In-car payments: exploring the potential of futuristic payments technologies

Sterling Pratz, Car IQ: In-car payment users need flexibility – it is very important to the consumer for their car to be connected to their preferred payment method partner or bank

Sterling Pratz, the CEO and Founder of Car IQ, was on the virtual stage of MoneyFest, where he discussed IoT payments and the innovative partnerships and novel machine-centered processes that create stronger authentication, securer transactions and better risk management. We had the chance to explore this topic further.

In recent years, you have worked on payment solutions for vehicles: what does this space look like? What is the adoption status of in-car payments among consumers?

In-car payments are all about simplicity and convenience. The goal is to enable cars to start transacting directly with merchants and payment service providers without human intervention. Our belief is that when cars or machines transact directly with banks and payment networks, not only is it inherently more secure and efficient, but it's also simpler for the car owner to enable their vehicle to transact and manage the payment process after the transaction.

From the day we founded Car IQ in 2016, our vision has been to create a payment platform for cars. After four years, we now have thousands of vehicles on our platform with unique IDs, making thousands of transactions – just in the last few months, our platform was used to pay for more than 15,000 gallons of fuel. Cars are also starting to pay for oil changes, tire replacements, and tolls using our platform.

We see this form of ecosystem already simplifying transactions, the processes being automated and managed by ts he car. Moreover, if the car is connected to the internet, all transactions are done through the cloud. Today, 85% of cars coming off the assembly line are connected to the cloud, so we see that as a market in place.

What are the unique needs of consumers in this payment space?

Two main needs are unique to in-car payment users. Firstly, they need to be able to access all their information through their dash or their phone, and they need to be able to use it to put in their PIN, or the pump number, or to get their receipt. Secondly, and more importantly, they need flexibility: it is very important to the consumer for their car to be connected to their preferred payment method partner or bank. Currently, our platform is built on the foundations of card payments, even though we manage the identity verification ourselves, but we have started to support peer-to-peer payments as well, and we think that will be a big portion of where in-car payments will go in the next two years.

How sensitive are in-car payments to fraud? What strategies do you employ to minimize fraud?

Fraud is a serious problem in this space. If you look at fuel cards, for instance, some of the fuel product providers are very vocal about the fact that fraud is about 3-7% of all transactions, and the biggest challenge that the card providers have is that fraud is increasingly non-traditional. For instance, a person has the right to use a card to purchase something, but they don’t purchase it for the right vehicle, or in the right manner, and this is actually friendly fraud. It is a real challenge for the merchants and banks because they do not have the visibility into the transaction or the person purchasing to validate that transaction.

Now, there are ancillary ways to flag transactions, as other variables may not add up. For example, if a Prius, which has a 9-gallon gas tank, purchases 40 gallons of fuel, this action can be easily flagged. So we have a team that is focused on fraud prevention who work on tying identity verification and machine awreness directly to the fraud platform.

Our way to prevent fraud during fuel purchases has three tiers: firstly, we establish how much fuel the car needs by checking how much fuel is left in the tank. Secondly, we perform an authorization on the vehicle: whose is the vehicle, does it have rights to purchase, and who is it purchasing from? If that all checks out, we authorize it to pair. Thirdly, and this is the most important part in preventing fraud, once the transaction is completed, we ask the car: did you receive fuel, and how much? That combination eliminates fraud, chargebacks, and disputes, which are the three most expensive parts of every transaction.

What are the biggest challenges currently for vehicle and machine payments?

I come from a background in developing early-stage companies, and I always find adoption as the biggest challenge. In our case, there are two challenges: consumer adoption and market adoption. On the one hand, consumers need to learn that paying with your car is easier and more secure. On the other hand, the cars need means they can transact with – you have to talk to a lot of merchants and integrate their APIs into the platform, which is what we are doing today. Once we add a merchant, cars can directly transact with them.

Fortunately, we are seeing adoption on both sides. We have thousands of vehicles on the network, and we just signed an agreement with the largest fleet operator in the world, as well as with a large automotives Original Equipment Manufacturer (OEM), and we are starting to go ahead with many merchants. We are developing on-demand services, like fuel and roadside assistance, and are moving into pay-at-the-pump, which is essential. What’s more, we have recently partenered with Discover Card, and count Citibank is one of our investors.

About Sterling Pratz

About Car IQ

At Car IQ, our mission is to create a platform that enables vehicles to receive, store and send funds securely. We have created the first payment solution developed specifically for vehicles and fleets. Our platform enables vehicles to autonomously initiate, validate and complete payments for services such as tolls, fuels, parking and more.