Car IQ Teams With Discover To Fast-Track Automotive Banking

By 2025, it is estimated that $86 billion will be spent on in-car commerce. That number assumes that human beings would be the ones giving the commands. But what if humans were removed from the in-car Commerce process – just as they have been removed from the autonomous driving process?

It could happen. In fact, if the California-based FinTech Car IQ has its way, it will happen soon. The company has recently closed a deal with Discover to collaborate on an automotive machine banking system that takes the human out of the equation and puts the payment system front and center.

Car IQ CEO Sterling Pratz told PYMNTS that several machine banking apps have already been integrated in its new automotive system, with a few more being tested. Machine banking, by way of background, is a relatively new term that describes the banking process that occurs when a machine – such as an Internet of Things device – initiates the transaction.

The collaboration with Discover was enabled when Car IQ incorporated its payment technology into the Discover payments platform. The company has developed a contactless automated platform that turns the vehicle into a payment mechanism for services such as tolls, fuel, insurance, parking and more. Once the service is complete, the vehicle generates a payment file to be paid via a virtual card transaction over the Discover Commercial Payments Network.

But before the Discover deal could happen, Car IQ had to accomplish something even more basic. In the early days of the Discover negotiations, Pratz was surprised to find out that while credit card companies and banks have strict regulations and processes in place for “know your customer” (KYC) to authenticate users, it had minimal “know your machine” (KYM) regulations. So, Car IQ created them. Now, when a machine makes a transaction from a vehicle, it triggers an authentication process that is very similar to what happens with a human-based purchase.

“When we started talking to Discover, we told them we had a KYM system and they knew that would be a game-changer,” said Pratz. “Because their thinking around machine banking was much different prior to that. They thought they could just put a credit card in the middle of the process and everything would work smoothly from there. But that’s not the right way to connect the machine directly to the network.”

After the machine integration was solved, Car IQ and Discover had to pick their testing targets. Because it’s a “one to many” strategy, it decided to start with vehicle fleets. The commercial applications from the transaction platform lent themselves well to the fleet business approach, creating an easily articulated use case.

Suppose an airport livery driver, part of a bigger fleet, has three trips to make from Santa Clara, California to the San Francisco airport. That driver would start the day with a process that’s actually similar to pairing a phone. He or she would enter the geolocations planned for the day, including any toll roads, key fuel retailers and any restaurants or retailers. The car and payment system are automatically programmed to pay tolls without the proprietary automated platforms adopted by many U.S. transit systems. When it’s time to fuel up, the driver pulls into the preferred gas station, where the car notes how much gas is left, how much is added, how much it costs and then pays automatically – no credit card necessary. An automatic record of the driver’s expenses is fed directly to fleet headquarters.

“The idea was to make payment management of fleet vehicles simpler,” said Pratz. “Believe it or not, today a lot of huge fleets are managed with simple CRM tools and Excel spreadsheets. But then on the expense and payment management side, it becomes a really daunting task. You have to validate that all expenses were real, and you’ve got to accrue any credit card costs or payment costs. And then it takes a fleet of people to write checks and make payments – and this whole process happens 30, 45 or even 60 days after the transaction.”

With the KYM process in place, Car IQ can actually take its solution to any IoT device. According to Pratz, the company’s growth will come from many different areas – but for now, automotive automated commerce is the sweet spot.

Pratz noted that the company is looking to onboard more credit card companies that recognize an opportunity to add a new transaction platform. Banks are already enthusiastic participants. Both Citi and the Royal Bank of Canada have been early investors. Car companies are also interested, which would make the jump to individual automotive users easier.

“One of the things we really want to achieve is our vision of simplifying the payment management of a vehicle,” Pratz said. “Think about all the things a car owner has to pay for: insurance, DMV registration, tolls, parking. We want to automate the payment of each of those activities for a vehicle. So, in a year from now, you’ll see us move into more activities that will integrate more payment capabilities. Imagine enabling a car to automatically register itself with the DMV. I’m sure you’ll see more of those features and functionalities from us in the next 12 months.”