For decades banks, card companies and tech startups have had little success getting consumers to ditch checks and pay their monthly rent online or through a mobile app. The online real estate company Zillow is the latest to try.

Today 80% of all rent is still paid in cash, check or money order, according to the Federal Reserve. In Zillow’s recent move to further monetize its real estate listing services, it has developed a new set of tools for renters and landlords — aimed to digitize the entire rental process from application to monthly rent collection.

On the surface, this may appear to be another digital offering that could be added to the heap of current and expired firms in this space such as RadPad (acquired by Landlord Station), RentPaidOnline and Spindle, AppFolio and YapStone. Even Apple Pay is muscling in on the rent check with its latest “eviction” ad for its P2P payments system.

However, what Zillow offers that is unique is a network of landlords and tenants who actively want to join it. Zillow claims 35 million renters visit its websites and mobile apps each month in search of a home or apartment. This network of landlords and renters has been built off the back of listing property values, real estate sales, taxes paid, photos and more for homes, condos and apartments.

YapStone is probably the biggest competitor that has been attempting to tackle this almost $500 billion rental check opportunity. In the past, it has hired a former PayPal CFO (Mary Hentges), an Amazon veteran (Daniel Issen) as its chief technology officer and even a high-powered eBay exec (Bryan Murphy) as its president to lead the charge. YapStone told PaymentsSource that Jerry Ulrich joined Aug. 7 as CFO from Blackhawk Network. Sanjay Saraf is the company’s current CTO, having been recruited from Western Union Digital in 2017 and David Weiss is the current president.

According to its website, YapStone's RentPayment.com brand has over 17 years of experience powering payments for the multifamily industry, enabling online payments for 3 million rental units. Currently there are 44 million rental units in the U.S. But unlike Zillow, YapStone doesn’t have a rental network or real estate content.

The other major boost in Zillow’s favor is the changing renter demographics — millennials.

More millennials rent today than ever before — 65% of households under 35 rent, compared with 57% before the recession. According to Zillow, affordability issues are a key factor inhibiting millennials from making their first home purchase, particularly coming up with the down payment. As a result, more than half of millennials (62%) shop for a rental while trying to purchase a home. Given current real estate prices in San Francisco, New York, Seattle and other major cities where millennials are congregating, these trends aren’t likely to change anytime soon.

The final factor in Zillow’s favor is that millennials desire convenience, particularly when it comes to using mobile devices. Like many alternative payment providers, Zillow uses its pricing to encourage consumers to pay by ACH, which is cheaper than accepting card payments. Card payments are still an option, but a pricey one; according to Zillow communications manager Amanda Woolley, Zillow charges tenants a $9.95 fee for debit card payments and a 2.95% fee for credit cards. Bank transfers are free, and there is never a fee for the landlord. Zillow works with Stripe to process payments.

While connecting landlords and tenants together may sound like a great opportunity, there can often be potential dangers if not executed properly.

“While rentals would appear to be a simple extension to Zillow’s business model, the dynamics are significantly different in general," said Tim Sloane, vice president of payments innovation at Mercator Advisory Group. "Add the vetting option and payment option, and the differences become very large. The potential to improperly vet the renter looms large, and while the details are in the contract that must exist between the Zillow and the renter and Zillow and the apartment owner, the fact remains that there are many vectors for liability.”

If Zillow is able to manage the legal contract side of things, there is another opportunity that could swing in its favor: Millennials' penchant for P2P apps such as Venmo and Square Cash. Jack Dorsey, CEO of Square, stated that the Square Cash app had 7 million active users at the end of last year. Those could fit very nicely into a Zillow rent payments app. Surely a portion of Venmo’s Q2 2018 $14 billion in P2P payments volume was spent on rent, which would also work well for Zillow.

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry