Property Management Firms’ Reliance on Checks Means More Late Rent Payments

“If it ain’t broke, don’t fix it” may not be best business strategy, especially when it comes to something as vital for future growth as payments in the property management space.

It is true that the sector may not be under the same loyalty pressures that the retail industry faces when it comes to offering innovative consumer-facing digital tools, but relying on outdated systems has clear drawbacks. Doing so possibly creates revenue gaps while waiting for checks to clear and can force increased personnel time to be spent on processing these payments rather than other matters.

Despite industry growth in 2022 making the sector ripe for a systems upgrade, the friction-filled practice of paper checks still holds sway, and a significant portion of residential and commercial rents are still paid by this method. That doesn’t mean tenants like to use it, however, as more bills are routinely paid online.

As noted in February’s edition of the Money Mobility Tracker, “Money Mobility Helps Property Managers in a Difficult Economy,” a PYMNTS and Ingo Money collaboration, this legacy habit may be particularly detrimental to property managers given renters’ payment preferences.

Far and away, consumers prefer to pay their bills via digital channels due to the ease of use and convenience the option offers. PYMNTS found in late 2021 that nearly two-thirds of consumers who opted to pay a bill digitally did so for ease and convenience, exceeding speed and security as motivations.

Historically, consumer preferences when it comes to the rental payments may not have been a significant consideration for the sector. Housing, like healthcare or insurance, is a necessity and there may have been little incentive to modernize.

However, the mindset is shifting somewhat to accommodate new economic realities. PYMNTS’ research found that 24% of paycheck-to-paycheck consumers had trouble covering all their bills in December, reflecting more than a 2% rise from the same period the previous year — and data showed that convenience and ease of use can thus play a factor.

Some Americans have been left making partial payments or skipping some months altogether, including 18% of utility bills — a category of service normally considered as essential to be paid on time as rent due. Of surveyed respondents, 14% said they deprioritize bills they consider friction filled. That — and the sometimes drawn-out and expensive process of eviction — should put check-first property managers on notice.

Clearly, no biller wants their notices put to the bottom of the pile. When considering the personnel hours spent not only processing on-time payments but the complications involved in following up on payments running late, modernizing a payment system to include multiple digital options may ultimately be far less of a headache than it may seem on initial examination.

In a PYMNTS interview earlier this month, Adam Feinstein, vice president of product for payments at AppFolio, summed up the overall benefits for the sector in going digital.

“Online payments processes can help create new efficiencies and uncover cost savings opportunities, increase security to lower fraud incidents and create a more convenient, modern experience for everyone involved,” he said.

In this day and age, there’s little reason for property managers to rely on legacy systems such as paper checks. As pressures to cut costs in a tight labor market continue, it may be time for the sector to move into the modern payments age.