Imagine a world where buying a car is as easy as a few taps on your phone and as personal as a handshake, with none of the headaches of the traditional dealership experience. Then picture that same efficient-yet-personal experience continuing post-purchase as the car becomes a digital wallet for all manner of driving-adjacent transactions: parking, fuel, tolls, and more. 

It’s a vision that works better for everyone involved—car brands, drivers, dealerships—but has been blocked for years by structural factors. Some of these are well recognized, such as the regulations in many US states that mandate auto manufacturers to distribute their new vehicles via franchised dealerships. A less well-known but equally important factor has been the lack of the underlying financial infrastructure required to facilitate better models of car ownership.

Over the last few years, one of the biggest surprises at Stripe has been that a piece of software we built a decade ago to solve a very different problem has provided the foundation the auto sector needed to transform. That software—Stripe Connect—was initially a way for early users such as Lyft to launch gig economy marketplaces, which split payments between multiple parties. It’s the first example of Connect helping to catalyze a transformation in car ownership.

Over the last few years, forward-thinking car brands such as Ford and Lotus have used Connect’s power and adaptability to create a second transformation in car ownership. 

Established car brands are now:

• Selling direct-to-consumer without disintermediating dealers (buy online and pick up at your local dealer, with Stripe automatically managing the splitting and movement of funds between car brands and dealers)
• Offering subscription access to fleets of cars
• Providing connected car services, such as enhanced roadside assistance and integrated streaming, which are utilized—and paid for—through the car itself. 

The major pieces are in place for a generational change in the ways cars are bought and owned, and by working with leading brands, Stripe financial infrastructure is helping to make it possible. Here are the biggest trends we’re seeing today.

Creating direct-to-consumer opportunities

Over the last two decades, ecommerce has expanded into nearly every corner of the economy. But for years, the auto industry was a notable holdout, in no small part because drivers were wary of making such a big purchase online.

That sentiment is shifting rapidly: McKinsey research found that 52% of potential car buyers (and 80% in North America according to a different study) are open to buying their next car entirely or predominantly online.

Car brands are capitalizing on the change. Lotus, the iconic British car brand, recently launched direct-to-consumer sales in Europe. Its new Eletre model can be configured, customized, and purchased online. Lotus uses Stripe Payments to make it easy for Lotus customers to pay a reservation fee via Apple Pay, Google Pay, or bank transfer, saving dealers and customers time and money. And by using Stripe Identity for customer identity verification in the sales process, Lotus simultaneously minimizes fraud and friction for legitimate customers.

In 2022, Lotus Cars UK transitioned to a fully online D2C sales model supported by Stripe’s payment services. We utilized Stripe for up-front credit card reservations and bank transfer payments for vehicle balances, accommodating both full cash transactions and deposits towards finance. The 2023 introduction of ‘account matching,’ a key Stripe fraud prevention feature alongside identity verification, refined our payment process, enhancing customer experience and markedly reducing abandoned checkouts. This partnership with Stripe was crucial in achieving our record sales of sports cars and lifestyle EVs.

Ford has created an ecommerce experience that uses Connect to route payments to the correct local Ford or Lincoln dealer. Ford also offers dealers improved payment acceptance for vehicle service via FordPay. It’s a fundamental shift in the auto economy that allows Ford to develop direct-to-consumer relationships while continuing to support its network of dealerships. Soon, Stripe will enable Ford Pro FinSimple for commercial customers, an ecommerce solution for vehicle ordering, reservations, and financing. Similarly, BMW of North America is working with Stripe to provide new pathways for managing vehicle preorders and online shopping, including extended warranties, upkeep, and digital services.

Stripe has developed strong expertise in user experiences that will help provide easy, intuitive, and secure payment processes for our customers.

Subscription access provides drivers more options and car brands more customers

Automakers used to worry that car subscriptions would cannibalize sales (why buy when you can subscribe instead?), but increasingly they’re realizing the opposite is true: subscriptions allow them to bring in new customers who eventually convert into buyers.

Porsche launched Porsche Drive, which provides drivers with access to a range of Porsche vehicles for $3,600 per month. The new sales channel has expanded the company’s customer base: 80% of Porsche Drive subscribers are new to the brand. Similarly, 91% of people who sign up for Volvo’s subscription service, Care by Volvo, are first-time Volvo drivers. Jaguar Land Rover is also offering innovative access to its luxury cars with Pivotal, a service which provides flexible car subscriptions that allow subscribers to pause or update vehicle choices.

Ambitious manufacturers clearly intend to move from an episodic, once or twice-in-a-decade sales engagement with customers, to an always-on, software-style customer relationship. Customers are eager partners in the change. They show a clear preference for subscription offerings that come right from the manufacturer itself: about 55% trust a subscription with an established car brand over one from automotive disruptors and third-party providers.

Always-on services enhance the driving experience and boost margins

The rise of car subscriptions goes hand in hand with another financial revolution: car brands are increasingly embracing connected mobility based on smart, internet-connected vehicles and data-driven services. 

It’s a vision they’ve wanted to pursue for a long time, but they’ve struggled to build scaled, always-on offerings for a few reasons. One has been the plain logistical difficulty of handling recurring payments and failed transactions efficiently, all within a simple user experience. This is where Stripe Billing comes in, enabling car brands to roll out and manage subscriptions easily.

Now they’re releasing apps that offer entertainment, live information, navigation, and diagnostics and sync across phones and in-car dashboards. For the driver, it’s an enhanced, more cohesive driving experience. Payments orchestrated by Stripe serve as the backbone which allows car brands to provide and monetize these features. Projections suggest that by 2030, 600 million connected cars could lead to $537 billion worth of in-car shopping. BMW is already opening up new ways to engage with customers through the BMW ConnectedDrive Store and the My BMW app, which offer an array of conveniences such as instant traffic updates, parking information, concierge services, and emergency assistance.

By envisioning vehicles as platforms for payments and connected services, car companies can boost the lifetime value of each customer. Imagine facilitating purchases like EV charging, tolls, or insurance payments—the integration of payment options into the driving experience is a straightforward next step that will make this possible.

The road ahead

Expanded financial relationships with customers are just the start of an extensive makeover of the auto industry. By using financial technology to make new digitized purchase flows work, car brands are opening the way to better data-driven decisions around inventory, new revenue streams from in-car purchases, and a strengthened longer-term bond with their customers. 

The success of this shift will rely on modern financial infrastructure to offer customers an effortless purchase experience while minimizing fraud, maximizing customer lifetime value, and ensuring payments can be routed to key stakeholders in the ecosystem, including dealerships. Stripe’s suite of tools, including Connect, Billing, Payments, and Identity, make this possible.

To learn more about how Stripe can help you lead the way, please get in touch.