Despite the growth of e-commerce and digital banking, old-fashioned ways to pay still reign in some corners of the economy. Two-thirds of renters pay either in cash or by paper check, according to a survey by the Boston Federal Reserve a few years ago.
Now, a couple of former HubSpot product managers, Remen Okoruwa and Ben Keller, see that as an opportunity. They’re debuting a new app this month called Rentdrop to digitize payments between landlords and renters.
The app lets people pay their rent via a connection to their bank account and send it to their landlord either electronically or via a check issued through Rentdrop. There’s even a handy autopay feature for more forgetful renters.
Renters can sign up on their own to avoid having to mail a rent check, or landlords can sign up and enroll their renters. There is no fee for renters, unless they pay by credit card, and no fee for landlords. Rentdrop plans to make money via premium service add-ons and by marketing other services to users.
“It’s nothing revolutionary, but it’s giving people exactly what they want,” Okoruwa said.
The Nigerian-American Harvard grad and his Boston College alum cofounder plan to start off by targeting the region’s off-campus housing market. With about 30,000 student renters in the area, it’s a suitable microcosm to hone their marketing efforts for a broader launch next year. Rentdrop estimates there are 165 college towns in the United States with at least 20,000 student renters each.
“We want to prove out in one of the biggest college towns in the country,” Okoruwa said. The plan is to “crack the code for renter acquisition in Boston and use those insights to scale across the country.”
The idea for the app sprouted from the two cofounders’ experiences splitting the rent with roommates. Okoruwa says he and two roommates had to engage in a monthly “Venmo shuffle,” as their landlord wanted a single paper check. Keller had an even more complex scheme with his four roommates. The group opened a shared bank account just to write a check for rent and kept a debit card that each roommate had to use once a month to deposit their share.
Okoruwa is hoping the new service catches on with young people enough to become a verb, a la Google or Uber.
“When you think about renting, what tech company do you think about now? Nothing,” he said. “We want to build a brand synonymous with renting ... I want ‘Rentdrop’ to be a verb.”
Another key feature of Rentdrop could help renters get access to credit. The service reports on-time rent payments to credit bureaus, allowing users to establish a good credit record even if they don’t have credit cards, car loans, or other kinds of borrowing.
To create Rentdrop’s service, the company is relying on a variety of larger fintech companies like Stripe and Dwolla that provide the underlying technology to enable features like bank transfers and autopay. By providing these basic financial service building blocks, the companies are making it easier for upstarts like Rentdrop to compete with big banks and credit card companies, said Sarah Biller, founder of the FinTech Sandbox and a member of MassChallenge’s FinTech Board of Advisors.
“Large firms still dominate the delivery of financial services and products,” Biller said. “But, not to be too kitsch, past performance is not indicative of future results.”
Rentdrop’s service has been beta-testing since January and has signed up hundreds of landlords and renters. It is also processing hundreds of thousands of dollars per month, increasing by 80 percent per month.
“There’s $300 billion of rent — we could keep this growth rate up for a while and still not equal 1 percent,” Okoruwa said.