Real Estate Slow to Transition Away From Checks

Although many industries aim to eliminate the friction associated with paper check payments, the digital transition can be a challenge.

In the real estate business, for instance, recent PYMNTS data shows that landlords and property managers are still leaning hard on paper checks — not only for rent collection but also for a significant portion of business-to-business (B2B) payments.

In fact, a PYMNTS report found that paper checks made up 34% of real estate companies’ B2B payments, according to “The Treasurer’s Guide to AR Payment Optimization,” a PYMNTS and CheckAlt collaboration.

Get the report: The Treasurer’s Guide to AR Payment Optimization

That’s higher than the share of B2B payments made by check in three other industries included in the study, including the 20% reported by the technology industry, the 26% reported by the industrial or manufacturing industry and the 28% reported by the finance and insurance.

Challenges to Digitization

Several key factors have enabled checks to retain their grip in real estate, including tenants’ needs and preferences and as well as insufficient digitally optimized payment infrastructure.

Adding to the problem, about 5% of American households lack bank accounts, according to 2019 data, so they’re still reliant on cash or other time-consuming methods to pay their rent or other bills.

To help tenants to adopt online tools for rent payment, property managers need to offer them first. Digital-first technologies also are becoming crucial to property managers’ B2B processes as the need to maintain cash flow to and from vendors and other partners becomes more acute.

Nevertheless, approximately 80% of commercial real estate firms surveyed in one recent study said their organizations lacked the core systems that could support emerging technologies.

Steps Toward Digitization

Still, payments in the real estate sector are shifting, and property managers must find payment partners that can facilitate the move from manual to electronic payment processes in this changing industry.

CheckAlt Chief Product Officer and Chief Innovation Officer Bobby Rahmanian told PYMNTS in a February interview that platform models (such as on offer from CheckAlt) can help FinTechs that work with banks move toward digital capture of checks and white label digital capabilities for banks in order to serve merchants or consumers.

Read more: Data, New Solutions Ease Switch From Paper Checks to Digital Payments

“It’s important to make sure the payments still stay electronic and don’t ‘fall back’ into checks,” Rahmanian said.

The need to upgrade these processes comes as property managers’ business partners and tenants look for more seamless, digital-first services for sending invoices, rent payments and other related bills.

Eliminating paper checks may not be feasible for all property management companies, such as those having to ensure they can accept payments from unbanked tenants. However, property managers should continue to take steps toward digitization, especially as their industry partners’ and tenants’ needs and preferences shift toward electronic payment methods.

Property management firms can benefit from finding payment partners to help them make the switch from paper to electronic payments as they navigate the increasingly digital industry.