The benefits of tokenised payments in e-mobility

tokenised payments e-mobility

The move towards clean energy in transport is gaining speed and traction around the world. Electric and hybrid car sales are skyrocketing, and will undoubtedly overtake sales of petrol and diesel cars. At the same time, technology is shaping how we pay for the energy that powers these vehicles.

In this article, we will look at the growth of e-mobility. As electric vehicles ownership goes mainstream, the industry has a lot of work to do in terms of infrastructure. In particular, we focus on payments. This article looks at how tokenisation can make an impact on EV charging payment solutions.

The growth of e-mobility

Electric cars have been around since the 1990s, but there has been growing awareness of the downsides of fossil fuels in recent years. The internal combustion engine powered by petrol or diesel is a polluting force; and it’s no longer welcome. The impact of vehicle emissions is a growing concern for those who live and work in urban areas, and a huge issue for the planet as a whole. Electric vehicles are one small part of the bigger solution to protect our environment.

The ideal scenario is for a vehicle which can run on renewable energy; having zero emissions, that also meets the needs of transporting people or goods from A to B. Equally, the costs and convenience to the driver should be comparable to alternative modern forms of transport.

Early electric plug-in models only allowed for short journeys, due to lithium-ion battery capacity limitations. The technology for a battery’s capacity has improved, the cost has gone down, and the practical considerations of running an electric vehicle are now acceptable to drivers in today’s world.

But there is still work to be done to improve the experience of owning an electric vehicle.

Increasing electric vehicle sales

According to Insideevs, an estimated 361,307 electric vehicles were sold in the USA in 2018, and they anticipate that number rising substantially in 2019. They also estimated that global sales in 2018 stood at 2,018,247 and are expected to notably higher in 2019. The International Energy Agency (IEA) predicts the number of electric vehicles on the road around the world will hit 125 million by 2030, but some expect the number will be even higher than this.

In many countries, there is a strong political will behind the switch to electric vehicles. For example, in the USA, the State of California is leading the way with a new target of 5 million zero emission vehicles on their highways by 2030; replacing an earlier goal of 1.5 million. Similarly, in October 2018 the European Parliament approved new draft rules aiming for zero and low-emission vehicles to make up 20% of all new car and van sales by 2025, and 35% by 2030.

Charging infrastructure

Most electric cars are recharged at home right now. But EV charging stations can now be found at workplaces, alongside fuel pumps at petrol stations, and adjacent to shops and restaurants. In 2017 there were over 50,000 public or private charging stations across the US.

A report from the Electric Vehicle Charging Association states the following:

“Globally, the EV charging infrastructure industry is expected to grow at a compound annual growth rate of 46.8 percent from 2017 to 2025, reaching $45.59 billion in revenue by 2025. In the U.S. alone, revenue increased by 576 percent over five years, growing from $27 million in 2011 to $182 million in 2016. If the annual increase in revenue matches the 11 percent growth rate from 2015 to 2016, the U.S. could see more than $276 million by 2020.”

There are still many issues with EV charging stations. These include their ability to meet peak demand, the cooperation with local utility companies, navigating red tape to develop new sites, incorporating renewable energy such as solar or wind, demystifying the jargon and terminology, and fostering a better understanding of EV customer behaviours. All of this, of course, requires heavy investment.

It’s still early days

The electric vehicle industry can be considered to be in the early stage of its lifecycle. Similarities exist between this and the mobile phone networks. Both operate in the B2B and B2C sectors, require high capital investment in supporting infrastructure, need geographic coverage to meet consumer demand, and have similar patterns of market penetration (innovators, early adopters, pragmatists, and so on).

Car manufacturing companies also provide EV charging stations, along with oil and gas companies like Royal Dutch Shell, retail franchises looking to attract customer traffic, restaurants, and many more. This fragmented and diverse mix of stakeholders and interested parties creates a complex landscape. In its early days, the mobile phone industry had a closed-loop system for its payment handling. By introducing pay-as-you-go, the industry opened up and saw rapid expansion.

In Europe, EV charging is undergoing a similar process, with more stations accepting ad-hoc payment. The complexities are still being ironed out; but the result will eventually be a mixture of one-off payment solutions and recurring account-based purchases; flexibility at the charging station.

Tokenised payments for EV charging

Tokenisation is the process of receiving, encrypting, and storing payment credentials in return for a token that can be used by a merchant to authorise one-time or recurring payments. In practice, this usually requires the consumer to register their payment details beforehand, digitally, in the merchant’s network.

This is beneficial for the e-mobility industry, specifically EV charging brands. Firstly, credit and debit cards can be used as an identifier to activate the EV charging station, lock and unlock the cable, calculate the amount, and pay. At the moment, this relies on the customer using the same card that is registered in the merchant’s system. The market is open to ad-hoc solutions, but these typically rely on eCommerce.

Perhaps the most impactful use of tokenisation in e-mobility is for recurring payments. The user goes to the website or app of their operator, and registers their payment details. The payment system does a 3D customer authorisation transaction, and issues a token to the operator using the encrypted details. This token can then be used to give the customer access to an EV charging station.

The front-end charging experience could be driven by the app, or as an integration between the app and an interface on the charging station itself. In either case, the customer has an optimal experience with no payment friction; the devil is in the back-end detail, and the customer can charge-and-go. Depending on the nature of the deal between the operator and the customer, an app might display costs of charging, deduction of credits, or if the customer is registered on a subscription basis… just a thank you message!

We have also explored eCommerce payment solutions for EV charging, which we look at in more detail in our article about the future of payment solutions for EV charging.

Tokenisation also offers security benefits. With EV charging stations often not staffed, there needs to be full control over who can access the power. This form of identification ensures that the customer can pay, or has already paid. Therefore, raising barriers and unlocking charging cables is less risky.

Visionary opportunities

Tokenisation opens up a world of opportunities for merchants, operators, and franchises.

For example, a customer could register with a merchant that operates EV charging stations with access-controlled toilets, restaurants, cafés, shops, and more. Tokenised payments would allow the customer to use the entire collection of services with absolute ease. This builds brand loyalty and can be integrated with returning customer incentives – thus building strong and sustainable revenue streams.

Another exciting prospect is the connected car. Why can’t tokenised payment solutions be integrated into the vehicle itself? Why does the driver need to interact directly with the app and the charging station? The car’s internal intelligence could link with the driver’s account, and work very effectively.

Due to tokenisation being highly suited to recurring payments, it also presents opportunities to businesses, hire firms, taxi companies, and lease companies. Fleets of electric vehicles could be linked to one single corporate account, with predetermined or pre-authorised payments. These outgoings can be optimised using data analysis and ERP systems, or other integrations for B2B and B2C.

Private charging and workplaces

Huge growth is predicted in sales of electric cars over the next decade. EV charging stations must be accessible, convenient, and able to recharge vehicle batteries quickly. The experience of charging must become consistent for drivers, as plug-in electric cars become the first choice for families and businesses.

According to The IEA Global Electric Vehicle (EV) Outlook 2018:

“Private chargers at homes and workplaces were estimated to number almost 3 million worldwide in 2017. In addition, there were about 430 000 publicly accessible chargers worldwide in 2017, on one quarter of which were fast chargers. Fast chargers are especially important in densely populated cities and are also essential to increase the appeal of EVs by enabling long distance travel.”

In most cases, electric vehicle owners will charge their car at home or at their workplace:

“Private chargers are expected to outnumber electric cars by 10% in 2030. This takes into account relatively fewer opportunities for households to install chargers – as more people without access to a parking space purchase electric cars – but at the same time increased availability of chargers at workplaces.”

If a home-based EV charging unit is rented by the homeowner from the operator, tokenised payments and digital accounts could come into play. But perhaps the biggest opportunity is for workplaces. Companies and commercial property owners can offer free or discounted recharging to employees as a perk, and this could also be delivered through tokenised identification or payment solutions.

Workplaces have a captive audience, with recurring loyalty and regular use. This is the perfect scenario, and EV charging could be tied in to create a holistic payment environment with workplace vending machines, coffee shops, staff gyms or sports clubs, and much more.

Summary

From the customer’s perspective, the demand is for convenience and consistency in EV charging. They want to be able to recharge in various places, using their preferred payment method. With this in mind, remember that tokenisation is just one part of the puzzle. Operators should also consider offering ad-hoc eCommerce-based payments using a contactless cards, mobile wallets, or a mobile website.

Operators need accurate unmanned automation, secure cashless payment systems, and a steady stream of data. Significant amounts of data on electric vehicle use, energy consumption, driver patterns and behaviours can indeed be collected. Information such as preferences for locations, peak and off-peak demand, costs of supply, etc. lead to better long-term planning for the growth of electric vehicles.

E-mobility is just getting started, and payment methods are at the core of its commercial growth.


 

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About the author

Anke Vandenbussche is Strategic Product Manager at CCV. After more than a decade of experience in the financial sector, Anke has built up a expertise in eCommerce entrepreneurship and online payments. As Strategic Product Manager at CCV, Anke is responsible for the strategic and commercial direction of the online payment platform, CCV Pay.


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