COVID-19 has forced a rapid shift to the adoption of online payment technology, triggering a massive disruption in traditional resident payment behavior in its wake. An analysis of payment activity across Domuso’s portfolio of multifamily properties at the beginning of the April rent cycle showed a marked preference to limit in-person exchanges in favor of safer, contact-less ways to pay.
Along with a 50 percent drop in paper check volume and a 600 percent increase in the use of Mobile Check Pay, Domuso also noted a 60 percent rise in credit card utilization going into May. The growing adoption of online payments, along with credit card issuers and properties continuing to waive and absorb credit card processing fees, means credit card usage for rent payments is likely to continue to grow. Yet, as credit card usage expands, so too does the risk of chargebacks.
In a recent meeting with a large property management company, one executive commented that “credit card chargebacks were never really a concern for us until now.”
Chargebacks have historically been an issue in relation to denied applicants disputing fees. Today, the concern is that as more credit cards are used for payment when cash is tight, it could lead to potentially more disputes.
While property managers have to prioritize keeping communications open and providing a streamlined user experience for residents, the need to maximize caution and protect against the increased risk of chargeback fraud is more important than ever.
Here’s how you can protect your rental revenue and reduce the risk of credit card chargebacks.
Offer credit card payments and let someone else take the risk
Allowing residents to make rent payments with credit cards, and even absorbing fees, is a smart strategy to ensure future on-time payments. Many residents were already motivated to use credit cards to gain points, airline miles and cash rewards before the pandemic. Today, credit card usage rates are higher, almost double across Domuso’s portfolio. However, as unemployment remains high, the risk of potential payment disputes also increases. Properties should investigate if their current payment provider offers chargeback protection as more credit card payments are made.
Domuso offers properties 100 percent chargeback protection on both credit card transactions and e-check / ACH returns. Having a provider take the risk saves valuable time, avoids the stress of managing disputes and helps to steer clear of financial losses.
An industry-leading risk mitigation tool, Domuso’s Online Certified - or digital certified funds - securely verifies a resident’s bank balance before transferring the payment directly to the property to guarantee protection from chargebacks and returns due to insufficient funds.
Ensure payment policies are clear
When residents enroll in an electronic payment platform they are required to agree to stated terms and conditions for payment. These policies can be reinforced in printed and email reminders, especially important at this time as payment behaviors are shifting. For new applicants it is important to have a clearly stated policy that application fees are non-refundable, even if you are not approved.
Switching to more sophisticated digital payment platforms also means having access to a range of automation settings and alternative payment methods that reduce payment risk and can remove chargebacks altogether. With Domuso, property managers can still accept traditional payment methods while offering the ability to accept digital certified funds and setting automated payment logic to limit options for residents with a history of risky payment behavior.
As the industry continues its transition to full percent digital payments, there are undoubtedly learning curves that properties will encounter.
Talk to us about how Domuso can help protect your bottom line, reduce risk exposure and create greater operational efficiency starting today.