Renting property can be done better, much better, that's the reason owners and tenants join Cubbi in the first place. Payments are an integral component to renting property and there are problems with them industry-wide and honestly, there was within Cubbi too.
So we made it better.
If you’re not familiar with how we previously handled payments, rent could only be paid via Direct Debit which was initiated on the day rent was due. A good set and forget process for collecting rent but..
When a Direct Debit is initiated, you don’t know if the funds have cleared for 3 business days. Once the payment clears, it takes another day or two to reach the owner. That’s almost a week.
We found most owners were ok to wait a week to get their rent money but the real problem was not the processing time, rather TRUST, knowing 100% without a doubt, all rent would be paid.
It became a big a problem if the payment failed because at that point the rent would be almost 5 days late before any action can be taken.
Regardless if it’s a genuine mistake by the tenant to have the funds in the account, the owner is obviously worried about the tenant making good on their rent.
Waiting another 3 business days for the auto retry of the Direct Debit to clear was excruciating.
Money is a sensitive topic so you want to be 100% when questioning a tenant. Mistrust can ruin a owner/tenant relationship, which is really important to a successful tenancy.
But managing a property is like running a business, you need to act quick on late rent. So what do you do?
Direct Debit is the industry’s best practice to getting rent paid and a great set and forget option so getting rid of it would have been an overreaction.
We simply moved the day we debited the tenants bank account to 5 days before the rent due date (instead of on the due date). This is a default setting, flexible for the tenant to choose, as long as it’s paid on time. Debiting the rent 5 days earlier allows enough time for the payment to clear and marked as paid even if there is a weekend in between. This also allows late rent to be followed up quickly.
But this was not the only problem and was certainly not going to solve everything.
We received feedback from a number of tenants who were frustrated with Direct Debit for a number of reasons; they didn’t have control over when the payment was going to be withdrawn from their account and some felt uncomfortable, even a little disrespected that they could not be relied on to initiate their own rent payments.
Many tenants like to spread their money over several bank accounts (eg savings accounts). If the full rent amount was not in the one bank account at the moment Cubbi tried to debit the rent, it would take 3 business days to find out if it failed. Even genuine problems took too long to rectify.
So just moving the day we debited the rent was not enough.
We know the slow processing times for Direct Debit made it really hard to rectify any payment issues, deal with late rent and many tenants didn’t like Direct Debit. So we had to provide a way for tenants to initiate their own payments, that was super fast.
Instant, real-time, straight away.
Welcome Instant Payments on the New Payments Platform.
The minute we were able to integrate with the platform we stopped everything and we focused on getting this done.
If you’re not familiar with the NPP it’s essentially the same as any normal EFT payment, the money still goes from one bank account to another. The difference is, they are instant 24/7 365 days. Instead of paying to a BSB and Account Number you pay to a PayID which is usually an email or mobile number. Read more about the NPP here.
Real-time payments mean 100% transparency, it’s either paid or not. No waiting for payments to clear and no more taking photos of receipts to prove a payment has left the bank account. Thus also adding more accountability on the tenant.
Little side note: Regardless of the payment method used by the tenant, as soon as any payment clears in Cubbi it’s paid out to the owner via NPP in real-time. Thus meaning if the tenant pays via NPP it’s in the owners bank account within 60 seconds from the moment the tenant makes the payment.
Ok, back to it..
We didn’t just add NPP but also BPAY as another payment option for the tenant because not all banks offer NPP-enabled payments, although 90% do. You can check if your bank does here.
BPAY needs no introduction, they are well known and trusted but they do take 1-2 business days to clear so for now they are a nice additional option for tenants.
To recap these are now the payment methods available to the tenant:
Some properties/tenants require stricter controls and sometimes trust needs to be built over time. This is why we also allow owners and tenants to agree to have Direct Debit ‘Always On’ as part of a lease agreement.
It’s not to say the tenant cannot pay via NPP or BPAY, it just means they cannot turn off their Direct Debit if they are behind in rent.
Cubbi is smart, it will not debit the rent if the rent is already paid, so tenants on Direct Debit can still pay ahead, beat the Direct Debit or up catch up on late rent via NPP. Therefore they can stop the automatic retry if a Direct Debit payment fails. After all, as long as the rent is paid, everyone is happy.
On the other hand some tenants are actually better rent payers if they have flexible options. This is because the tenant can manage rent payments into their lifestyle rather than disrupting how they manage their finances. Also, giving power and ownership to a tenant to manage how they pay rent can boost the owner/tenant relationship. Give trust, receive trust.
It almost goes without saying but important to mention, providing more flexibility requires a strict late rent process and policy applied to every new lease. More on that another time.
We have 3 payment options available to tenants:
Plus an additional layer to force Direct Debit ‘Always On’ for tighter controls.
In conclusion we have allowed greater flexibility to accommodate various lifestyles and preferences of tenants and owners to remove unnecessary friction that is inherent in the way rental payments are made today. With the goal to have the rent in the owners bank account on the day the rent is due.