Checks are becoming less and less a part of consumers’ lives each day. According to data from the U.S. Federal Reserve, the number of checks in use declined by more than 50 percent over a 12-year period beginning in 2000. In that same span, payment with cards, mobile wallets and direct deposit tripled, and the trend is not expected to reverse itself anytime soon. Young people especially have stopped using checks, with a study from WePay reporting that 52 percent of millennials never use checks at all.
When it comes to rent payments, however, checks still reign supreme. The Fed study indicated that consumers are still using checks to pay for larger transactions, such as their monthly rent, despite the inconvenience of writing a check. In fact, checks are still used, despite evidence from the Association for Financial Professionals’ 2015 Payments Fraud and Control Survey that they “continue to lead as the payment type most susceptible to fraudulent attacks, even as their overall use continues to decline.”
As founder and CEO of RadPad, Jonathan Eppers is trying to make paying rent easier and safer. The company aims to eliminate the hassles and risks of paper checks for renters and landlords with a mobile payment app. PYMNTS recently caught up with Eppers to discuss why mobile payments are taking so long to catch on in the rental industry and what’s coming up next.
More Services, More Customers
RadPad was founded in 2012 as a search engine designed to help connect renters to landlords looking for new tenants, but Eppers and his team quickly realized that their customers were not remaining on the app for long enough. After successfully using RadPad to find an apartment, most customers would delete the app until it was once again time to find a new place to live, he said, meaning they were losing out on potential profits.
Eppers and his team wanted to find a way to keep their customers on the app for a longer period of time and increase their profits. Enter mobile payments.
“It was obvious to us that payments was the next big thing to tackle because, once you move into an apartment, most landlords in the U.S. only accept check or cash rent payments,” he said. “And most people that are renting don’t even have a checkbook, or if they do, it’s only to pay the rent. So, we wanted to build something that enabled renters to very easily and quickly sign up and start making credit or debit card rent payments to landlords.”
So, the company added mobile payments to the app, allowing any tenant to use RadPad to pay any landlord their monthly rent through the app. Renters use their credit or debit cards or mobile wallets to pay the rent, and RadPad uses those funds to write a check to the landlord. That means there’s no need for the landlord to register to use the platform, making it easier for renters to adopt the solution.
Eppers said that the service also offers users perks and benefits that they could not access simply by paying rent via an eCheck from their bank. For now, renters pay no fees for debit card transactions (they do pay a 3.49 percent fee on credit card payments), can earn miles and cash back for paying their rent with a credit card and can use RadPad payments to build their payment history and credit score. The company also guarantees that all rent payments will be delivered on time as long as users make the payment at least four days before their rent is due.
So far, the solution has worked well, Eppers said, noting that young renters, mostly people between the ages of 24 and 34, have flocked to the app since the mobile payments service was introduced 16 months ago. Eppers reported that the company is seeing 15 percent growth month over month and is sending checks to landlords in all 50 states. All told, tenants have sent more than $120 million in rent through RadPad so far.
Finding A Solution For Landlords And Tenants
While Eppers believes RadPad can help bring mobile payments to the renting industry, he said there is still some work to be done to make them more mainstream. Eppers said that he thinks there are two reasons so many tenants who may not use checks in their day-to-day life still write one on the first of every month to cover the rent.
“I think, for one, it’s been within really the past three years that people have gotten comfortable paying anything on their phone,” he said. However, even as mobile payments became a more accepted and trusted currency, there was another problem to solve.
“If you wanted to sign up on one of these rent payment products, both the landlord and the renter had to use the platform,” Eppers said, explaining that most landlords had no incentive to receive mobile payments. “They’d been getting checks for as long as checks had been around, and they’re not begging for something new.”
So, Eppers and his team worked to find a solution that would make receiving payments even simpler for landlords who were wary of changing the way they made their money.
“Your landlord does not have to use our platform in order to use our product as a renter,” Eppers explained, noting that RadPad partners with Plaid, a company that enables applications to connect with users’ bank accounts, to help landlords easily collect rent without needing to use a routing or account number. “Landlords love it because it’s free for them to sign up and accept electronic payment. They can choose whatever bank account they want to choose.”
Keeping Digital Squatters Out
Eppers noted that a crucial factor in making sure renters are comfortable with paying their rent via a mobile payments app is ensuring they feel safe when using the service.
“The key point of making this product work is preventing fraud,” he said. “So, when a renter signs up, we don’t just take who they tell us that their landlords are and start cutting out payments to them.”
Instead, the tenant goes through a verification process, during which they must confirm their phone number, email address and their landlord’s information. If there is trouble verifying the landlord, RadPad will ask tenants to provide documentation, such as a lease, to authenticate and approve the transactions.
Eppers said that balancing the need for top-flight security with the desire to keep the app as easy to use as possible is a crucial process for him and his team.
“Something I really focus on a lot is keeping the experience simple and easy so people can get through it quickly but also balancing the risk/reward of letting bad actors into the marketplace,” Eppers said.
In order to find the right level of security and simplicity, Eppers said that his team has turned to experts in security, fraud prevention and authentication.
“There’s always that balance, but one of the ways we’ve done it is to utilize external partners who have great products that we can use to help us,” he said, citing security providers, such as Western Union and TeleSign. “We use outside technologies so our customers can more quickly get through the experience.”
What’s Moving In?
Eppers said that, as he and his team continue to grow the solution, the aim remains the same: to keep users on RadPad for as long as possible. To achieve that goal, Eppers says he imagines adding more forms of payment and potential uses for the app.
The company has already begun offering payments via mobile wallets, such as Apple Pay and Android Pay, and Eppers said he imagines his customers using the service for more than just paying rent.”I can see people using their credit card or the mobile wallet on file to pay for all of those other things you have to pay every month,” Eppers said, including many of the things people still use checks to pay for, such as utility bills. “I think those are things we’re looking at as natural progressions of our product.”
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