Why Rent Payments Are Slow to Move to Mobile
Rent payments are among the few lingering paper-based transactions, though a subset of the payments industry is shaking the trees to find ways to change that.
"I can see a world where there are Near Field Communication [NFC] devices in the lobby, where people can pass through and pay with an Apple Watch or an iPhone in high-traffic areas," said Tom Villante, CEO of YapStone, a Walnut Creek, Calif.-based mobile and online payment company.
YapStone offers digital payment options for rentals, and is bolstering its technology to accept a variety of rent payments, such as for apartments and vacation rentals. Comerica Bank and Bregal Sagemount last week closed a $60 million financing package with YapStone to fund the expansion.
But the company still faces many hurdles in its efforts to get landlords to adopt its technology.
Since rent checks usually don't involve an invoice, there's a barrier that prevents digital presentment, said Stessa Cohen, a research director at Gartner, who adds there may be expenses tied to digital channels that a landlord may wish to avoid.
"There's a lease and an agreement, generally you know how much is due and when it is due," Cohen said. "But both parties like a paper trail and a paper check works really well for that."
While mobile payment systems are reaching more industries and consumers, the market for this technology is still too immature to promote it for non-shopping payments such as rent. "Tenants may not want to add an app that they only use once per month," Cohen said.
Still, YapStone is making significant progress. The mix of apartment and vacation rental payments served by Yapstone drove 36% yearly growth in 2014 to $120 million in annual revenue, and the company processed more than $10 billion in volume. That's a drop in the bucket compared to the total market size; Villante estimates the addressable market for apartments and vacation rentals in the U.S. and Europe is almost $1 trillion.
"There's a huge payment opportunity out there," Villante said. "There is still a chance to add value to the system."
The addressable apartment rental payments market is close to $500 billion in the U.S. alone, but most of the transactions are still paper-based. To convert those to digital payments, YapStone is building mobile apps that landlords can use to collect money and communicate with tenants on maintenance and other matters.
The contactless technology is more forward-looking, though Villante said a physical presence is key to taking paper out of rent. "Maybe someone didn't get the memo that online payments were available," Villante said.
YapStone's online gateway for apartments is rentpayment.com. It also can integrate with most property management software packages, and tracks individual payments and manages rules regarding payments and bank accounts.
For vacation rentals, YapStone integrates with travel programs such as booking software. The company has also expanded into church and other non-profit payment types.
Despite the prevalence of paper checks, or perhaps because of it, many other companies are pursuing rental payments automation.
RentMoola accepts automated card payments for rent, condo fees, parking and other property payments, and enables recurring and one-time payments from more than 100 countries. It adds other digital services through a partnership with Landlord Web Solutions.
RentPaidOnline and Spindle have partnered to accept a variety of payment channels and accommodate rent splitting among roommates. RealPage is another option, as are traditional person-to-person transfer services such as PayPal or emerging P2P plays such as the bank-led clearXchange.
The barriers to automating rental payments are mostly cultural, rather than technological.
"Any payment can be mobilized. NFC readers allow the tenant to use debit card, credit cards or wallets. Many Gen Yers don't even get checks with their checking accounts anymore," said Mary Monahan, executive vice president and research director of mobile for Javelin Strategy & Research. "Rent is one of the more difficult bills to move over because individual landlords often don't accept credit card payments."