way people buy cars to what they buy using their cars, the automotive industry is changing gear.
In 1959, Volvo invented the three-point safety belt and purposely left the patent open so other manufacturers could adopt it. More than half a century later, Tesla shipped the first WiFi-based software updates to its Model S cars, removing the need for the customer to visit a Tesla dealership for updates and enhancements. It raised the standard for customer experience and product excellence and a decade of digital innovation followed.
Today, automotive brands are challenged not only by their competitors in traditional manufacturing, but increasingly by tech-focused companies eager to compete in the ownership experience both inside and outside the car. This dynamic is still in its infancy, but already it has changed everything from the way consumers shop for cars to how they manage their cars’ features.
A new way to buy
For most of the auto industry’s existence, buying a car relied heavily on serendipity: You could choose from whatever happened to be on the lot the day you arrived. Today, an increasing proportion of consumers research online before they buy. They know what they want, and whether it’s available, long before they talk to a sales associate. It’s a change that’s evident in the spiking popularity of “test drive” videos on YouTube and Google searches for “cars to buy,” which have quadrupled year-over-year.
A customer who reaches the bottom of the sales funnel is more informed than ever before. And today, they can specify and order their perfect car directly through a manufacturer or franchisee’s website. Dealerships now serve less as sales arenas than as handover areas for cars that were ordered and paid for in advance. Sixty-three percent of consumers say they would consider ordering their next car online, and auto companies are gearing up for this new type of sales channel—with many choosing to use Stripe Connect. They’re launching new car models, typically electric ones, that serve as the catalyst for a reimagined sales process: order online, collect in store.
A car’s features used to be set at the time of sale. Today, major brands like Tesla and BMW are embracing a different approach to upgrades. They’re bringing “functions on demand” to market whereby the customer can activate in-vehicle features like heated seats, navigation, or advanced cruise control on a subscription basis.
The shift has implications for nearly every aspect of the manufacturing and ownership experience. It allows manufacturers to minimize inventory complexities by reducing the quantity of each model they need to build—pushing customization from the assembly line to the driveway. It shows how money movement can be a seamless part of the value chain for brands and drivers, and how manufacturers can truly own the customer experience through connected services.
How we pay for cars is changing, too. Consumers are already comfortable buying smartphones and streaming services on a subscription basis. The leap to paying for a car using the same logic is significant, but it is happening. According to Stripe data, 31% of adults would rather use a single monthly subscription for all their transport services than pay for each trip individually.
Car-sharing service Lynk&Co is an example of those preferences in action. With support from Stripe, it offers a technologically advanced new car, designed and engineered in Sweden, on a subscription basis that customers “can keep forever, or leave whenever.” When the car is not being used by the main driver, Lynk&Co’s sharing platform can be used to lend it out and manage bookings.
More innovation ahead
These changes take place in the context of a broader shift to electric vehicles—a shift that has gathered massive momentum over the last decade and may be all but completed during the next. Most manufacturers have committed to offering only electric vehicles ahead of the European Union's mandate of 2035. California is the first US state to adopt the same timeline, with more states likely to follow.
Electric cars will generate entirely new payments ecosystems. Drivers pulling up to electric charging points will expect the experience to be seamless regardless of the country, the car, or the charging infrastructure. The auto industry already sees this kind of innovation happening with select cars that operate on traditional fuel sources, particularly in the realm of commercial vehicles and their fleet owners: fill up, drive off, and the fuel pump charges your preferred payment method in the vehicle’s digital wallet. Stripe is now working with auto companies like Ford and Toyota to offer a range of payments experiences for both their customers and retailers.
For more than a century, leaving the house has meant corralling your car keys, purse, and wallet. Not for much longer. We can already open and start our cars with smartphones and, very soon, the car will serve as your wallet, too.