A new player for in-car payments: JP Morgan

Last September, JP Morgan announced that it was taking a majority stake in Volkswagen Payments SA, the payment platform of Volkswagen Financial Services. This strategic move by the group reveals the dynamism and potential of a future market.

FACTS

• JP Morgan and Volkswagen Financial Services have signed a strategic agreement for the U.S. bank to acquire a majority stake in Volkswagen Payments SA, for approximately 75% of the financial captive's entity.

• Under the agreement, Volkswagen Financial Services will continue its activities as a payment and financial services provider for the entire Volkswagen Group.

• JP Morgan will, however, take ownership of all digital payment services offered by Volkswagen Payments around the vehicle at the time :

  • the initial purchase of the vehicles by their owners

  • their rental,

  • payment of the purchase price on board the vehicle

  • refueling or recharging vehicles,

  • parking,

  • subscription services and other insurance.

• The acquisition is still subject to approval by the relevant regulatory authorities. The final agreement is expected to be concluded in the first half of 2022.

CHALLENGES

• Setting a benchmark: JP Morgan is gaining a central position within the automotive industry. Volkswagen Payments was founded in 2017 to carry a payments infrastructure specifically designed for the automotive industry. It currently operates its business in 32 markets around the world.

• Becoming a reference in the mobility market: In addition to in-car payments and financial services around the motor vehicle, JP Morgan has planned from the start to build on this acquisition to develop a broader payments platform around mobility in general.

• Taking advantage of a financial windfall: The in-car payment market is expected to be worth more than $4 billion worldwide by the end of 2021 according to some studies. And according to a global study by Ptolemus Consulting Group on payments made via connected vehicles, 600 million vehicles will generate transactions worth more than $500 billion by 2030.

MARKET PERSPECTIVE

• Earlier this year, Gartner published the results of a study predicting very strong growth in in-car payments worldwide.

• Since then, initiatives have multiplied and the market's dynamism is confirmed. Especially since it is driven by many different players, gravitating around the automotive sector (manufacturers and oil companies), or coming from any other horizon (like the web giant Amazon).

• JP Morgan belongs to this second category of players, but its takeover of Volkswagen Financial Services should give it the legitimacy it needs to successfully position itself in this market of the future.