In the rapidly digitizing real estate industry, CasaPay emerges as a transformative solution, streamlining rental transactions for both landlords and tenants. With a focus on efficiency and ease, CasaPay aims to revolutionize the rental experience, leaving behind traditional complexities and embracing a new era of simplicity.
In this interview, we delve into the genesis of CasaPay, exploring its features and how it empowers users to bid farewell to archaic processes, hearing its story and vision towards the future from one of its co-founders, Risto Klausen.
The Story Behind
As a second-time founder, my journey in digitization began when I established my first company, called the Inzmo, back in Berlin in 2016.
Moving to Berlin with my co-founder, we were taken aback by the local practice of landlords asking for three months' rent upfront as a deposit. While this was a customary approach for Germans, as foreigners and expats, we found it quite unfamiliar.
A few years later, as we delved deeper into the real estate domain, we recognized that the deposit was just the tip of the iceberg. It wasn't solely about covering the financial risk but also about potential property damages and liabilities. After extensive research, we came to the conclusion that our goal was not to eliminate the deposit but rather to address the risks involved and make landlords feel secure enough not to ask for it. Deposits were cumbersome for landlords, especially for larger enterprises, as managing them required significant effort.
Unfortunately, there was no viable alternative in the market to replace the deposit system. Landlords were essentially compelled to adhere to the traditional approach, as it had been the norm for the past 50 years. Through our analysis, we discovered that landlords relying on mortgages or third-party financing faced a major cash flow issue. If they didn't receive monthly rents while still having to pay the mortgage, it became a significant struggle. This was particularly true for smaller landlords, dealing with limited cash flow volumes, making it a massive risk for them.
To address these challenges, we developed a solution called CasaPay. Our aim was to combine the management of financial risk with property risk, providing landlords with a more secure and efficient way to handle rental transactions.
The Industry Experience
What we're envisioning here is a hybrid approach that combines the strengths of PropTech and FinTech. Our solution revolves around a FinTech model, where we integrate elements from the buy-now-pay-later industry. Additionally, my background in insurance has played a crucial role in shaping this concept.
In the past, I co-founded a company called Inzmo in Berlin, where we focused on developing tech-driven insurance solutions. Our main value proposition was to create innovative insurance products, including verification processes for various objects like smartphones, among others.
The expertise we gained from this venture now serves as a foundation for designing our current solution. As we explore the rental real estate domain, we already possess advanced technology not only from the German market but also from the UK and other countries we have analyzed.
By combining FinTech with PropTech, we aim to create a powerful and innovative platform that leverages our expertise in insurance knowledge and technology-driven solutions to revolutionize the rental real estate industry.
The CasaPay Platform
The Casa Pay platform operates in three different phases. It creates a fully integrated and bundled solution for both landlords and tenants.
In the first phase, we focus on full automation of open banking data and credit scoring. By analyzing this data, we gain a deep understanding of the cash flow and the tenant's ability to cover their monthly rent. We take into consideration their income and even set upper limits on rent to prevent tenants from struggling financially. This comprehensive approach not only supports and protects the landlords but also ensures the well-being of the tenants. Leveraging open banking data allows us to predict and manage risks effectively, creating a combined solution that benefits everyone involved.
Moving on to the second phase, once the credit scoring is complete, we provide a seamless payments infrastructure. Tenants can easily connect their banking solution to CasaPay, enabling automatic and timely rent payments to landlords. In case of any missed payments, we step in to ensure that the landlords receive their rent promptly, regardless of the situation. Our primary goal is to support tenants during financial challenges, and we offer flexible installment plans to avoid triggering any claim-related events. This approach acknowledges that cash flow issues may arise, and we strive to swiftly resolve them without any disruption to the tenancy.
The third phase focuses on enhancing the financial risk mitigation even further by providing renters/home insurance. This coverage extends not only to the property owned by the landlords but also to the tenant's personal belongings, such as laptops or mobile phones. With this comprehensive insurance, both parties can have peace of mind, knowing that they are protected against unexpected events.
Addressing Both Landlords' and Tenants' Pain Points
The number one pain point for landlords is the missing cash flow when tenants default on their payments. This not only causes financial struggles but also adds stress due to the communication and legal requirements for claims and insurance processes. Even with insurance coverage, there may be waiting periods and deductibles, making the risk of financial loss a significant concern. For tenants, we offer flexible rent options, allowing monthly rents to be paid in weekly installments.
Data and tenant risk profiles are crucial for us, enabling us to offer a range of financial services in the long term. This includes solutions like "rent to buy," as requested by tenants, and other financial services tailored for landlords. Our concept is built around payments as the foundation, with various financial and insurance products layered on top. We do not intend to venture into property management, preferring instead to collaborate and partner with professional players in that domain.
The Learning Curve of the Solution
The platform is designed to be user-friendly and self-serve, making the onboarding process straightforward. Financial claims are automatically paid out without the need for manual intervention. Similarly, property damage claims are also handled through a fully self-service approach. Onboarding private or small landlords is quick, taking only a few minutes. They can simply purchase the solution and immediately log in, enabling their tenants to do the same. Integrating with property management software companies may take a bit longer, typically ranging from weeks to around one month due to API integration requirements and technical partnerships. Overall, the platform prioritizes ease of use and efficiency for all users.
Unique Product Features
While there are companies offering individual value propositions like deposit solutions, landlord income insurance, payment solutions, and Buy Now Pay Later options, none of them provide a fully combined solution like CasaPay does. Other platforms may use components from different service providers, but this approach adds extra effort and stress for all stakeholders, including tenants and landlords.
CasaPay's unique selling point lies in offering a comprehensive and integrated solution that covers all these aspects in one platform. This eliminates the need for users to navigate multiple services and simplifies the rental experience for everyone involved. While some companies, like jetty.com, may have similar value propositions, CasaPay's approach stands out by providing a holistic and all-encompassing solution, catering to the needs of both tenants and landlords.
Standardizing All Transactional Matters Across Countries and Continents
Our plan involves designing a two-layer setup with a scalable backbone, such as payments providers like PayPal. However, we must also consider and adapt to the regional differences and regulations. Looking at successful examples in the short-term rental industry, like European platforms operating in over 120 countries, we can expect scalability. Nevertheless, we acknowledge the need to address country-specific factors for a successful expansion.
The UK is essentially our home market, but there is a great deal of interest from various platforms looking for a scalable solution across multiple countries. These platforms aim to provide a consistent and seamless customer experience, whether the tenant stays for short terms in different cities. Ensuring a similar user experience across different locations is a key focus for us.
Whether a landlord has one property or thousands, there are no limitations on the number of tenants that can be onboarded. The ultimate aim is to provide a seamless and positive tenant experience through improved payment solutions.
Navigating Digitization Through a Traditional Sector as Real Estate
Handling cash payments in the rental market poses a key challenge that needs to be addressed. In Estonia, approximately 25% of transactions are still conducted in cash, and although it is legally allowed, there are inherent risks for both tenants and landlords. Not tracking all payments can lead to misunderstandings and difficulties, especially when resolving disputes in court.
The rental real estate market can be divided into two sub-segments. On one hand, there are tech-savvy investors and small private landlords who are already using various digital solutions, including mid-term rental platforms. On the other hand, some landlords, especially in countries like Germany, may still rely on traditional methods like cash payments or paper-based systems.
However, due to the boom in short-term and mid-term rentals, there is a growing trend of adopting digital solutions. More landlords are becoming open to embracing innovation and moving towards digital environments for managing rental transactions. Although it may take time to transition completely, the increasing popularity of digital platforms shows a positive shift towards streamlining rental processes and enhancing the overall rental experience.
