WEBCAST: Strategies for Resident Automated Payments Systems

By Keat Foong, Executive Editor

Businesses can effectively leverage electronic payment systems to drive revenue growth and cash flow, said speakers at an MHN webinar sponsored by NWP Services Corp.

The webinar, entitled “Capturing Revenue Growth: Cash Flow Strategies that Work,” (click here to view the webinar) provided information with respect to the reasons for exploring effective automated payment systems, the types of technology available for more cost-effective payment methods, the legislative environment affecting the future use of credit and debit cards, and the ways in which cost-effective payment systems can be implemented in apartment communities.

“Electronic-payments are here to stay,” said Mike Radice, president and CEO of NWP Services Corp. “There is a high number of rapidly changing technologies and services being introduced in the industry. The landscape is changing very rapidly.” Radice said that current and future residents will be looking to apartment owners to provide them with the technologies that will furnish them with “choice, convenience and control” over how they pay their apartment rents and bills.

Robert Napolitano, director, information technology, Maxx Properties, said that adopting a system of automated payments resulted in a 27 percent reduction in labor costs and a 7 percent fall in turnover for Maxx Properties, according to the company’s study of a portion of its portfolio. Transaction costs were reduced by 45 percent, and credit card fees cut by 99 percent as the interchange fees were being passed to consumers. “It is not the idea, but the execution of the idea, that defines success,” he added.

Napolitano presented a case study of Maxx Properties’ adoption one-and-a-half years ago of automated payment processing. The system incorporated online payment, credit card payment by phone, pay-by-cash via Western Union, and check scanning. The company wanted to maximize cash flow and capture revenue by reducing costs and improving its processing efficiencies, he said. “At the time, we were paying enormous amounts in credit card fees, and community managers and assistance community managers were spending time at the banks manually entering payments instead of focusing on core competencies.”

Napolitano said that once Maxx Properties identified and selected its vendor, it converted most of its payment system in 30 days. He noted that building acceptance, among both residents and internal staff, was important to the success of the program implementation. The entire onsite staff was trained, credit card payment by phone was implemented across the portfolio, check scanning was implemented in half the portfolio within 30 days, and a “mass communication and marketing strategy” was adopted targeting the residents. A batch file was created and uploaded to the system for every method of payment and every unit. And a code was created for every resident, Napolitano explained.

Residents who had used credit cards moved to online payment, while those who normally paid by check continued to pay by check, said Napolitano. There were initial kinks such as incorrect codes that were entered, and it turns out check scanning was not adopted 100 percent at all properties—some of which were still employing check scanning to a certain extent.

On the legislative front, David Cardwell, vice president of capital markets and technology at the National Multi Housing Council, informed attendees of proposed regulation under the Dodd-Frank financial reform legislation to cap debit card transaction fees at 12 cents. The fee cap, which comes, under the Durbin Amendment, applies only to banks with $10 billion or more in assets, and it is expected to benefit merchants and consumers.  “The impact to our industry of that legislation would be lower transfer fees for debit cards,” said  Cardwell. The fee limit may also promote the use of debit cards over credit cards to pay rent, he noted.

Originally, the proposed regulation was issued by the Fed in December 2010, and a final rule was expected in April. However, the Fed is expected to publish rules in July postponing the implementation until the fall. That will give time for Congress to pass a bill that will require the Fed to consider the incremental cost of debit card transactions. Congress has been lobbied and is considering sending a directive to the Fed to reevaluate the fee limit, said Cardwell, although retailers and merchants are also lobbying to keep the 12 cents fee cap.

Separately, the Fed has also settled with credit card networks to allow pricing differences between cash versus debit and credit card payments at the same payment location. The limits on pass-though fees still apply, though. Debit cards are more commonly used in apartments than credit cards. “We don’t expect the industry to move to a greater use of credit cards,” said Cardwell.

Radice said social media such as Facebook and Twitter is clearly an emerging area of technology that will use payments technology soon. Ways will be found to integrate social media and e-payments to the extent that residents are engaged in networking on the Internet, he said. Radice also anticipates for the forseeable future an increased adoption of digital wallets using mobile technology.

In conclusion, Radice said that apartment owners need to know the demographics of their communities and desires of their residents as well as what is right for their properties. They then should match the right technology to the right choice. Owners have to ensure “what objectives you are trying to achieve by introducing electronic payment platform”—increased cash flow and improved efficiencies, advised Radice.

“A high level of constant communications about the flexibility and convenience of making payments [using automated payment systems] will be crucial to the success of the automated payment adoption,” Radice added. He advised attendees that residents’ “choice, convenience and control” with regards to how they move their funds to the apartment owner “is crucial to their view of your adoption of electronic payments.”