By John D. Stoll

Volkswagen AG's financing arm has acquired a Canadian mobile payments company, the latest move by a car maker investing heavily to compete in a mobility arms race that is heating up in the auto industry.

The German auto maker's Volkswagen Financial Services AG will dish out an undisclosed sum to acquire PayByPhone, a Vancouver-based company that allows people to pay for certain parking spaces by mobile apps, phone calls or texts. PayByPhone, founded in 2000, says it processes $300 million in transactions annually.

PayByPhone's transaction volume amounts to just a sliver of the hundreds of billionsof dollars in revenue that Volkswagen generates annually through sales of cars, trucks, financial services and other products. But the deal is about far more than one of the world's largest auto makers getting into the parking business.

Volkswagen wants access to proven technology to connect a variety of commerce opportunities and vendors to the cabin of a car and passengers looking for easier payment methods. Whereas it is difficult to earn even a 10% profit margin on the sale of a car, some analysts and startup entrepreneurs estimate the margins that auto makers could reap on the selling of access to car owners and their data could exceed 75%.

The two companies confirmed the deal but Volkswagen officials could not immediately be reached for further comment.

The move comes shortly after the German auto giant launched its "Moia" division, a 50-person unit based in Berlin and created to compete in ride-sharing and other so-called mobility services. Earlier this year, Volkswagen invested $300 million in Tel-Aviv-based Gett, which competes with Uber's ride-hailing service.

Volkswagen is spending billions of dollars to remedy a diesel-emissions cheating scandal that emerged in late 2015 and bruised its reputation. It is also pouring sizable investments in several initiatives that may not reap sizable profits for several years, if at all.

Audi, one of a dozen brands operated by Volkswagen, in January pledged $28 million to Silvercar, a startup that lets its customers book rental cars using a mobile app.

There have been a flood of unrelated transactions in the auto industry as Ford Motor Co., Toyota Motor Corp., BMW AG and others place financial bets on small startups in an effort to outrun Silicon Valley tech giants that are trying to reinvent automobiles. Alphabet Inc., Apple Inc. and Uber Technologies Inc. are among the best-known companies looking todevelop autonomous vehicles, for instance.

Auto makers have been buying or investing in ride-hailing companies, car-sharing services and self-driving technology providers. Many have set up offices near San Francisco and created so-called mobility divisions.

PayByPhone says it has agreements with "many of the largest and most complex parking operations in the world." The company handles payments for a total of 262,000 spaces in Paris, Boston, London, San Francisco and Seattle.

Currently, mobile payment methods are fragmented and often customized by product providers, such as Starbucks Corp. Vehicle insurers, service garages and local retailers are among the companies that are expected to be interested in working with auto makers on how to make money off car-owner data and access.

General Motors Co. recently tapped International Business Machines Corp. for help leapfrogging other auto makers and tech companies angling for arole inside the car. Daimler AG is working with Israeli startup Otonomo to create digital infrastructures by which cars can exchange data with other connected cars,

In an interview Tuesday, PayByPhone Chief Executive Kush Parikh said "there are more and more connected services going into the vehicle," and the purchase could allow the auto maker a better way to offer drivers a more convenient way to buy things. PayByPhone currently works with municipalities or owners of parking garages or related services. Mr. Parikh said user growth has ballooned in recent years as payment methods become easier for car owners.

"Your license plate becomes your identity," he said, pointing to a project in London where customers are identified by license plates. Mr. Parikh said mobile parking payments are "a gateway" to other payment providers.

Write to John D. Stoll at john.stoll@wsj.com

(END) Dow Jones Newswires

December 28, 2016 02:47 ET(07:47 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.