While more than half of consumers pay bills online, an astounding 80 percent still rely on paper checks to pay rent. But with Zillow now processing rental payments, legacy payment systems are seemingly on track to be upended. In the latest Payments Powering Platforms Tracker, PYMNTS catches up with co-founders of rental payment platforms Avail and Cozy to discuss how the entrance of a high-profile player will impact the space, and why rent checks have endured for so long.
Consumers, particularly millennials, are increasingly paying their bills online. According to research from 2017, more than 50 percent of bills in the U.S. are paid online, with 61 percent of those payments coming from millennials.
Why, then, does the rent check endure? Most consumers say they prefer to make payments online, thanks to the speed and convenience of online portals, but the Federal Reserve Bank of Boston claims that more than 80 percent of rent payments are still paid with paper checks or cash — despite frictions that plague such payments, like slower transaction times and security flaws.
In a recent interview, Ryan Coon, co-founder and CEO of rent payment platform Avail, told PYMNTS the one reason he thinks the use of paper checks for rent payments persists: It’s a system that’s widely understood, can be accessed by anyone and doesn’t have many fees associated with it. This makes it difficult for alternative methods to make their mark.
But change could soon be on the way. Avail, along with its companion in the space, Cozy, are part of a growing group of online platforms looking to upend the rental process. They’re hoping to eliminate not just paper rent checks, but also paper applications and legacy systems that slow down the rental process. The space has already attracted plenty of big players — most recently with the entrance of online real estate company Zillow, which announced earlier this month that it would roll out new application and rent processing features.
For this month’s Payments Powering Platforms Tracker feature story, PYMNTS caught up with Coon, as well as Gino Zahnd, CEO and co-founder of Cozy, to find out what is stalling rent payment innovation, and what Zillow’s entrance means for the industry.
Easing the Application Process
Paper checks may be nearly ubiquitous when it comes to renting real estate, but that doesn’t mean they are without flaws.
Zahnd pointed out that finding and paying for a new apartment has long been considered a necessary, but particularly painful, process — and one that is ripe for improvement.
Potential tenants are often forced to fill out extensive, time-consuming applications — and the experience isn’t much better for landlords. They’re stuck reviewing applications that often include more information than necessary, and, once a property has been rented, chasing down delinquent payments from those who have yet to pay up.
“The rental process has historically been filled with friction, from listing to move-out,” Zahnd said. What surprised him and his team during the birth of Cozy was just how much time landlords and tenants waste when dealing with paper applications.
To address this, solutions like Avail and Cozy offer streamlined application processes with more limited sets of information that speak directly to what landlords need to know, saving time for both parties. In the case of Cozy, that means only asking tenants about things that matter to landlords, such as employment status, income and whether they have a criminal record.
Avail, meanwhile, helps to automate and expedite the application review process by partnering with credit agencies like TransUnion. It also helps landlords list their vacant properties on websites and platforms, attracting more potential tenants.
Coon noted that putting the apartment applications online helps make the process more secure. Paper applications can be lost, stolen or even thrown away, allowing bad actors to get their hands on sensitive information.
“If you go and apply for an apartment in Chicago, for example, you just walk up to someone’s unit or office, write down all your information on a piece of paper and hand it over to them,” he said. “That certainly isn’t secure.”
Bringing Rent Payments Online
Matching a tenant to a vacant home is only half the battle for those dealing with real estate rentals.
After they move in, tenants deal with the frictions and issues surrounding paper checks for rent. Landlords also face their own litany of payment-related issues, from delinquent tenants who dodge requests for payment, to the relatively time-consuming process of waiting for checks to arrive via mail – and waiting again for them to clear once deposited into a bank account.
Online payments can offer solutions for most of these payment problems, Coon and Zahnd claimed. For example, Zahnd noted that, once armed with online payment capabilities, many tenants choose to set up automated payments, which helps to eliminate late or forgotten payments and allows landlords to know exactly when they can expect money to reach their accounts.
Accepting rent payments online is not without roadblocks, the pair said.
“One of the biggest challenges we’ve faced is establishing trust,” Coon said. “Because these payments are such large dollar amounts, we’ve had to work really hard to establish trust between us, landlords and tenants. We’ve invested in having full-time, basically round-the-clock customer support, to make sure we’re available and ready to answer questions or problems from tenants or landlords whenever they come in.”
Platforms must keep in near-constant communication with landlords, customers and payment providers, Zahnd explained, so each party knows what to expect when it comes time to pay the rent.
“Those types of design and communication challenges are where the true difficulty lies, and where the investment has to be made, assuming your tech is solid. It’s taken us half a decade to have a sharply honed product, in that regard,” Zahnd said. “And as far as we’re concerned, we still have tons of improvements to make.”
The Future of Rentals
While the vast majority of rent payments are still paid via paper check, the new features offered by Zillow could shrink that statistic.
Zillow’s new offerings should bring attention, and customers, to the online rental market, Zahnd said, increasing the total volume of online rent payments. That increase in revenue will help support other players in the space offering similar services.
“We’re excited to see Zillow enter our market,” he said. “The U.S. rental market is massive, and we’ve seen a number of billion-dollar companies operate in real estate listings. There’s room in the market for multiple successes.”
But competing players like Cozy and Avail will need to keep pace with Zillow’s offerings and features, both executives noted. Zahnd said Cozy bolstered its platform in 2017 by adding features such as renter’s insurance and maintenance, and this year it has added document uploading and sharing, as well as automatic late fee features.
Coon, meanwhile, agreed that the emergence of Zillow and other big-name players would bring increased attention, awareness and, hopefully, revenue to the industry. He also noted that it would force existing providers to differentiate themselves via more comprehensive features.
“It’s all about bringing everything the landlord needs to one place,” he said.
Paper checks may have long dominated the rental realm. But now, it seems, at long last, that rent may finally be getting the redesign it needs, thanks to the power of platform payments.
About the Tracker
The Payments Powering Platforms Tracker™, powered by WePay, serves as a monthly framework for the space, providing coverage of the most recent news and trends, along with a provider directory highlighting the key players contributing across the payment-integrated platform ecosystem.
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