Digital Certified Funds Automate Rent Payments
Digital innovations in property management reduce the risk of late payments and chargebacks.
Landlords have long required new residents and those with a history of late payments to pay with money orders and cashier’s checks. Both are known as certified funds. Now, with the help of real-time financial verification data, residents of multifamily properties who are required to pay with certified funds can do so without leaving the comfort of their homes. And, property managers can streamline receivables collection.
How it Works
Digital certified funds, also known as online certified payments, give multifamily property operators a fully-automated front-office platform—and a paperless process.
Residents can make online certified payments via a mobile device or desktop browser to pay their rent. The process starts by verifying user identity and bank account ownership. Next, the user’s transactional and behavioral data is analyzed in real time in order to authorize a certified transaction. This then allows the capture of funds from the user’s financial institution and settles the funds risk-free to the property.
Automated Payment Logic
The latest technology can also do the heavy lifting and minimize the manual overhead when it comes to preventing and processing late payments. Certified funds are typically required upon move-in, but property managers understand they are often used for residents who have a history of late payments. With the latest rent payment technology, property managers can use certified payment logic to set parameters that only present certified payment options to residents based on their past behavior.
With this new automation, operators have the ability to avoid returned late payments by only accepting digital certified funds once a payment is deemed late. Additionally, operators can customize different settings based on each property’s needs, such as easily accepting prepayments from residents, which is beneficial when residents head out of town before their rent is due.
Chargeback Protection
Chargebacks were introduced more than 40 years ago, designed as a consumer protection effort to instill confidence in credit cards. Yet, the increasingly fraudulent consumer use of chargebacks is having a significant impact on property bottom lines.
Recently, a multifamily regional property manager in northern California reported that they faced a loss of $15,000 in credit card chargebacks within a single month—from just two residents.
One resident disputed six months of rent charges, and the other resident initiated a chargeback on several months of rent as well. As a result, the owner requested they stop accepting credit card payments altogether. However, using digital certified funds, the property manager was able to continue accepting credit card payments while removing all the risk from future potential chargebacks.
Unfortunately, these aren’t isolated incidents. A 2019 study found that 81% of individuals admitted to filing a chargeback out of convenience and a considerable percent of the dispute cases were lost. While it is less common to see chargebacks on rent payments, these often occur with rental application fees and other property add-on services. In fact, Verifi, an industry leader in end-to-end payment verification, did the math on chargebacks. They found that every dollar lost to chargeback fraud costs the property an estimated $2.40. So, $100 in chargebacks can cost the property $240.
Even for a single property, chargebacks can have a marked effect on net operating income while taking a material amount of time for property managers to resolve. However, those that have moved to modernized rent payments platforms have been able to avoid them.
Cash Equivalent Payments
Because of widespread risk management practices among property management companies, cash equivalent payments are often required for certain situations.
For example, a resident must obtain a traditional money order at a kiosk. Because money orders typically have caps on their value, a renter may need to obtain several money orders to reach the value of the payment. Another form of digital certified payment is also offered by MoneyGram, allowing residents to make payments via digital money orders from any MoneyGram kiosk.
With more than 30,000 kiosks accessible in private and public locations, residents can now send all types of payments, at any time, without being subject to paying in person during the property manager’s office hours. MoneyGram comes with some market-leading built-in risk protections, including automatically attributing all payments made with MoneyGram to the correct apartment unit, thus eliminating the need to disclose additional sensitive information
which is often the case with cashier’s checks and paper money orders.
Ultimately, paper money orders and similar forms of payment aren’t as safe as once believed. Repeated incidents of fraud over the last decade shows they can be easily stolen or tampered with. They also require manual processing, leaving them prone to errors and increased processing time.
When payments went missing or were stolen, residents had to send the property manager another form of paper payment while the issue was being resolved. By sending and processing certified digital payments, renters and managers are assured zero risk.
Digital money orders ensure lower liability since they require less handling, improved data accuracy because they eliminate manual payment processing, reduced theft and fraud, and immediate payment confirmation. Digital innovations are having a marked impact on traditionally manual financial processes, and they are reshaping the way property owners and investors manage their P&Ls. The combined benefits of these tech innovations deliver an opportunity to improve and exert some control over resident behavior and mitigate risk while protecting the bottom line for owners and their investors.
