What are autonomous vehicles?

Autonomous and semi-autonomous vehicles are quickly increasing their global presence, with small-scale deployments and pilot programs happening around the world. Autonomous vehicles (AVs), also known as self-driving or driverless vehicles, have become a focal point for innovation as consumers increasingly rely on contactless payment and delivery options. Semi-autonomous vehicles have some autonomous features but are not fully self-driving. Semi-autonomous vehicles are classified as Level 1, Level 2, or Level 3, depending on how involved the driver of the vehicle must be. This article provides a basic overview of autonomous vehicles and connected vehicle payments.

While autonomous vehicles may conjure up the image of a driverless car moving passengers through city streets, significant attention is being given to the area of moving packages and food, rather than people, along pre-determined paths, instead of flexible routes.

AV deliveries support the growing trend of delivery-as-a-service (DaaS). A few examples include Walmart’s testing of self-driving trucks and drone deliveries, Amazon’s plans to develop new technology for its autonomous delivery vehicle, Scout, and Domino’s use of Nuro’s golf-cart sized delivery vehicles to autonomously deliver pizzas in Houston, Texas.

The benefits and challenges of autonomous vehicles

Autonomous delivery options will lead to incremental purchases and an expanded geographic footprint and extended hours for merchants. They can also promote time and cost savings, convenience, a smaller environmental impact, and reduced staffing requirements–a particularly noteworthy benefit for merchants in areas suffering from labor shortages.

Even so, there are still some challenges associated with AVs. For starters, the United States has yet to announce a federal regulatory framework that addresses the testing and deployment of autonomous vehicles.

Without a national framework, an inconsistent patchwork of state laws regulates AV testing and deployment. Several high-profile safety incidents caused by autonomous vehicles have triggered public concern. Better federal oversight will make it easier to address these concerns and determine liability if an incident does occur.

 

What are connected vehicle payments?

Connected vehicles are vehicles with technology that allows them to communicate with other, external tech, such as a built-in navigation system that can link to an external GPS. Connected vehicle payments, or v-commerce, allows users to make purchases without leaving their vehicle. Credit card and car companies are investing in the v-commerce space, with over a dozen automobile makers developing connected card payments.

Connected vehicle payments will continue to flourish over time. A report from Juniper Research estimated that in-vehicle payment spend will exceed $86 billion by 2025. Consumer use cases for v-commerce range from pre-ordering food from a rest stop to locating and booking parking in advance. Fleet drivers could use this technology to pay at the pump and to pay tolls, fees, and parking tickets. As with other forms of technology, more use cases will emerge over time.

 

The future of autonomous vehicles and connected payments

 

For deeper insight into what is on the horizon for autonomous vehicles, connected vehicles, and payments, see Mercator Advisory Group’s recent report, Autonomous Vehicles, Connected Vehicles, and Their Impact on Payments.