Rent is one of the few payment types where automation has made very little headway, still relying heavily on mailed checks that the landlord deposits in person at a bank.
One strategy to change that is to borrow a concept from the gig economy, in which the payment rides along with other services. For example, when passengers use the Uber app, they're doing so to schedule a ride rather than to initiate a payment.
AppFolio, a Goleta, Calif.-based property management company, contends that by placing rent into a compelling property management portal, it's more likely to win converts on both sides of the transaction.
"You want to build in an easy way to pay online in an area where people can log in, do maintenance requests, view their lease, track and make payments in the same spot," said Nat Kunes, vice president of product development for AppFolio.
AppFolio has added more payments technology recently, with a focus on the needs of the rent collector. Its latest updates enable property managers to create one-time and recurring bills to assign expenses to any property or general ledger account code. The web portal also tracks budgets and compares income and expenses, accepts application fees, rent and utility payments from checking or savings accounts. Other features allow add-on items such as recurring or one-off fees for parking or storage units.
"Property managers need to do a lot of things. They have to market and advertise properties, there's accounting, screening, managing tenants and collecting funds," Kunes said. "We want to put that all in the same place."
There's also the draw of speedier rent collection. AppFolio has partnered with a bank that it would not identify to speed availability of rent payments from about five days to one over the past year. It also plans to get certified as a payment processor as part of an initiative to offer real-time payments in the near future.
Consumers are becoming accustomed to mobile transactions, direct payroll deposit and automated monthly bills. These processes have existed long enough to not be considered innovative anymore.
But the revolution has not reached rent. Even though a check can cost five times more to process than an online payment, 85% of rent is still paid by non-digital means, according to Federal Reserve Bank of Boston. And it's not for lack of trying.
"The biggest issue for landlords moving away from paper checks is the cost of adopting a new payment form factor," said Michael Moeser, director of payments at Javelin Strategy & Research, who said landlords the government and businesses are the three major holdouts for automated payments.
The lack of success has to do with the merchant discount rate charged to property owners, which is about 5%, vs. the perceived cost of checks, which is "nearly free" in the eyes of landlords, Moeser said.
"Credit cards have tried to break into the apartment rental business for the last 20 years with little success outside of major cities such as New York, Chicago and San Francisco, where rents are thousands of dollars per month," Moeser said.
The timing is better now for this technology because of the influx of young people into the rental market, and the overall growth of digital payments and commerce, according to Kunes.
"We've noticed that tenants have become more mobile and also want a lot of different ways to pay beyond bank checks. They want debit, credit, e-checks, even electronic cash," Kunes said, noting AppFolio has partnered with
AppFolio, which is aimed at a variety of rental companies, will likely find the greatest traction among large-property owners, who manage about 500 to 1,000 units, according to Moeser.
"For these big guys, electronic payment and automation makes a lot of sense," Moeser said. "For the lion's share of the market, you have people who rent homes, duplexes or small apartment buildings where there is little incentive to move away from paper checks until the perceived cost is zero."
