The nomadic nature of renters creates a lot of friction for companies that match apartment-seekers with available housing. But a California startup says it's beating that problem with a payments solution that asks neither renters nor landlords to change their habits.

Culver City, Calif.-based RadPad launched in 2014 with the goal of disrupting the fragmented apartment-rental brokerage business with an app that streamlines the process of finding a place to rent, while providing richer details and property reviews than are found on many broader real estate websites.  

RadPad has about 1 million active national rental property listings, but it specializes in Los Angeles and Chicago, which have large rental markets for young adults. Soon after opening its doors, the company discovered one of the biggest pain points for tenants and landlords is a disconnect around their preferred payment methods.

Landlords often ask renters to pay with a paper check, and renters—many of them paper-averse Millennials used to mobile services like Venmo—are looking to pay their rent electronically, RadPad found.

"Many younger people hate writing checks, if they do it at all," said Matt Reilly, RadPad's marketing director.

The company attacked the problem by working with Yapstone and Stripe to accept renters' payments electronically but send the funds to landlords as a paper check. Roommates who split rent and use RadPad can pay separately through the app, and RadPad bundles the funds into a single payment for the landlord.

Once renters enroll a card with RadPad, payments are automatic unless the renter opts for a one-time payment, and users can also visit the app to easily switch the payment method from credit or debit, depending on that month's cash flow.

RadPad's services are always free to tenants who pay with a debit card, while credit card payments carry a fee of 2.9% of the payment, and there is no fee for landlords who simply receive payments through the service at the direction of tenants, Reilly said.

RadPad also offers renters the option to pay with Apple Pay and beginning this month it added Android Pay, with an introductory promotion of free credit card payments through the end of the year, according to Reilly.

RadPad plans to soon begin a test of Mastercard's Masterpass digital wallet, he added. RadPad currently has 500,000 active monthly users, the company said.

In addition to some small payment-fee revenue, RadPad's profits come from fees landlords pay for listing properties and a $30 fee prospective renters pay RadPad to order a credit report customized for the rental market. RadPad agrees to send the report to the landlords of the apartments each tenant is considering.

"Many times landlords will require tenants to get an individual credit report for each property where they're putting in an application, which can be time-consuming and expensive, but we handle that with a one-time fee," Reilly said.

Though it began as a convenience to renters, increasingly RadPad's payments portal is driving most of its new business, the company said. Landlords typically learn of the company's existence when renters' checks begin to arrive with a note from RadPad touting its listing services. And last month RadPad introduced the option for landlords that use its services to invite renters to pay via the app, which is also accelerating growth.

Driving repeat business is key to RadPad's success because renters tend to move every 18 to 24 months, and maintaining a connection to users is vital, Reilly said.

"The beauty of RadPad's payments feature is that once we get a rental customer, we tend to keep them when they move to the next apartment, which keeps them tied in for hunting for a new apartment through our service, too," he said.

RadPad sends reminders each month to tenants of when it's time to pay their rent, along with confirmations when the transaction settles and clears. RadPad requires renters to send payments at least four days before the rent is due, to allow time for processing the transaction and mailing the check, Reilly said.

Landlords who enroll with RadPad can check the status of renters' payments, including which members of a household that splits rent have paid.

"Instead of waiting for the check to arrive, landlords can log on and see who's already paid and whose rent is still due," Reilly said.

One of the services RadPad offers landlords is the option to receive payments via ACH. The company also is considering adding an ACH payment option for renters, but it's not in high demand.

"A lot of younger consumers tell us they prefer paying by card because they don't want to put their bank account on file. Rent is usually the biggest payment of the month for our customers and they want the control and security they get from a card," Reilly said.

RadPad sees additional possibilities emerging from the payments feature of the app, particularly around the data it generates.

"One of the cool things we can do is aggregate the payments history of renters, and we see a lot of opportunity to eventually leverage that data, where a tenant could authorize us to vouch for them with a landlord or another company extending credit," Reilly said.

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