Much like PropTech, Open Banking has been used as a buzzword in recent years. However, when it comes to the rental sector, particularly when we consider the impact of the current coronavirus pandemic, the concept has the potential to revolutionise the way payments are handled and processed for the better.
Here at agentOS, we recently received approval from the Financial Conduct Authority (FCA) to offer an Open Banking solution to letting agents.
Below, I outline why we believe Open Banking can be so beneficial for agents, landlords, suppliers and tenants.
A new normal? The impact of Covid-19
Over recent weeks we have all been dealing with the impact of the spread of coronavirus across the world. In many countries, the global pandemic has had both a financial and social impact.
In the short-term, those operating in the PRS will have to adapt to changeable payment schedules due to the likelihood of buy-to-let mortgage payment holidays and informal rent holidays granted by landlords.
During times like these, it helps to have live technology which uses automation to process payments, otherwise the administrative burden on agents could be significant.
Meanwhile, the pandemic has raised some interesting questions about the future of our industry. Will working from home for a large proportion of the population become the new normal?
If so, do agencies have the solutions in place to be able to offer the same level of high service to consumers while working remotely? The current situation is also likely to encourage property professionals to ask themselves whether they have the measures and infrastructure in place to cope with something similar happening again in the future.
Open Banking was set to challenge the status quo of rental payment processing soon, but the impact of what has happened recently could expedite this change.
How does Open Banking work?
Open Banking is a technology solution which provides businesses and consumers with a secure way for software suppliers to access their financial information.
It was set up by the Competition and Markets Authority on behalf of the government, providing consumers and businesses with more choice and understanding of their finances without ever having to part with their login details.
In the private rented sector (PRS), Open Banking can allow software to automate payments and reconciliation. It also allows agents to use online banking - as opposed to BACS - without having to manually process payments every day.
Furthermore, Open Banking can improve transparency and make it a lot easier for all parties to identify who money belongs to, when it's due to be paid and so on. It's all about having a more joined-up payment process, enabled through live technology.
As the PRS continues to grow, the need for this kind of accounting and record keeping is only going to grow. That said, adoption of Open Banking in the lettings sector has so far been limited and that's what we're trying to change.
The technology has been a huge success in the mortgage sector and several firms have used it to improve the tenant referencing process.
Reducing rental payment pain points for agents
For many agents, managing rental payments and client money can be a fragmented and time-consuming process. In many cases it is also administration-heavy and open to human error.
So not only is the process taking up a huge amount of agents' time, it is also stopping them from focusing on the part of the business they are best at: working with existing clients and growing the business by partnering with new landlords.
We don't want to see owners of independent agencies or senior staff at larger chains logging in to sort out payments at 10pm in the evening. It's no longer necessary to require this level of daily hands-on payment management.
Many agencies already use automation in other parts of their business from marketing to drawing up tenancy contracts, so there's no reason why this shouldn't be the case with payments and it's Open Banking that can make this a reality.
With more PRS regulation than ever before, agents increasingly need solutions that save them time, make things easier and allow them to demonstrate their transparency.
Another benefit of Open Banking is that agencies which embrace it are likely to appeal to a wider pool of landlords and tenants. Tech-savvy landlords will appreciate its speed and clarity, while millennial tenants will enjoy the fact it's live and provides them with all the information they need.
As the lettings sector develops and grows, embracing technology will remain crucial. In light of the current situation and the need for the industry to bounce back, Open Banking could be a key tool for letting agents in the coming years.
*Glyn Trott is managing director of agentOS