Automotive Marries FinTech

Not surprising that Auto companies are investing in FinTech very aggressively – as much as 15 times that what they invested in 2015!

Top 3 areas where these investments are being consumed are:

Auto insurance:

Automotive insurance industry is on its way to be revolutionised by usage-based insurance (UBI) thanks to the companies like Claim di, Cuvva, etc., who are pushing for a major transformation.

UBI will decide premiums based on a variety of user behaviours such as number of driving hours, distance, driver profile, parking, maintenance history, and even climate. 250 telematics programmes are present globally, encouraging insurers and F&I divisions to follow UBI’s model. This will further help the insurance provider assess the premiums effectively.

By 2025, the usage-based insurance (UBI) has the potential to access almost $20 billion market revenue compared to the $1.3 billion in 2016. This is possible because companies are innovating with UBI tracked by telematics systems and also collective peer-based insurance calculations.

ClaimDi, for example, has collaborated with 38 insurers that insure 60% of all vehicles in Thailand. What’s even more fitting is that it offers emergency response services and they have enabled customers to buy insurance on the mobile app in as less as 10 minutes. This digital facility, besides being convenient for the users, is estimated to reduce the processing time by 80%, the cost of the procedure by 90%, and make the transaction completely fraud-free. All this as telematics collects useful analytics of the driver’s risk profile.

Digital retailing:

Digital retailing spending in automotive IT is estimated to grow at a CAGR of 29.1% to over $3 billion by 2025.

Auto companies are coming up with plans to drive vehicle sales. In that, Carwow’s technique to popularity has been simple.

The user has to browse online and select a car. The then dealers put forth competitive quotes for the customer. The user chooses a dealer with most suitable price for the deal they are happy with.

This simple model has enabled customers to save close to $5,000 while managing to make sales in UK worth $1.25 billion.

Giants like JP Morgan Chase are also trying to make financing easy and this has led to their partnership with over 14,000 dealers. While this will no doubt give the finance company more customers even before they enter the dealership, dealers will benefit from the dealer inventory that is promoted digitally. Customers, meanwhile, are the perennial benefactors of this new model.

Digital payments:

New mobility business models have already created a huge storm in the industry. RideSharing, CarSharing, and even Smart Parking have managed to appeal the larger customer base. But the question of sustainability and more profit looms over their hood. So what CAN they do?

Integrate.

Integrating with other mobility platforms is touted to be their salvation. And estimates that way look good as well, with the potential of generating billions. For example, CarSharing generated a revenue of $2.02 billion in 2016. But by 2025, it can grow at a CAGR of 19% and amount to almost $10 billion by entertaining almost 38 million members and half a million vehicles in North America and Europe.

Similarly, RideSharing has the potential to grow at a CAGR of 24% and generate $22.5 billion and include 147 million members in 2025. Smart parking on the other hand is estimated to generate $43 billion in 2025 from $7 billion in 2016 at a CAGR of 22.3%.

These services save time, lower congestion, emissions, and increase car occupancy.

Complementing this mobility platform will be online payments, which is already happening and which, in the next decade, are going to be more personalized and easy. For instance, Aria’s, a cloud-based monetization platform, services application includes toll payment and UBI among others. Its subscription pricing options are based on tier pricing, surge pricing, flat rate subscription, etc.

Not only that, these companies are off to launching their own apps for payments. For example, Ola in India uses ‘Ola Money’.

More companies are launching their own methods to enable the various medium of transaction. Financial services companies like Mastercard has Masterpass and JP Mogran has Chase Pay. Tech companies like Microsoft is teaming with Toyota and Tata Motors to use Azure. Automotive manufacturers like Mercedes has PayCash (for Europe).


Sachi Mulmi is a researcher with Frost & Sullivan. She can be reached at sachi.mulmi@frost.com


Sapan Agarwal drives content and marketing for Frost & Sullivan. Sapan is based out of Kuala Lumpur Malaysia and can be reached at sapan.agarwal@frost.com | +603 6204 5830

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