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Making sense of the rapidly changing payments landscape within automotive retail

With many different payment methods available to automotive dealers, how do dealers choose which is right for their business? Through our work with some of the largest automotive dealer groups in the UK, we have learnt that when it comes to payments it’s not one-size-fits-all.

To set the scene, it’s worth outlining the different touchpoints where a dealer transacts with their customers:

Each touchpoint is different and selecting the most suitable payment method can have a big impact on conversion, cost and operational efficiency.

It’s now time to take a more detailed look at each payment touchpoint and dive into the various payment options to explore which is the most suitable for both the customer and dealership.


The value of a deposit typically ranges from £99 to £500. Conversion is key for deposits, as dealers want to allow customers to quickly secure their chosen vehicle before it’s sold to another customer.

Dealers therefore need to provide customers with high-converting payment options, while also reducing their risk if the customer is not present in the showroom. Often, sales representatives take card payments over the phone for remote sales but this leaves the dealership open to fraudulent payments made with stolen cards.

An alternative solution is for the sales representative to send the customer a payment request via email or SMS so they can make a secure payment from their banking app with Open Banking or a 3D Secure card payment. This offers a quick and easy payment process for the customer to aid conversion, while minimising both the operational effort for the sales team and risk for the dealership.

It’s tempting to just provide the customer with the option of an Open Banking payment at this stage to reduce payment processing fees. However, the cost of losing a sale because the customer is unable to use a credit card can outweigh the benefits of reducing transaction fees.

Taking deposits online still has the same requirements, with conversion being the key driver. Historically, many dealers have defaulted to offering cards as the primary option for online deposits, but there is also the option to introduce Open Banking at this stage. The Open Banking journey is best suited to mobile, so if the customer is on a desktop it’s a good idea to offer a QR-code to allow the customer to make the payment on their mobile device.

Dealerships also need to have the ability to easily make full and partial refunds across both cards and Open Banking, as many deposits are fully refundable. If they don’t have the capability to make refunds in a timely manner, it can create a poor customer experience.

We would therefore suggest that the dealer provides the customer with the option to choose to pay via either a card or Open Banking.

Most suitable payment options:

  • Cards

  • Open Banking


At this stage, the customer has invested a significant amount of time and decided that they want to progress with the purchase. Depending on if the customer has arranged finance or a part exchange at this point, payment sizes can range from the low thousands to tens of thousands of pounds.

Due to the large transaction size, a card payment is not suitable for the dealer as the variable rate transaction fee could end up costing the dealership hundreds of pounds, eclipsing a large proportion of their profit margin.

Historically, most dealerships have reverted to bank transfers for balance payments to avoid card fees. However, this results in a very manual process for both the sales and accounts team to verify payments before a vehicle can be released to the customer.

Open Banking payments along with settlement accounts provide a great solution. This allows sales representatives to verify that a payment has been made and release the vehicle without the need to manually check with the accounts team – greatly improving dealer efficiency and the customer experience.

However, some banks impose limits on the amount that can be paid via Open Banking meaning that this solution doesn’t work for all customers. For example, Barclays limits the first Open Banking payment to a new beneficiary at £2,000 – not ideal if the customer needs to make a £10,000 balance payment on a busy Saturday morning. Only offering Open Banking in this situation can lead to a frustrated customer or, in the worst case, a lost sale.

Dealerships should therefore look for a solution that allows customers to make a bank transfer if an Open Banking payment fails, while still providing the sales representative with the verification of funds needed to release a vehicle. At Cocoon, we call this solution “Automated Bank Transfer”.

Most suitable payment options:

  • Open Banking (primary option)

  • Automated Bank Transfer (secondary option if Open Banking fails)


Service payments in dealerships are typically below £2,000 and high-volume. Automotive retailers therefore need a solution that provides instant confirmation of payments and something that’s quick and easy for customers and staff alike.

Due to the transaction sizes, service payments are an ideal candidate for Open Banking, which provides a simple payment option for customers and helps dealerships greatly reduce their payment processing costs.

Once the customer has approved the work on the vehicle, the service advisor can send the customer a payment link via email or SMS. The customer can then make an Open Banking payment ahead of coming into the dealership to collect their vehicle, creating a smoother vehicle collection journey.

A number of dealers are also looking to integrate their payment provider with their aftersales management software. Specialist automotive software providers such as RTC Automotive enable dealers to offer a “Pay Now” option on the Vehicle Health Check, allowing customers to approve and pay for aftersales work in a few clicks on their phone.

In our experience, Open Banking payments are suitable for around 70-80% of service payments. However, there are always going to be some customers that want to make a payment via card so dealers should look to provide a card option on any payment links sent to the customer to avoid causing frustration.

Providers such as Cocoon can work with dealerships to optimise the payment flow to maximise Open Banking uptake, while minimising customer frustration by also providing the alternative option of a card payment.

Finally, instalment payments can help customers authorise more work and increase invoice values by providing a cost-effective way to split a large bill into more manageable monthly payments. While 0% interest instalments are by far the most expensive payment option to offer customers, dealers often find that the increased work authorised justifies the cost of providing this payment option to customers. Analysis by the leading automotive instalment provider, Bumper, has shown a +350% increase in the average invoice of customers using Bumper to split their bill.

Due to the higher margins in service than in sales, one can see how a quick cost-benefit analysis could certainly make instalments a worthwhile payment option for certain customers.

Most suitable payment options:

  • Open Banking (primary option)

  • Cards (secondary option)

  • Instalments (where applicable)


As parts orders are typically of a similar size to those in service, it would be easy to assume that the requirements are therefore identical to those of service payments.

However, a key difference in parts is the split between consumer and business payments. The parts department often sells to other smaller garages and repair centres. While Open Banking payments do work well for parts, we often find that the uptake is not quite as high as for service.

Sometimes the person making the parts order doesn’t have access to the business bank account to authorise an Open Banking payment, or they may wish to use a company credit card to support their business cash flow.

As with all payments, it’s advisable for dealerships to avoid taking card payments over the phone, especially from customers they don’t know. If a stolen card is used, the dealer could deliver the parts and also have to fund a chargeback – a double financial hit to the dealer.

Therefore, a payment link with the option for both a 3D Secure card payment and Open Banking payment is an ideal solution for parts.

Most suitable payment options:

  • Cards

  • Open Banking


When introducing new payment methods, dealer groups should look for a solution that can accommodate settlement into multiple bank accounts per franchised dealership for Open Banking / Bank Transfer payments and multiple Merchant ID (MIDs) for card payments. This functionality is essential to keep smooth finance operations throughout the introduction of any new payment system – without it, the increased operational overhead in reconciling and allocating payments can quickly outweigh the benefits of offering new payment options.

At Cocoon we aim to take away as much of the complexity as possible from the automotive payment landscape, providing a single solution that automatically presents the customer and dealer with the right payment option at the right time.

We are always happy to provide an honest assessment of your current payment operations and opportunities for improvement. Please don’t hesitate to contact us.


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