Seizing the Opportunity

By Jeffrey Steele, Contributing Editor

In the last few thousand years, the way we pay has changed only three times, says Kerry W. Kirby, CEO of New Orleans-based 365 Connect. “It’s gone from coins to paper money to plastic cards,” he says. “We use all three today.”

What the next sequential step will be for the multifamily industry is open to conjecture. Many experts feel prepaid debit cards will be the nearly universal payment method in years ahead. Others feel it will be automatic clearinghouse (ACH) transactions, in which funds are electronically debited from residents’ bank accounts. But while experts differ on the payment method that will be embraced, they are unanimous in the belief that renters’ preferences will determine the chosen payment method, and that offering it in a mobile option will be essential.

Those who believe prepaid debit cards are payment processing’s future cite two factors as influencing their beliefs. The first is that debit cards are the payment method of choice for the next demographic wave of renters. The other holds that debit cards are the best way to deal with renters who don’t use banks.

In the first camp is Matt Golis, CEO of Walnut Creek, Calif.’s Yapstone, which offers as one of its products RentPayment. “Generation Y individuals have never written a check in their lives, and this is the next generation coming out of college once they move out of their parents’ homes,” he says.

“These are prospective renters who pay by debit card, which they use for everything from Starbucks coffees to their rent payments … Debit cards will be the way landlords will accept payment from this new generation,” he predicts.

Debit cards also boast another plus. Properties can offer payment via debit card without levying a fee. “Online, they can finally say to renters, ‘You can use a Visa- or MasterCard-branded debit card, and there’s no fee,’” Golis says.

Meet the un-banked

Another argument for debit cards taking the place as the payment tool of the future is offered by Dave Bateman, chairman and CEO of Provo, Utah-based Property Solutions, which provides software products tailored to the multifamily industry. “One of the challenges when it comes to payment processing in the multifamily industry is handling the 18 or so million people in the U.S. who are un-banked,” he says.

“As the payment industry and, specifically, the multifamily industry evolves away from paper transactions, companies are trying to automate their accounts receivable. But the un-banked go to Western Union and get money orders.”

The “un-banked,” according to Bateman, include those apprehensive about depositing their earnings in banks due to their legal status, and those who can’t obtain bank accounts because of past bad behavior. For these people, prepaid debit cards will return them to the electronic society, Bateman says.

The multifamily sector can usually take its time adopting new technology, but will have to lead in seizing the opportunity prepaid debit cards present, even to the point of issuing the cards, Bateman says.

“Essentially, the monetary model and habits of the un-banked customer stay the same. They still go to Western Union, but rather than getting money orders, they load money on their debit cards and use those to pay rent. It lets the multifamily properties finally go paperless.”

Set it and forget it

Breaking from the prepaid debit card camp is Kirby, whose 365 Connect is a technology solutions provider serving the multifamily industry exclusively. “We’ve been big fans of ACH transactions, where the funds are debited from residents’ checking or savings accounts,” he says, noting this is an inexpensive solution, with transaction rates typically from $0.50 to $1.50. “And residents can set it up to recur, and then forget it,” he says.

The multifamily industry has always had something of an identity crisis, with part of it wanting to operate like a hotel and part like housing, Kirby asserts. “But this is housing. I can’t rent it and check out the next day because I don’t like where I’m living. You have people making a personal choice about living in that apartment. There are few things more personal than your home. So in the same regard, we need to treat making payments as more personal. And in car payments and home loans, ACH is very common. We need to keep the thought process flowing in the same direction in the renting industry.”

Going mobile

Regardless of the payment method selected, it will have to be offered in a mobile format because, as Golis says, “When renters make payments, the fastest-growing way they’re interacting is through their mobile devices.”

Tamara Berndt, product manager, residential portfolio with Santa Barbara, Calif.-based Yardi Systems, agrees. “From a multifamily perspective, we’re looking at all features that will specifically help multifamily property managers,” she says. “We’ve introduced features like mobile rent payments, so renters can make payments from their smart phones, iPads or tablets.”

Going forward, Berndt says, the two key areas being explored by Yardi include mobility and ensuring renters’ financial information is kept secure.