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Payment infrastructure critical in scaling mobility businesses

What is the role of payments in scaling a mobility business, and what does this mean for the future of travel and transport? By Paul Marcantonio

Much of the mobility sector relies on scale to deliver true value, either through being large enough to drive down the cost of vehicles through economies of scale or operating over a broad enough area to access the largest possible market. However, achieving this scale won’t be possible without having the supporting infrastructure to go with it, and the most important facet of this is payments.

Automotive World Magazine – January 2021

The current state of play

The way people and goods travel is undergoing significant change as a result of technological development and social transformation. Mobility is on a trajectory to become more sustainable, equitable, efficient and convenient. In the past decade, the transportation ecosystem has evolved to incorporate ride-hailing, car- and bike-sharing, micromobility and microtransit, alongside digital trip planning, ticketing and payment. As well as this, electric vehicles are becoming more viable, and the growth of connected and autonomous vehicles is on the horizon.

Commuting habits and demographic changes are also impacting the economics of mass transit. Millennials are driving shorter distances, with on-demand options such as ride-hailing and shared e-bikes and e-scooters surging in popularity across the world. Car sales peaked in 2017, stagnated in 2018 and started to decline in 2019, even before the pandemic.

The mobility sector is now adapting to provide the on-demand experience people expect in every facet of life, whether it’s Netflix or getting around their city; they need increased consumption choices and convenience. At the same time, with urban populations growing, cities are becoming increasingly gridlocked and polluted, and micromobility and shared transport schemes provide solutions.

As the world reacts to the pandemic and the economic fallout as a result, combined with the looming threat of climate change, mobility will continue to evolve. The predicted shift is away from personally owned, driver-driven vehicles and towards a future mobility system that focuses on seamless, multimodal travel facilitated by driverless cars and shared mobility.

moovel MaaS
Cities are moving towards multimodal journeys

Payment infrastructure facilitates growth

Consumers now want to pay for their on-demand mobility products and services at speed, and with efficiency and safety. For mobility companies, payment infrastructure is not simply an operational consideration, but a vital part of future-proofing a business and maintaining a slick customer experience.

Given that mobility businesses need to grow at pace to remain competitive, expanding into new territories and new markets is a key strategy for growth. Reaching new territories, though, increases pressure on existing payment infrastructure. Volumes of payments will increase, while fraud protection becomes more difficult to oversee. Transaction processing, if carried out by the weakest or most unprepared payment providers, could crumble under the weight of a growing customer base utilising a range of different payment methods. Meanwhile, customers in different markets may have different expectations, and the available consumer purchase options will be required to diversify and increase.

Payments infrastructure is particularly specific to different geographies. Without being able to pay via a familiar method, customers lose interest in a service. A payment process that involves friction results in abandoned transactions, or distrust and dissatisfaction with the brand. Therefore, mobility companies must ensure they are building a safe, frictionless and convenient experience for users.

Having a unified payment strategy is ineffective; companies need to implement payment infrastructure that is appropriate in each market. Mobility companies will need a robust strategy for regional variations in payment preferences. Indeed, companies that neglect to do so will find it difficult to engage with new customers in new territories, and could also breach local regulations.

Turning the car into a platform for payment
Honda and Visa are working to turn the car into a platform for payment

Payments service providers adapt

Given changing consumer habits, a priority for mobility businesses is linking card payments to a mobile app. This results in a better experience for the end-user and also increases user adoption, since consumers can pay on the go when they need the mobility service.

Payments linked to a mobile app also enable the withdrawal of a small amount of money at the end of a ride, allowing companies to authorise a predetermined amount and only charge for the time rented. As a result, consumers can pay as they go with no need to commit to longer-term usage or renting and no need for forward planning. The mobility sector is then able to provide instant gratification to the user. As such, payment providers are tailoring technologies to the mobility industry, following patterns of payment that are already present across other verticals to serve the changing needs and expectations of consumers.

Effective payment solutions provide ways for mobility companies to offer their customers familiar payment methods, while at the same time building a unified payment process to ensure brand continuity and accessibility in all markets. Riders are more frequently paying via their mobiles, on the go, and using new payment methods such as Apple Pay and Google Pay, so payment solutions must cater to this.

Consumers are also increasingly concerned about security, but at the same time require a checkout process that is convenient. Advanced anti-fraud scoring systems combined with tokenisation is making the checkout process safe. Tokenisation allows card payment details to be saved and stored safely and securely for repeat future payments. As well as this, proprietary risk control systems including anti-fraud based on AI are being created, ensuring payment providers can adapt their technologies to meet the needs of individual business.

card payment
Payment providers are tailoring technologies to the mobility industry, following patterns of payment that are already present across other verticals

Other features that mobility companies need include zero-amount authorisation so riders can verify their cards without being charged, and customisation based on language, currency and design preferences. Payment solutions must also be easily scalable, given that growing mobility companies must enter new countries at speed and provide a unified payment scenario. Payment solutions that take months to integrate will only curtail growth.

The journey forward

Looking ahead, the pressures of climate change and accelerating technological innovation combined with consumer behavioural shifts mean mobility will continue to evolve, and payments will sit at the heart of it. Visa and Honda, for example, just announced a proof-of-concept connected car that makes paying for things like fuel and parking simple and painless, with payment made via two in-car apps. Security and user experience will be the main pillars going forwards, but the car will become the payment point, in turn providing more data about user behaviour, and developing a better user experience.

Meanwhile, ride-hailing and ride-sharing services will continue to go global. The global scooter-sharing market was already valued at US$99.8m in 2018, and market estimates suggest it may reach US$553m in 2025. This means there will be a demand for local payment methods on a broader scale.

For individual mobility companies looking to capitalise on this trend and adapt for what the future holds, an expansion strategy is meaningless if the company cannot scale its infrastructure in tandem to meet new requirements. As such, mobility companies must form close partnerships with payment providers to cater to future demand, so that effective payment technology is united with mobility technology to provide a seamless service for consumers, wherever they are and however they prefer to pay.

About the author: Paul Marcantonio is Executive Director – UK & Western Europe at payment service provider ECOMMPAY

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