Modernized payment solutions specialized in real estate, you ask? Yes, absolutely! The traditionally conservative real estate payment industry has been turning to technology little by little, and necessarily in 2020, first out of necessity and then for performance reasons...
It's not so long ago that all payments for rent, condominium fees or recurring expenses were made by cheque... in fact, "older people" will remember the days when purchases and bills, even at the grocery store, were paid by cash or cheque. The latter were quickly outclassed by more avant-garde and, above all, more secure technological means.
But before we delve into the present, let's go back in time: the first methods of payment in our ancestors' time were easily summed up as barter, gold coins and promissory bills. It's a long time ago, you may say, but these were the very first monetary exchanges your ancestor used to buy his land and build his residence, in order to pay the governor, the Sieur or the superintendant, faithful representatives of the king who owned the land, the sums due!
Back in the present, we were talking earlier about checks and cash. Payment methods are evolving and now we're seeing more and more digital methods such as debit cards and credit cards, now commonplace as are mobile payment apps like Apple Pay and Google Pay. We're even seeing limited use of cryptocurrencies, with some companies offering them as a payment method in the real estate sector. The Bank of Canada is even studying the relevance of one day issuing a digital currency. New technologies in our payment systems offer new opportunities and benefits to consumers, businesses and financial institutions alike.
Payments, an ecosystem in itself!
To explain this whole payments ecosystem, let's start from the basics.
What we think of as money today consists largely of bank deposits. Most payments, whether by pre-authorized debit, debit card, credit card, bank transfer or cheque, inevitably involve a transfer of funds between financial institutions. These transfers take place via secure, recognized payment systems that enable one financial institution or third-party payment service provider to transfer funds to another. In Canada, these systems process more than $200 billion* every business day - no small feat!
"I remember 15 years ago, at the very beginning of Otonom Solution, pre-authorized debits were much less widespread! Today, it's commonplace and represents more than $4 billion in secure funds transfers annually at Otonom, which is phenomenal for an SME like ours!" says Dany Losier, Executive Vice-President at Otonom Solution, a Canadian fintech specializing in real estate payments since 2008.
What is pre-authorized payment, or "PAD" as it is affectionately known?
PAD" or pre-authorized debit is the most widely used type of payment for recurring payments, as well as being the safest and least expensive. Contrary to popular belief, this system is very simple, and involves 3 easy steps for the owner or syndicate:
- By obtaining a one-time authorization from the co-owner or tenant, on a duly completed form, to deduct the monthly fees from his or her account, accompanied by a copy of the cheque;
- Via your representative, enter the details of the direct debit in the appropriate online form, depending on the supplier selected;
- By sending the amounts to be paid, according to the payment frequency, usually monthly.
Interbanking, security and technical innovation: major advances!
Let's take another step back in time... The first major change was the introduction of interbanking in Canada almost 40 years ago, with the arrival of the Interac system in 1984. This innovation made payments and withdrawals easier for users - a revolution in itself, with easier transactions and a more secure payment method! A whole new way of making payments was born.
Back to today, technological innovation is accelerating to meet the expectations of consumers, young and old, with the integration of different universes, whether virtual, digital or downright bricks-and-mortar. These universes, and external elements such as COVID-19, have turned thinking on its head. Consumers have moved from a typical physical banking world to make their payments, to a digital world and now to a virtual one. They expect technology to adapt to their habits and offer them a seamless, integrated payment experience, and for payment service providers, such as Otonom Solution, Stripe, Global Payments, or financial institutions, to innovate to meet their needs. Payment companies and financial institutions that focus on their customers, on the payment experiences they want, and that offer the technological advances needed to deliver those experiences, will be sustainable for the future.
Current technologies and what the future holds.
Recent years have seen a proliferation of new technologies facilitating payment flows. Several payment mechanisms are available to us or are "under observation". We need only think of peer-to-peer payment, bank tokens, NFC payment with a connected object, digital currency, blockchain (used in many sectors, including real estate, banking, law and payments), cryptocurrency, and so on.
In this same evolution, we're also seeing the emergence of open banking, a form of real-time payment, enabling third-party financial and payment service providers to access consumers' banking information, when the consumer consents to this access. In fact, experts expect the open banking market to exceed $116 billion by 2026...It's exponential!
The transformation of banking structures and customer relationships is already beginning to change the way institutions and third-party payment services interact with their customers, while also creating new services.
"It goes without saying that we follow the evolution of the real estate payment environment with great interest, in order to adapt to the needs of our customers and partners," says Otonom Solution's Dany Losier.
However, the parallels between today's uses and the needs that have justified the constant innovation of payment methods over the years are just as striking. The aim is to develop and optimize a simple, accessible and secure solution for using a payment service with guaranteed inherent added value.
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