Scaling Your Property Management Business With Payment Technology
Property management is an industry that has seen steady yet significant growth over the past year. Obviously, the industry has been affected by the recent economic downturn, and property managers have been placed in a demanding position. Investopedia informs us that property managers are routinely responsible for managing real estate assets held by another entity, either a business or a person. Thus, the economic downturn caused by the COVID-19 pandemic has left many people in the unfortunate position of not being able to meet their rental obligations.
Despite the hardships, however, renters seem to be able to manage their funds responsibly. Several states have instituted moratoriums on rent to ensure residents’ stability in those areas, with varying levels of success. The property rental market remains strong, even amidst this uncertainty.
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The current situation is nevertheless quite challenging for many in the industry, though. Because of the limited returns on investment, property managers have had to get creative with how they deal with the crisis. As McKinsey writes, some areas of the real estate industry will see this as a chance to develop digitally and create a better tenant and customer experience. There are signs that the industry will come out strong, despite experiencing a severe impact on the current management of properties. People are still renting properties, meaning that the demand for rentals is still there. However, the competitive edge in this “new normal” environment will go to those who embrace change.
Methods for Rent Payment Acceptance
As a property manager, it’s expected that you’ll have a set of methods in place for collecting rent. The rental agreement should cover all of these. From our research, we’ve found that the most common ways that property managers accept rent are:
Cash/Check/Money Order
These are the most common methods that tenants use to pay their rent. They’ve been around for a long time and are quite reliable, assuming that tenants can meet obligations. These payment methods form the mainstay of rental payments within the US.
Credit Cards
Some property managers prefer to use a credit card for transactions, but the fees attached to the transactions may be too steep for many smaller property holders. Recent trends in the industry have seen credit cards being a preferred payment method in several US locales.
Direct Deposit
Some tenants set up a standing order to directly deposit the rent into their landlord’s accounts. Direct deposit carries with it some level of risk to the property manager, and the accounts used for collecting rent are usually receiving accounts only. Direct deposits are seamless for tenants but rely on those individuals who have enough money in their budgets to meet expenses. If they don’t, the bank will charge them an overdraft fee.
Online
Online payment solutions for rental properties have skyrocketed in recent years. Several online payment options exist, but many are limited in scope, only support a handful of payment methods, or cannot be integrated with other software.
A 2016 report by the Federal Reserve Bank of Boston noted that most tenants pay rent via check (42%) with the other most popular methods being cash (22%) and money order (16%), respectively.
Challenges of Rental Payment Processing
Rental tenants usually pay rent on time, but there are other potential issues that could crop up while processing rent payments. Among the most common issues that property managers continuously face in their jobs are:
Heavy reliance on manual methods
Processing paper checks take a lot of time and effort, such as running to bank branches and following up on check clearing. It makes for a highly inefficient rent processing system. According to iProperty Management, as much as 45% of surveyed property managers would like to see better efficiency in their rent processing. Automation has the potential to improve efficiency if appropriately implemented.
Manual account reconciliation
Reconciling accounts in one’s accounting or business software can be time consuming and error-ridden. These errors may carry over and could potentially lead to problems with tax payments, unhappy renters, or legal issues later on.
Late or missed payments
Tenants sometimes are late with their rent or can’t make payments. Most legal systems require property managers to serve notice to tenants before eviction, but nevertheless, the property generates no income for the owner during the time the original tenant occupies it. The recent pandemic has made it even more difficult, as many tenants are out of work or are struggling financially. CNBC reported in May that only half of Americans stated that they could make rent for the month.
Payment fraud
Since checks are the usual method of rent payment, it’s not hard to foresee that there will be some payment fraud involved. Occasionally, tenants will write property managers bad checks to mollify them and keep an eviction notice at bay. This practice ties up the processing system and takes valuable time from the property manager that could be spent on paying assets.
The Move to a Digital Payment System is Necessary
Most property managers accept and prefer cash and checks for rent payments. However, the reality is that these methods of payments are holdovers from another time. With people more concerned about social distancing, and even more of them working online, renters are looking at modern methods to pay their rent. Realty Times6 even advises landlords that collecting rent in cash should be a thing of the past. As the world around us changes, so too many landlords and property managers will need to adapt to the times. Digital payments—which refers to the electronic processing of card and ACH payments—are more than just a convenience to the tenant. They also make the property manager’s life a lot easier. Among the benefits that digital payments offer to property managers are:
Convenience
The life of a property manager is difficult enough as it is without having to get to every tenant’s location on time to collect rent. Digital payment methods can push notifications as tenants pay and automatically send reminders to tenants who missed their payments through email.
Automatic transaction reconciliations
No more manual reconciliations and human error with your data entry. Digital systems can interface with the accounting software to provide seamless reconciliations.
More efficient processing
No need to switch between different software programs or take the time to run to the bank. By utilizing a digital payment processing solution, you’ll experience improved cash flow and more rapid funding.
Lower overall cost of payment acceptance
While collecting cash or check payments in-person may seem like a low-cost method of rent receipt, the hidden administrative costs can lead to severe consequences. Digital payment solutions make the hidden costs of rent collection disappear.
Digital record-keeping
Digital record- and receipt-keeping helps property managers to ensure that they have accurate data available for accounting and audit trail purposes.
Cardknox – A Digital Payment Solution for Independent Software Vendors (ISVs) and Value-Added Resellers (VARs)
As more landlords and property managers move to digital payment systems, it’s up to value-added resellers (VARs) and independent software vendors (ISVs) to respond by providing solutions. Cardknox, seeing a need for an integrated approach to facilitate digital payments, has developed its own solution. Cardknox’s focus is on usability and connectivity, allowing for easy implementation of payment features that ISVs and VARs can utilize in their own products.
With the need for a digital payment service that is flexible and reliable, Cardknox is the perfect platform for building a comprehensive software system for the industry. Among the useful features that Cardknox offers to property management businesses include:
1. Easy Integration
Property management, customer relationships management (CRM), and accounting software are utilized by many property management businesses. Therefore, a digital payment solution needs to be able to seamlessly integrate with these programs for a buyer to consider it useful. Cardknox’s robust SDK, gateway emulators, and plugins make it that much easier to integrate the Cardknox gateway with a wide range of software.
Cardknox’s integration removes the need for manual entry or reconciliations, as the Cardknox gateway and software program are synced. The result is a more efficient system overall, one that clients can depend upon to have the right data without hassle. The focus of Cardknox’s integration extends to both online and in-person processing. Property managers can integrate Cardknox with payment terminals to swipe cards in-person, or with websites or software to accept payments online. Plus, property managers can use Cardknox’s virtual terminal platforms to key-in payments or set up automated recurring payment schedules.
Simplicity is critical when it comes to complex elements such as digital payment integration. With a Cardknox integration, clients can quickly see their transaction details at a glance. There’s no room for error due to manual data entry, and the accounting and CRM systems automatically generate profiles, receipts, and data as payments are received.
2. Multiple Payment Methods
ACH Payments
ACH is quickly becoming one of the most preferred payment methods for tenants because
of its ease of use and quick processing time. Our integration enables property managers to process one-time and recurring ACH payments, which greatly streamlines the rent receipt process since customers do not need to mail out invoices or take checks to the bank. Plus, funding is fast since automatic ACH transfers go directly to bank accounts, and they generally clear within a couple of days or less.
Card Payments
Cardknox supports several types of card payments, including magstripe, EMV, contactless, and even mobile wallet transactions. Cardknox can handle these transactions both online and in-person, offering flexibility to tenants in their choice of payments. The Cardknox Merchant Portal, a virtual terminal solution, allows merchants to securely store and process customer card details in order to facilitate automatic payments. Plus, our account updater tool ensures that stored card data is regularly updated in the event that the card has expired or is inactive.
The Real Deal reports that since the start of the COVID-19 pandemic, credit card rent payments have risen by as much as 30% in New York. Based on this data, supporting card payments as a landlord or property manager is quickly becoming a necessity.
3. Payment Facilitator (PayFac) Model – Cardknox Go
Payment processing accounts can be challenging for ISVs and VARs to work with. Occasionally, these clients opt to become an independent sales vendor (ISO) and offer their own payment processing solution, but this brings with it security concerns and user data maintenance and transparency. Cardknox Go is our PayFac solution designed with ISVs and VARs in mind. Instead of spending time trying to develop a working solution from scratch, we provide a simplified system that’s easy to integrate and ensures a seamless onboarding experience for clients.
Cardknox Go operates on a master merchant services system. The ISV/VAR registers with Carknox as a master merchant and can then create their own sub-merchant accounts. This setup means that the ISV or VAR doesn’t need to spend time developing security protocols and updating privacy policies to conform to regulations and manage risk. With Cardknox Go, your clients can get their payment system up-and-running that much faster.
Again, simplification is the core of our process. Our PayFac model comes with flat-rate transparent pricing. There are no surprises in our transaction fees, and the ISV or VAR doesn’t have any added expenses to pass on to their clients. With such a simple payment facilitation system, developers and their clients can set up accounts and start receiving payments with very little lag time.
4. Payment Card Industry (PCI) Security Standard Compliance
Any business that stores, intercepts, or processes card data needs to be PCI compliant. Fortunately, Cardknox makes it that much easier for ISVs and VARs to build an integration that’s fully compliant— which means that property managers will love the ease with which they can become PCI compliant. Our tokenization technology replaces sensitive card details with a highly-secure data token, which greatly simplifies PCI compliance. Additionally, our gateway can be integrated with a wide range
of Point-to-Point Encryption (P2PE)-certified payment hardware. P2PE was established by the PCI Security Standards Council and serves as a way to instantaneously convert swiped card data into indecipherable code to reduce the incidence of hacking or data interception. Merchants that integrate Cardknox into their payment system can benefit from our P2PE interfaces.
5. Online Billing and Processing Solutions
Whether it’s to maintain social distancing or reduce the occurrence of late payments, more and more property managers and landlords are looking to switch to online payment processing solutions. Cardknox’s many online solutions can be integrated with ease or set up as standalone systems so that property managers can process payments and send invoices.
Recurring Payment Scheduling
With the right online processing system, merchants can automatically deduct rent from their tenant’s bank account. This automatic deduction helps make the billing cycle more efficient and ensures that there won’t be any late payments. For property managers primarily that work on tight deadlines, this addition can be a significant positive to push them towards adopting online payments.
Cardknox offers several methods for businesses to create recurring payments. The first option is using Cardknox’s Merchant Portal. Users of the portal can securely store customer details, including their payment methods. Then, the user can create a recurring schedule based on the desired frequency and amount. If a business has more tech-savvy personnel, Cardknox also offers access to recurring payments through API integration.
With the help of our additional features, property managers can enjoy fewer payment declines. Our Account Updater tool automatically scans cards on file to detect those that are inactive or expired, and it then obtains the correct information and applies it to the system. Plus, our UpdateYourCard solution automatically contacts the cardholder to obtain updated card information in the event that Account Updater was not able to resolve the issue. This convenient utility allows customers to provide the right card information at their convenience. We’ve covered these topics in detail here.
PaymentSITE
PaymentSITE is a hosted online form that can be shared with tenants via its URL or embedded into a webpage to accept
ACH or credit/debit card payments. Property managers can customize their PaymentSITE to include custom fields and branding before sharing it with tenants. These custom fields can also be used to encourage users to sign up for recurring rent payments. PaymentSITE is fully hosted and is 100% PCI compliant, making it the perfect solution for businesses that want to accept payments online without hassle.
6. Support for Convenience and Service Fees
Convenience fees are additional fees that companies may charge to customers for making a remote payment with a credit card. These fees can be used to offset the costs of card processing. Typically, businesses are only allowed to levy a convenience fee if they offer an alternative bill pay option that doesn’t include an attached fee. For example, in the case of rent or bill payment, convenience fees can’t be charged if the merchant doesn’t give the tenant the option to mail in a check for no added cost.
Services fees are similar to convenience fees in that they are additional costs charged to the consumer to offset credit card processing rates. However, unlike convenience fees, service fees can be charged for in-person transactions as well. The client may set these fees as either percentage-based or a flat rate. Each state has its own laws governing what service fees are legal, and businesses will need to comply with local regulations.
Many property management businesses charge convenience or service fees because the costs of processing high-ticket transactions can add up fast. Fortunately, Cardknox’s system supports both convenience and service fees. With Cardknox, businesses can flexibly add a flat-rate charge or a percentage-based deduction as a convenience or service charge at their discretion (and per compliance with any relevant regulations). The price is then calculated automatically and added to the customer’s receipt.
7. Transaction Monitoring
Cardknox’s Merchant Portal makes it easy for businesses to monitor transactions as they occur. Users can set up multiple accounts to track transactions for different property locations, and additional users can be added to the master account. Large companies usually have numerous employees operating in overlapping positions, so having various account compatibilities makes it much easier for them to manage their properties.
Analytics is a part of transaction data that many businesses overlook, but the Cardknox Merchant Portal caters to companies interested in hard data. Employees can export reports and format them as they see fit via advanced reporting filters. Reports can even be professionally formatted using templates and sent out to the business executives for perusal. The data within these reports can further gauge the success of existing payment systems and spot problems with tenants before they occur.
Scaling Property Management Requires Long-Term Consideration
Businesses that start small often grow and expand. Even small property management businesses ultimately require a sophisticated method of dealing with clients. The modern world has made it easier for companies that understand how new payment technology works to make the most out of their investments. By appealing to a demographic of renters who prefer remote deposits and avoiding face-to-face interactions, landlords and property managers can bring in new renters. And at the same time, with the help of integrated payment solutions, property managers can enjoy streamlined business operations and faster funding.
There’s no shortage of people looking for properties. Existing renters are prioritizing their rent, ensuring that the market remains afloat. Globe News Wire reports that renters seem to be responsible for managing their debt, despite the economic contraction.
Now’s the time to harness the power of the latest payment technology for the property management industry. By partnering with Cardknox, industry businesses can enjoy the convenience of automated and tenant-friendly payment solutions. If you’re interested in Cardknox’s payment technology and how it can benefit your software development or business goals, contact us today!
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