Property Management: For now, a Niche that Likes Remittances
“How would you like to pay – cash or check?” Today, thanks to an ever-evolving payments landscape there are a wide variety of payment options available to consumers for making purchases or paying bills. One area where remittance processing particularly shines is property management.
As consumers opt for and expect multiple payment methods — with electronic means steadily increasing — many corporations, depending on their market niche, stick to a policy of accepting check payments only.
Some 70 percent of renters of the 43 million rental households in the U.S. continue to pay by check. Many renters – 79 percent surveyed by the National Multifamily Housing Council – say they would prefer to pay rent electronically.
But property managers come in all shapes and sizes – from landlords managing a few units to large companies managing thousands of units – and have clung to entrenched payment methods for receiving rent payments.
Each landlord or property company, due to relative size and other key factors, have adopted collection practices that have suited their particular needs. Because it’s a fragmented marketplace for corporates and consumers alike, there is no one-size fits all solution for rent payments.
Accordingly, consumers can be skeptical of alternate payment methods and may choose to pay bills because checks offer:
- Security: According to a recent Gallup Poll nearly 70 percent of American consumers worry hackers will steal credit card data from retailers; and, 62% worry hackers will target their personal devices. After the rash of cyber-attacks on Target, Home Depot and other large retailers in 2014, many consumers are cutting back on credit card use and continue to use checks to pay bills.
- Traditional Habits: Electronic bill pay options are touted as an easier and less time-consuming payment method than checks plus late fees are often avoided due to same-day processing. Tech-savvy millennials may prefer it but older demographics – the so-called matures and steadfasts — have been more cautious. Fred Davis, a professor of information systems at the University of Arkansas says, “Personal finance habits take longer to change than the way you might switch from one smartphone to another. That’s because money is so important to us.”
- Convenience: Setting up accounts online, getting accustomed to multiple bill pay interfaces, and logging in with passwords that are not as easy to maintain as purported, can be more trouble than it is worth compared to simply writing a check to the payee and enclosing the coupon.
For property managers and landlords, the benefits of processing paper checks include:
- The remittance combined with the paper check contains vital data that provides a level of security for the payee;
- Landlords have some recourse for non-payment with payer’s banks;
- Remittance processing is easily handled through third parties if needed and can streamline the process and lower cost-per-item;
- There is some potential for check fraud or kiting, but checks are considered a very secure payment instrument;
- Alternate payments methods to checks come with disadvantages as well. With auto-paying bills for example, consumers can get caught off base if they decide to pay from different accounts (enter different account information can be time-consuming or confuse the system), or they could be short of funds when the payment is executed. If a payment is missed, it could affect your credit rating. And monthly recurring charges can continue even after you stop the auto-pay order.
In short, every payment method has pros and cons for payee and payer and this will be remain true as more third-party solutions become available from new start-ups entering the market like RentMoola, RadPad, and PayLease.
No one can really predict what payment method or system will work best for this industry. For now, paying the rent by mailing a check remains a tried and true method of payment for both landlords and tenants.