Making it Big in FinTech with the Right Data and Tech

Recently, Domuso co-founder and COO, Michael Lightfoot and, senior director of Evestnet | Yodlee incubator, Jeff Cain sat down to chat about startups, data, making life easier for renters and apartment owners and the future of payments. In case you missed it: here's your chance to listen on-demand to the webinar below.

First, a little background. Domuso’s digital platform for multifamily rental payments automates and consolidates 100% of rent receivables and manages the entire resident life-cycle from move-in to move-out. From 2018 to 2019, Domuso grew over 400 percent and the company now delivers services to three of the top 10 multifamily property management firms who collectively control more than 300,000 rental units. The Envestnet | Yodlee Data Aggregation Platform is a key part of Domuso’s technology for risk management allowing Domuso to simplify operations for the property manager while giving residents more convenient, safe and affordable payment alternatives.

The pain-points, Digital Certified and the ah-ha moment

In large multifamily apartment portfolios – the kind that Domuso focuses on, portfolios can include anywhere between 5000 to 10,000 rental units. The rule of thumb is about one person per 100 units leading to a lot of inefficiencies. Especially when it comes to communicating with residents and bringing in the monthly rent. "We wanted to help property managers really help the residents," recounts Michael Lightfoot when asked about how Domuso came about. "We wanted a tool that would automate some of the tasks and some of the complexity around payment transactions. Astonishingly, almost 70% of rent in the United States is still paid by paper check. We were looking to enable property managers do meaningful work on the communication and relationship management front. We believe that property management should not just offer but promote and encourage residents to pay online."

Domuso pushed the innovation with three unique products: Point-of-Sale financing, Mobile Check Capture and Digital Certified. Point-of-Sale financing is an alternative to a credit card similar to PayPal Credit or Affirm while Mobile Check Capture allows residents to pay rental checks using a mobile app. The third and possibly the most exciting one, Digital Certified, is an online alternative to the traditional money order. Talking a little more extensively about Digital Certified, Lightfoot elaborated on why it is a particularly exciting innovation and how developing its risk model was a particularly enlightening moment for Domuso considering the rent affordability issue and the fact that many people live paycheck to paycheck in the United States.

About 10 percent of the rent in the United States is paid through money order. This happens because property managers don’t want to take risks with certain payments like move-in fees, late fees and payments from residents with not-so-great credit history. Essentially digital certified is a risk management product. It replaces the traditional paper money order where the resident has to walk to a bank or a 7-Eleven or a Walgreens to obtain them and then drop off at the property. The key thing to remember, Lightfoot stressed, is the existing limitations with the ACH network and paper checks, where returns are not real-time and typically happen five to seven days later. So, it’s a big hassle for property managers to be approaching the resident five to seven days later and say: "Hey, something was wrong with your payment." Domuso’s Digital Certified alternative does a risk-score and certifies those funds in real-time for the property manager. The risk model that Domuso developed relies on the analysis of data with a thin margin. Domuso found that for a $1000 rent payment submitted, 25% of the population had an under $100 buffer while 65% had about a $500 buffer. Much time was spent understanding the user behavior in that risk profile before delivering the product- a first of its kind in the market!

The Right Data

Much of the risk management that Domuso does relies on is being able to understand consumer banking data. Ultimately, after examining other data integration solutions, Domuso chose to go with Yodlee to develop the risk model. A few crucial factors helped seal that decision, including the broad-bank coverage Domuso needed in order to allow every resident attempting to pay take advantage of their solution, was assisted by Yodlee’s capacity to help verify a user's identity, thereby cutting down on fraud. This, in turn, granted access to real-time data as even 24 hours-old information is for all such purposes stale and increases the risk exposure created.

When asked if he knew that Domuso was going to be a data-driven company, Lightfoot remarked on how they definitely from the outset had understood the importance of data. “There’s a tremendous wealth of information that we feel is being underutilized in the rental industry—communication data, behavior payment data and financial information. A lot of this data is siloed, either inside of a different software system or potentially it’s inaccessible on paper and isn’t available in an electronic format. I see a big opportunity to be able to utilize this data better. I think where we are going to see those benefits are more on-demand, real-time information for residents, which is the digital experience. You're going to see properties and property managers being able to improve their financial performance and change the dynamic of their team, so that they can focus on the human element of the business. A lot of the day-to-day manual touch points can be eliminated.”

When asked if there was a favorite story, Lightfoot warmly recollected one set around Domuso’s loan product: a feature that allows a resident to finance any balance due to the property as an alternative to a credit card. A woman was relocating from out of state and found herself in a fix because she hadn't gotten her first paycheck and was waiting on her security deposit to come back from her old apartment. Domuso was able to assess the reality of the situation and extend credit to help her. In return, she wrote Domuso a wonderful review!

What’s Next?

Innovative companies like Domuso are leveraging aggregation platforms such as Yodlee to deliver innovative solutions for markets that have been slow to embrace technological advances such as the property management industry. When discussing about what’s in store for the future- integration opportunities with other platforms out there- or someone with a solution that will integrate well with Domuso’s, Lightfoot agreed that the opportunities were tremendous. “But, as a small team, I would want to establish where we are with our payment solutions before we start expanding our product and exploring other categories.”

Touching upon predictions for the next five or ten years in consumer credit or payment, Lightfoot shared his beliefs about how just the movement of money won’t be enough- it will be solutions that win in the marketplace. Holistic payment solutions that encompass communication very specialized to their use-case and unburden teams from handling the operational workload rather than just move the money, payback solutions and deeply integrated payments inside of a fast solution. Those are the types of business models for tomorrow’s payment industry.

Domuso_Yodlee Webinar

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