Online pay takes off

No one likes arrears. Tenants just want to be in the black. And social landlords want the same, because rent is the income that makes the wheels of the housing sector turn.

Everyone is concerned about what will happen to arrears in the future: universal credit may be rolling out at a slow pace, but once it has fully arrived, housing benefit will no longer be paid directly to social landlords. The upshot is that more tenants will have to manage their own rent payments.

The sector’s concern about this turn of events is well documented, and many landlords are still hoping for changes to the direct payment element of universal credit. But in the meantime, social landlords are also turning to technology to help improve the rent payment process and reduce arrears.

A survey of 52 social landlords by Inside Housing has found that landlords are increasingly encouraging tenants to pay rent and manage their rental accounts online.

Landlords obviously just want to make it as easy as possible for tenants to pay rent. The calculation they are relying on goes like this: a smooth process equals more rent paid, equals lower arrears and fewer resources used up chasing payment.

As 10,000-home Coast & Country Housing put it in its survey response, ‘We try to be as flexible as possible to give tenants as many options as possible to pay their rent.

‘We are open to new ideas to make it as easy as possible.’

State of pay

Of the UK housing associations that responded to our survey, 50 out of 52 allow tenants to pay rent online. However, some caution might be needed in interpreting this result.

The survey was sent out to more than 100 housing associations, and it could be that landlords were more likely to respond to such a survey if they do offer some online services.

Many of these landlords don’t have specialist payment facilities themselves. Instead, they have signed up to payment collection companies that do it for them, such as a firm called Allpay. These third-party payment services typically allow tenants to pay rent online, but not access their account information, such as how much money they owe, and a history of payments.

Ross Macmillan, a market intelligence consultant at Allpay, which says that it has more than 500 customers who are social landlords, explains this is because the firm does not have access to landlords’ IT systems that record information about tenants’ balance and payment history.

However, these payment systems do also allow tenants to pay in person, at a series of shops and petrol stations, and by text message.

Typically payments through Allpay’s mobile app represent 1%-5% of a social landlord’s total transactions, he adds.

These systems do have their downsides for landlords, says Nick Atkin, chief executive of Halton Housing Trust: it can take up to five working days for the landlord to receive a payment, and it costs the landlord money
to receive rent payments (this is another reason many landlords prefer direct debits).

However, he explains, it’s just too expensive for landlords to design their own online payment service.

Indeed, our survey responses suggest that the more old-school methods of payment are still the most popular with tenants.

North Hertfordshire Homes is one of the minority of landlords that allows tenants to both pay online and manage their account - for example, by checking their current balance online.

But the 9,000-home landlord says: ‘The most popular method of payment with our tenants is still paying at the post office.’

It seems not that much has changed since 2012, when the Department for Work and Pensions found that about 60% of social housing tenants paid by cash.

New Charter Housing Trust has found its 24-hour phone line is popular.

‘It is used every hour of every day,’ the organisation says. It is an automated service - which may help tenants who are in arrears, as they tend to dislike having to phone up and speak to someone when paying rent.

Investing in checking rent

The area of our survey that does seem to point to recent and widespread change is in facilities to allow tenants to check their rent statements and manage their accounts online.

For tenants who are on a limited income and have to manage their spending carefully, the ability to pay online and monitor their account at any time has obvious benefits.

One in four landlords who responded to our survey still don’t offer this to their tenants, despite the very widespread acceptance of online payment.

However, even among these 13 landlords, eight are either about to launch, or are considering launching such a service.

In an indication that things are changing now, even among those landlords that told us they do offer online rent management, three are upgrading their systems again to offer better facilities.

North Lincolnshire Homes is one of the landlords that offers this service online. Its system was only launched a few months ago, in March 2014. In its survey response, the 10,000-home association explains that tenants can check the last 20 entries of their rent statement and get an up-to-date balance, clearly showing if they’re in credit or arrears.

‘It frees up our customer service staff to have quality conversations and handle more complex cases,’ the landlord says.

‘Since we launched the system back in March, we’ve recorded 2,620 views of online rent accounts.

‘As of 31 July we had 634 tenants signed up to the overall system, which represents just more than 6% of our tenant base.

‘We have plans to encourage more and more of our tenants to get online through our digital inclusion programmes so they too can manage their tenancies online.’

In an indication of social landlords’ interest in helping tenants keep constant track of their account information, they are experimenting with different ways of allowing access to this information - for example, by calling an automated line or sending a text.

Vale of Aylesbury Housing Trust has a service whereby tenants can get their rent account balance automatically sent to them by text message.

The direct debit dilemma

For landlords that want to encourage the use of online payment, their experience with direct debits might seem to encourage caution.

Sue O’Neill, director of finance and resources at Merlin Housing Society, explains that the 8,000-home landlord has found it ‘really difficult’ to get tenants to sign up to direct debits.

‘We’ve introduced weekly direct debit payment dates and that has helped a bit. But our customers just don’t seem to trust it,’ she adds.

‘We’ve had great success with Moto [a credit card payment-processing service], though.

‘This means our staff can accept card payments from customers by phone, which are then processed securely by the Worldpay payments service over the internet.

‘So if a customer rings about something else and we see they’re in arrears, our staff can take a payment from them there and then rather than only being able to ask them to go away and pay us some other way.’

Despite years of trying to get tenants to sign up to pay by direct debit, a very well-established method of payment, almost half of our survey respondents told us they are having to use incentives, such as prize draws, to persuade their tenants to sign up. Golden Gates Housing Trust simply gives tenants £60 when they switch to direct debit.

Although we left the question open, almost no landlords told us they offer incentives to encourage tenants to use any other kind of payment method.

Moat is the only exception. The 20,000-home association offers incentives to all tenants who clear their rent on time, regardless of payment method.

However, some landlords are hoping that online payments won’t create the same hurdles to jump as direct debit.

Direct debits are good for landlords, as the payment comes out of the tenant’s bank account automatically.

This is better than a standing order because if rents change, the landlord can request a change to the amount coming out of a tenant’s account by direct debit, but if they have a standing order set up, the tenant has to change the amount themselves.

But for some tenants, direct debit is not all that appealing.

Bron Afon Community Housing sums it up: ‘The majority of our tenants have bank accounts but they are not suitable for transactions because of overdrafts and bank charges.’

Mr Atkin at Halton Housing Trust says: ‘That’s where the gap will start to be filled by the ability to pay online or through some sort of app.’

Quick, online payments, could allow tenants to pay when they want, without feeling tied down or worried by money coming out of their account when they cannot afford it.

Digital divide

The rush to get tenants to pay rent and manage accounts online, however, runs up against one big problem: not all tenants are online. Last year, Affinity Sutton carried out a survey of its tenants and found that 74% were online - up from 57% in only two years, but still lagging behind the national figure for the general population, which at that time was 83%.

And even among those who are already using the internet, not all of them are confident in paying for things online.

Jenny Osbourne, acting chief executive at tenant empowerment organisation TPAS, puts the dilemma like this: ‘Without a doubt landlords need to ensure they are on board with engaging digitally with their tenants as much as they can. It’s about offering the choice and flexibility. Many of their tenants may want to manage their rent in the same way they can manage many other services in their lives. Current and future tenants will increasingly expect to access landlord services online.

‘However, TPAS recognises that many tenants remain both digitally excluded and scared of using online platforms, particularly around money.’

TPAS argues that social landlords shouldn’t leap to invest in online payment right away - they need to make sure first that training and support is available to help tenants use online services.

‘Organisations should work with their tenants to agree the nature and pace of the roll-out of digital platforms,’ Ms Osbourne adds.

Longhurst Group is one of the landlords that sees the question in a similar light. The 18,000-home provider launched a service earlier this year that lets tenants manage their accounts online for the first time.

A spokesperson says: ‘Online accessibility is an excellent way to hand tenants more control of their tenancy. However, as universal credit is introduced and the rest of the world moves to become “digital by default”, the choice will be limited to getting online or losing out.

‘We’re encouraging people to choose digital options now, and offering support to help them build skills and confidence, so that they are ready to manage the changes ahead.’