If you're a frequent toll road user in the U.S., there's a good chance you've got a little box on your windshield. These transponders handle the details of automated toll payment using decades-old wireless technologies.

While some toll authorities have been experimenting with transponder-free options (such as plate recognition), a new pilot program between Mastercard, Volvo Cars and the North Carolina Turnpike Authority very well might change the game. Instead of dated transponders, this new system relies on a combination of in-car software, GPS and the latest in secure mobile payment technologies. Just as commuters are finding that they can take public transit with contactless payment — no tickets or special apps required — this is the equivalent of turning your car into a mobile wallet.

"This is part of a broader strategy to create frictionless urban mobility solutions around the world, no matter how you get around," says Chapin Flynn, Mastercard’s global urban mobility lead. "Frictionless driver experiences and in-vehicle commerce are a real part of that."

Right now, drivers typically create a prepaid account with their state or regional tolling agency to receive the transponder, and then manage their top-ups and other information — adjusting the prepaid amount if, say, they start a new job with a longer, more expensive commute, notifying the agency if they change their payment credential or get a new vehicle. 

On the back end, the transponders in their vehicles communicate with the toll plaza by sending a unique code that identifies the tag (and vehicle it’s attached to), and the toll plaza — a traditional toll booth or, increasingly likely, an overhead gantry equipped with cameras and sensors that allow for free-flowing traffic — initiates a transaction.

With this new in-vehicle payment method, the car initiates the transaction. Software running in the vehicle uses its GPS position to determine whether the vehicle is on a toll road. There's no longer a requirement for a transponder on the windshield. Theoretically, in fact, nothing is required at the toll plaza as the transaction is automatically processed using the same tokenization method used to secure other forms of contactless payments.

"What's happening on the back end is Mastercard is tokenizing a combination of the vehicle's VIN and license plate and some other information to create a unique and secure payment experience," Flynn says. "The North Carolina Turnpike Authority then uses that token to process the transaction safely and securely, almost in the same way you would if you used your digital wallet on your phone to buy a cup of coffee in the morning."

From a user perspective, drivers just need to enter  credit card information into the car once. After that, everything happens automatically, but only if drivers explicitly enable it. "Nothing should be a surprise,” Flynn says. “We're not opting people in by default.” 

The lack of a transponder does mean that each car will need some custom software, but J.J. Eden, the authority’s executive director who literally wrote the rules for EZ-Pass back in the 1980s, says that Volvo's support for Android Automotive and open-source software means that porting this technology from one model and even brand to the next should be relatively easy for new cars. Older cars, though, would likely require either a revolutionary payment approach or some sort of hardware device.

"Ideally, we want things to be open,” Eden says. “I don't want to wind up where we wound up with E-ZPass, where we had proprietary technology for a long time and then just stagnated.”

That openness should, hopefully, mean this technology will be easy to spread beyond this Volvo partnership in North Carolina. But the real next step could be a move beyond using the car to just pay tolls. This same basic technology could be expanded to paying for anything from a fueling stop to a drive-through indulgence.

"Parking is probably the next easy one," Eden says. Here, drivers simply search for parking through the in-car navigation as usual, then the car would handle the payment and communicate the correct spot or other necessary information.

Even further down the road, Flynn envisions a future tying this technology to in-car AI. Drivers could ask the car to order a coffee at the next Starbucks. It would calculate the arrival time and put in the order appropriately to ensure the brew is still hot when upon arrival.

"You just pull up, your car has already taken care of the order and the payment, and it's ready to go," Flynn says.

This technology could also represent a major step forward in something called vehicle-to-vehicle (V2V) and vehicle-to-everything (V2X) communications. These are catch-all terms for cars wirelessly talking with each other and with infrastructure such as traffic lights and even local transportation authorities. With V2V and V2X, cars could access data about work zones, crashes and dangerous weather conditions and alert the driver in real time.

As more cars on the road feature standard cellular connectivity and the ability to run advanced software, such as this automatic toll payment system, they will be similar to rolling smartphones. This opens the door for V2V and V2X to go mainstream without local municipalities having to invest in expensive wireless equipment.

The net result might not just be easier and faster toll payments, but safer driving. For now, the pilot program with the NCTA starts sometime before the end of 2025. Volvo owners in North Carolina: Watch your dashboards for more information!