As property technology (proptech) applications continue to expand, there has been corresponding growth in the consumer market, which, in turn, is increasing demand on the payment ecosystems of proptech businesses. From property transactions and rent collection to maintenance solutions, there are more touchpoints than ever along proptech payment routes.
In the UK’s rapidly evolving proptech sector, as businesses continue to move payments mechanisms online using a variety of systems and third parties, the whole process is becoming more complex. This is creating a real need for payments solutions that are flexible enough to adapt to the wider payments ecosystem as it continues to expand.
Payments and proptech growing together
Fortunately, since proptech platforms have a core dependency on payment technology, this is exactly what is happening. Payment technology is an enabler for proptech and proptech is driving innovation in fintech payments, so proptech CFOs are looking for solutions that are as innovative as the products their companies are creating. They need solutions that not only make the processing of payments simpler but also add value and create efficiencies in workflows. In short, both proptech and fintech payments companies are looking to cut out the middleman and make transactions less complicated, quicker, cheaper and more customer-friendly.
Online payments systems will provide the foundation for proptech’s next generation of innovations. In fact, proptech is already relying on fintech to provide financial services to the next generation of developers, homeowners and renters.
Here are some payment trends that are already making this happen:
Real-time payments made better
With companies such as Zai, real-time payments are already here, but solutions that transform making payments into a better experience for customers will help proptechs retain clients and upsell services. A good example comes from New York-based Signature Bank. The firm launched a blockchain-based payment system, called Signet, that allowed corporate customers to send dollar payments in real time without transaction fees. This cryptocurrency payment system uses a stable coin pegged to the dollar. It’s easy to see how the same system could be used with proptechs to accelerate property purchases, for instance.
In Europe, N26, the app-based mobile bank is another example. The online bank promises that it’s possible to set up your bank account in under eight minutes and followed up with instant money transfers in the SEPA area for customers on a paid plan. Customers on free plans could take advantage of these instant transactions 24/7 for a small fee.
UK proptechs should look to ideas like this for inspiration. The easier you make it for customers to make payments, the more they’ll want to make payments. According to the 2020 McKinsey Global Payments report, over one-third of SMEs would change payments service provider if there was a faster, easier service on the market. And, according to online accounting firm Xero, customers pay up to 35% faster when using an online payment gateway.
The introduction of digital wallets is a good example. Their use has exploded especially during the pandemic, and is now expected to account for 52% of ecommerce transactions by 2023. Meanwhile ATM usage has collapsed, down 46% each month on average from March to July 2020.
PMS and API
Of course, there needs to be an interface facilitating the partnerships between fintech payment businesses and proptech companies for these businesses to work together effectively for customers. Payment solution providers have often acquired other businesses to help them provide more functionality to their clients, but often that has resulted in rigid, cumbersome interfaces that aren’t able to adapt to future requirements, or shifts in the market.
New, advanced property management systems (PMS) are now replacing older systems. These have more functionality and can be adapted to meet the needs of the organisation and third party users, such as tenants, or suppliers. Good examples of PMS include:
AgentOS - Attractive, fully featured solution that comes with a landlord dashboard, along with rent management and maintenance management.
Elevate - A user-friendly, cloud-based solution focused on residential lettings. Also has sales capabilities built in for agents involved with rentals and sales.
Origin - Using this system, landlords can manage their own portfolio from rent collection and security deposits right through to maintenance.
PayProp - As well as offering complete transactional control and regulatory compliance, agents can see at a glance who’s paid and who hasn’t using this rental management system.
Rentman - Compliant with the professional guidelines laid down by industry bodies, including the Association of Residential Letting Agents (ARLA) and the National Approved Letting Scheme (NALS) in the UK, this solution claims to do it all from marketing to management.
What’s making all these solutions work together are application programming interfaces (APIs). These software intermediaries, designed to allow disparate systems to communicate seamlessly, are becoming more flexible and versatile all the time.
This is how Kent-based rental proptech, Canopy, is partnering with credit reporting firm, Experian, to develop their RentPassport product - a digital passport designed to replace rent deposits. API technology is making it possible for Canopy to link to Experian’s credit checking system. Once a prospective tenant has input their address history to the RentPassport, Experian is able to carry out a full credit check in just sixty seconds with a display indicator then displaying the creditworthiness of the tenant.
Likewise, PayProp, one of the biggest processors of rental payments in the UK, is using APIs to allocate and send payments to various parties, such as landlords and contractors. These payments are automated to occur on the day that the tenant pays rent.
APIs will become commonplace in smart buildings equipped with sensors and IoT devices that need to interact with one another. All this data could then be collated and displayed on an app for users. When maintenance or repairs are needed, building managers will be able to review a list of contractors and pricing, track progress of the work and even make payments.
We expect that the API economy will continue to develop in 2022 and beyond, offering more functionality and allowing businesses to integrate greater levels of complexity into their payment systems while using automation to keep it all efficient, straightforward and user-friendly.
Data-rich payments delivering business benefits
When applications talk to each other, they exchange data and this is transforming the ecosystem. Payment descriptors, which explain charges or payments on bank statements are basic examples. These help people recognise transactions and reduce chargebacks and disputes. There are two main types of descriptors: static and dynamic. A static descriptor is set for all transactions and normally consists of two elements: a “doing business as” (DBA) name and contact information. Dynamic descriptors are used to describe the product or service involved in the transaction and is configured for each transaction via the API.
But the way data is being exchanged is becoming ever more sophisticated and functional. A “request for payment” (R2P) is a new all-digital way to request payment, where structured data is exchanged through a message workflow before payment is made. At its simplest, this can give recipients the information they need to make the payment correctly, but, clearly, this is ushering in a smarter, more efficient way of making payments.
Businesses will now be looking at new types of applications for data-rich payment transfers. The question will be what types of data can you send? And how can that information be used to benefit the business or the user-experience, for instance, in the case of someone selling or renting a property?
Using machine learning (ML) and artificial intelligence (AI) on a growing volume of payment data has the potential to deliver insights that will inform business strategy, improve the customer experience and prevent fraud.
Improving agility and streamlining business processes
The technology to make digital payments easy and fast has been around for a while, but many proptechs are looking for more functionality. When it comes to housing applications, for example, there is the need for identity and income verification, or to identify payment behaviours that might indicate fraud.
Compliance is another area important for landlords. Lettings platform, GoodLord, alerts landlords if a refund is required to a tenant as a result of complex changes to tenancy laws. It's a good example of how proptechs can adapt payment systems to provide better service and value for customers.
Payment solution providers will be looking at the types of functionality proptechs need to deliver more to their customers, as well as for their own internal systems such as automated scheduling, reconciliations and solutions that support financial management and accounting.
A booming proptech industry means that many of these growing firms need to scale fast. Payment solutions have to be flexible enough to handle fast growth, adapt to new payment technologies and customer trends, while still delivering efficiencies for proptech companies to make them more agile.
Home truths
By its nature, property, especially when it’s someone’s home, is a very personal thing. While buying and selling property means dealing in huge sums of money, rental payments, along with utilities, are also major expenses for tenants. Landlords and property managers will continue to look for more efficient ways to make it easier for renters to pay and eliminate friction from their own payment processes and improve the tenant experience. It will be proptechs and fintechs payment providers working together that will find those solutions.
