WHITE PAPER. Online Payments in the Property Management Industry: 2013 Market Survey Results

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1 WHITE PAPER 2013 Market Survey Results $ $

2 INTRODUCTION In 2012, PayLease commissioned New Heights Research to compile the industry s first study about online payment usage within the property management industry. The report uncovered some surprising findings about how management companies were using (or in some cases, not using) online payments to collect rent or HOA dues. One year later, New Heights Research contacted Homeowners Associations (HOAs) and Property Management Companies (PMCs) again to see how things have changed in This report is a synopsis of their findings. METHODOLOGY In 2012, PayLease and New Heights Research constructed a list of 42,000 management companies within the United States. Those records were grouped based on company portfolio type: HOA, PMC (Property Management Company - includes Multifamily and Single Family) and by their number of units under management. A statistically significant sample size of each market segment was selected, totaling 585 firms. Those 585 firms were contacted by New Heights Research via web and phone to determine the following: Residential units under management (and properties/communities as possible) Online payment solution status (including primary type/vendor) Management portfolio by property type (community association, multifamily, single family, other residential [student, military, etc.], commercial) Research for the 2013 study followed the same methodology as used in the previous year s survey. The same management companies that were surveyed in the 2012 study were contacted by New Heights Research again in Page 1

3 SURVEY RESULTS CHANGES TO EXISTING ONLINE PAYMENT SOLUTIONS First, all 585 firms were asked if they made any changes to their solution over the past year. Specifically, they were asked to indicate if they had just begun the use of online payments or if they had added or changed solutions within the past 12 months. Interestingly, 17% of firms indicated they made a change to their payment status. The changes were broken down as follows: Firms who were new users to online payments: 7% Firms who switched online payment providers: 7% Firms who added new payment methods to an existing solution: 3% How Firms Changed Their Online Payment Solution in 2013 Switched online payment providers 7% 7% New users to online payments 3% Added new payment methods to an existing solution Page 2

4 Data Commentary With a steady rise in online payment solutions among HOA and multifamily firms, the numbers clearly indicate a growing comfort with this technology. Online payments tailored to the property management industry have now been in existence for a decade. And providers have finally made e-payment services much more attainable to the masses thanks to solutions that are affordable and easy to implement/use. Not only do we see an increase in online payment solutions within each unit segment of HOA and multifamily, but we also see that firms are expanding the number of online payment choices they offer, as reported by 3% of the sample. It is common for management companies to ease into online payments by initially only offering ACH or credit card transactions. When a firm becomes more comfortable with online payments, they typically add other solutions such as check scanning or cash, both of which convert paper transactions into electronic ones. Reasons for Change? Growing comfort with online payment technology, reduced implementation costs Residents demanding more online payment options Increasing competition among online payment vendors A growing demand for online payment options among renters and homeowners is also a likely factor in the increase. According to the fifth annual Fiserv Billing Household survey released in January 2013, 73% of Americans with internet access pay at least one bill per month online. With such a high number of Americans utilizing online technology for bill payments, property management firms are likely capitalizing on this popular channel to collect rent and HOA dues. Along with a growing comfort level with online payment solutions, firms are also expecting more from their payment provider. Roughly 7% of firms switched providers; indicating that vendors are beginning to build new features and functionality that are increasing competition with one another. Also, with a growing number of vendors offering payments to the property management industry, management firms have more choices and are clearly holding their providers accountable for inferior pricing, integration and/or customer service. Page 3

5 ONLINE PAYMENT ADOPTION BY NUMBER OF FIRMS New Heights Research asked all 585 companies if they offered any online payment options for rent or HOA dues. The sample showed a healthy increase in the presence of online payment solutions since Overall, the total number of firms in the HOA and multifamily segment offering online payments has risen 7%, from 53% in 2012, to 60% in HOAs are far more likely to offer online payments compared to their multifamily counterparts. HOAs increased their online payment usage by 4% since Sixty-nine percent (69%) of HOA firms now offer online payments for their homeowners. While multifamily firms have a much lower rate of online payment usage, they reported twice the amount of new online payment users than the HOA segment, with 8% implementing a solution since The higher adoption rate among HOAs is likely due to their decentralized structure. Online payments provide homeowners with an alternative to mailing their payment since they do not have the option to bring it by an office like in a multifamily environment. HOAs also benefit by receiving their funds immediately versus waiting on a mailed payment. 100 E-Payment Adoption by Number of Firms Percentage of Online Payment Adoption % 60% 26% 65% 69% 45% 46% 54% All Firms HOA Multifamily Portfolio Type In addition to summarizing online payment usage by the number of companies in the HOA and multifamily segments, New Heights Research also broke down the adoption rate by unit count. Let s take a look at that analysis. Page 4

6 HOA HOAs saw a 3% increase in online payment solutions since Seventy-three percent (73%) of homes within the HOA segment had an online payment solution in 2012 versus 76% in According to research done in 2013 by the Community Association Institute (CAI), there are currently 26 million homes in the United States managed by HOAs. If we use this figure to analyze the New Heights Research survey, that would mean roughly 6.2 million homes do not have an option to pay their dues online. Like the data in 2012, the more homes a HOA company manages, the more likely they are to offer online payments. However, the biggest area of growth in online payments for HOAs has been among the mid-sized companies (1,501 5,000 homes). In 2013, 70% of mid-sized firms had an online payment solution compared with 62% in 2012 an 8% increase. Large HOA firms (5,000+ homes) saw a 3% increase, from 76% in 2012 to 79% in HOA Units With Online Payments Percentage of Online Payment Adoption % 76% All HOAs 27% 27% Homes 60% 61% 501-1,500 Homes 62% 70% 1,501-5,000 Homes 76% 79% 5,000+ Homes Penetration by Unit Count Page 5

7 Multifamily As was the case in 2012, HOAs continue to outpace multifamily units in their use of online payment solutions. Fifty-eight percent (58%) of multifamily units have access to an online payment solution in 2013, compared with 76% of HOA managed units. To better understand the implications of this, we will use data compiled by National Multi-Housing Council (NMHC). The NMHC data compiled in 2013 sites the United States having 19.5 million multifamily units. Therefore, close to 8.2 million multifamily units do not have the option to pay rent online. However, there was a slight gain 3% - in online payment usage in the multifamily segment. Fifty-five percent (55%) of multifamily firms were offering online payments in 2012, and in 2013, that number grew to 58%. Small multifamily firms (managing 501-1,500 units) made a huge leap in offering online payments, with a 17% increase from the previous year. Lower costs and solutions that are easier to implement are likely factors in such a large increase. Mid-sized (1,500-5,000 units) firms saw a 4% increase from their payment status in Forty-nine percent (49%) of mid-sized firms offer residents online payment options versus 45% in Large firms (5,000+ units under management) did not see any growth in online payments and remained at 64%. This number is not expected to rise much, if at all, given the high penetration rate for this segment. 100 Multifamily Units With Online Payments Percentage of Online Payment Adoption % 58% All Firms 19% 26% Units 42% 59% 501-1,500 Units 45% 49% 1,501-5,000 Units 64% 64% 5,000+ Units Penetration by Unit Count Page 6

8 CONCLUSION: PREDICTIONS FOR 2014 There was sizeable growth in the 2013 online payment landscape. So what s in store for 2014? Multifamily and HOA firms will continue to implement online payments at a consistent rate of approximately 5-7% per year. The expectation is that multifamily firms will continue to outpace HOAs. Not only that, but firms will also continue to add new products and services to their existing solution at a rate of 4-6%. Cash payment services, which convert cash payments made from a retail location into electronic transactions will likely see the biggest increase. This is a newer product that is gaining in popularity among management firms looking to eliminate cash and money orders from community offices. Lastly, we predict to see firms changing providers at an increasing rate. Competition among payment providers servicing the property management industry is rising with vendors adding new products and improving integration, pricing and customer service. Management companies will have more options and will not be held captive by an inferior service. In 2014 we expect the percentage of firms that change providers to be around 8-10%. In conclusion, the outlook for 2014 is bright for management companies who already have, or are looking to implement an online payment solution. Providers are getting better at meeting the day-to-day needs of property managers, making online payments more attractive for management firms. The next year will be a buyers market, with more choices for management firms both in service providers and in payment options. Page 7

9 ABOUT PAYLEASE PayLease, LLC is a leading electronic payments provider for the property management industry, specifically targeting the multifamily, single family, HOA and commercial markets. PayLease provides property managers the ability to accept and manage rent payments and HOA payments through a secure online interface. With PayLease, residents are able to pay their property manager using an E-check, cash or with a credit card. Since its inception in 2003, PayLease has grown to serve thousands of property management companies nationwide and is among the fastest growing technology companies in the United States. For more information, please visit Scranton Rd., Suite 450 San Diego, CA P (866) F (866) E sales@paylease.com paylease.com