Executive View: Payments innovation in the automotive industry

Open banking will provide a useful solution for franchised dealer groups which are reliant on expensive and inefficient card payments and bank transfers, argues Cian O’Dowd, co-founder and chief operating officer of Atoa, an FCA authorised payment institution.

Car dealerships today operate in the backdrop of rapid payment innovation. But something is stopping dealerships from fully embracing new payment technologies. With customer expectations evolving when it comes to purchasing a vehicle, we believe that it is important that car dealerships understand what more innovative payments could bring to their business and customers.

Traditional payment methods are failing car dealerships

Currently, the vast majority of car dealerships rely on card payment networks and bank transfers. Cards are typically used for smaller transactions like deposits and repairs, and bank transfers are favored for larger purchases such as the vehicles themselves. So what’s the problem?

Card payments can be expensive and expose dealerships to slower cash flow and chargeback risks, making them unsuitable for large transactions.

While seemingly "free", bank transfers create hidden costs in back-office operations, as staff waste hours finding and allocating payments, especially when dealing with missing references and ghost payments not matching a car or customer. Research from some of our existing work with dealerships tells us that the time spent finding and allocating manual bank transfers conservatively costs them £4 per payment in labour costs.

Think also about your customers’ experience. Sales staff without bank account access often cannot verify if bank transfer payments have been settled, especially over weekends when finance teams are not working. This means that many dealerships in 2025 still don’t release cars over the weekend - when many customers are looking to buy.

The blockers and challenges associated with the current mix of card payments and bank transfers add up and create a situation in need of a remedy. But the answer might already be available - Open Banking.

Open Banking is where authorised third-party payment providers use secure application programming interfaces (APIs) and can access customer data shared by banks to enhance financial services for users. It offers immediate settlement, lower transaction costs, and protection against chargebacks.

A key advantage for the automotive industry is that these payments can include reference numbers, such as customer or car registration details, which enable easy payment reconciliation and allow sales staff to verify payments without needing bank account access or contacting the finance team.

This speedier payment process can lead to faster car releases - even over the weekend. That means your weekend car shopper can complete the sale there and then, and staff can increase sales conversion rates and reduce the "days to sell" per vehicle.

What’s holding us back?

My view is that the automotive industry is well-suited for payment innovation. All the ingredients are there - high-value transactions, tight profit margins, and a constant drive for efficiency and improvements in customer experience.

While attempts to transition to Open Banking have been made, its adoption is still in its early stages within the sector. This might be because many solutions aren't "ready to use" and fail to address challenges like high-value payments and seamless refunds.

On top of this, major banks often only provide APIs that require integration by software developers, putting Open Banking out of reach for dealerships lacking dedicated development teams.

Another barrier we’ve noticed when it comes to dealerships exploring Open Banking solutions is their uncertainty about the provider’s necessary regulatory licenses, potential security risks and accessibility to accurate credit checks on customers. That’s why it’s important to ensure their chosen vendor has the relevant licenses and certifications to operate within this space. Trust and security are critical when handling financial information.

Introducing "dealership ready" Open Banking

My view is that Open Banking solutions need to take on a "dealership ready" approach to tap into this industry. By this I mean they need to move from developer-focused APIs to systems that dealerships can use "out of the box."

Firstly, Open Banking solutions should be designed with security front of mind, with strong customer authentication (like Face ID or fingerprint scans) for payment approvals. This will not only protect sensitive payment details as a safer alternative to sharing card details over the phone but also eliminate the risk of chargebacks.

When it comes to credit checks, Open Banking providers should allow dealerships to access Account Information Services (AIS) APIs, which provide a fast, accurate, and cost-effective way to check client credit in real-time, as opposed to traditional credit reporting agencies that are often costly and time-consuming.

At Atoa, we ensure that payments are generated with relevant references, saving sales teams time on reconciliation and enabling them to easily access payment confirmations without the finance team. As a result, payment verification is simplified and cars can be released quicker on weekends.

Seizing future opportunities

As the world starts to wake up to the benefits of Open Banking, awareness remains the biggest challenge. Both customer and merchant awareness on how Open Banking is a secure and efficient alternative is still lacking, but hopefully with time and greater usage, this will increase.

When it comes to payments, dealerships should consider current challenges and their future needs. Open Banking can improve processes, streamline operations, reduce payment fees and enhance customer experience.

It might sound complicated - even daunting - but it’s really not. Fintechs are well-positioned to drive this innovation due to their agility and focus on developing "dealership ready" experiences. Find the right partner and explore the advantages Open Banking can bring.

Author: Cian O’Dowd, co-founder and chief operating officer of Atoa