Analysis
9 Sep 21

VWFS sells in-vehicle payments operation to JP Morgan

Volkswagen Financial Services is to sell a controlling 75% stake in its payments platform to banking giant J.P. Morgan for an undisclosed sum. The two companies will work together to build customised payment solutions for the entire Volkswagen Group in Europe and expand globally.

Volkswagen Payments S.A. delivers a range of digital payments services, including: initial purchase and leasing, in-vehicle payments, fuelling and electric vehicle charging, parking as well as subscription-based services such as insurance and in-vehicle entertainment. It operates in 32 markets around the world.

$9bn market

A report earlier this year by Prophecy Market Insights forecast that the global in-vehicle payments market will be worth US$8.90 billion by 2029, up from US$1.90 billion in 2019, as advances in connected vehicle technologies and the IoT integrate mobile wallets into vehicle dashboards.

The potential of the market has seen partnerships formed between OEMs, financial service companies and oil majors. As early as 2016, Mastercard partnered with General Motors and IBM to integrate payments into GM’s OnStar Go system; a year later Jaguar and Shell joined forces to enable drivers to pay for fuel at Shell stations with PayPal or Apple Pay via their car’s touchscreen; and Visa and Honda have created a proof-of-concept connected car with an in-built payments system.

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Autonomous and connected

This type of connected technology is forecast to become even more valuable with the development of autonomous vehicles, which will turn drive time into leisure or work time, enabling drivers and passengers to shop or access entertainment during their journeys. Connected systems will also allow shared autonomous vehicles (with no designated driver) to pay for recharging and parking without human involvement.

Max Neukirchen, Global Head of Merchant Services at J.P. Morgan, said: “Auto payments encapsulate many of the characteristics of the wallet of the future. Partnering with a leader in the field gives us a great opportunity to be at the heart of that.”

Mobility market

VWFS and JP Morgan will seek to develop the payments platform for new markets and industries outside the automotive sector, where mobility-focused payments will become key.

Volkswagen will remain a shareholder in Volkswagen Payments, once the deal goes ahead, subject to regulatory approvals, in the first half of 2022. 

Dr. Christian Dahlheim, Head of Volkswagen Group Sales, said: “With its many years of banking experience and global market presence, J.P. Morgan is the ideal partner for Volkswagen Payments S.A. to implement the requirements of the Volkswagen Group's brands for customized automotive payment solutions worldwide.”

 

Image: VW

 

Authored by: Jonathan Manning