As part of our mission at RentLondonFlat to create a long-term renting platform online that uses the latest technology solutions to offer our Guests an AirBnB-like experience, we have launched a new payment processing platform that uses LettsPay and E Money.

LettsPay is a leading client accounting provider that take advantage of Open Banking and E Money tech. Open Banking and e-money, we are certain, will greatly benefit our service delivery and the value offering we present to our customers. Especially in consideration of the increasingly complicated regulatory environment around Client Money Protection (CMP) and anti-money laundering (AML), this adoption of an Open Banking and E Money model platform is a welcome next step, as RentLondonFlat plays its part in the PropTech revolution.

What is Open Banking?

Open Banking came out of UK government initiatives in recent years to make retail banking more convenient and more secure — especially for consumers, and for SMEs (small- and medium-sized enterprises).

UK-regulated banks, under the Open Banking programme of measures, have to allow the option for users (private individual users, and also SME users) to share their banking activity with:

• authorised helpful service providers, e.g. Modulr FS, LettsPay, and budgeting apps
• other banks (both within the UK and abroad)

RentLondonFlat, as a UK-based SME with a global team and customer base, is uniquely placed to take advantage of the pioneering role that the UK has played in Open Banking. The Open Banking trend “has taken the world by storm”, says John Glen, economic secretary to the Treasury. Thirty more financial market jurisdictions apart from the UK are now following the lead set by the UK with Open Banking.

The difference between a bank account and a digital (E Money) account

A digital account, also called an electronic money account, or E Money account, is, in one sense, similar to a traditional bank account, which consumers have been using for centuries. With an E Money account, just as with traditional bank accounts:

• money is paid into the account
• stored in the account
• money is paid out of the account

However, an E Money account is in other ways very, very different from the traditional model.

The money in an E Money account can never be used for the institute’s own purposes. Whereas with traditional banking, the banks will move around the money in accounts to fund lending and then pay customers interest for the privilege, E Money accounts keep every penny safeguarded.

An EMI (Electronic Money Institution) has to keep 100% of every penny in its accounts in the Bank of England. So if the EMI goes insolvent, all of their clients are suitably reimbursed every penny of their funds. This makes an EMI even safer than a bank with FSCS insurance, because that only covers £85,000 in a specific account. So, if a bank goes bust customers will only get a maximum of £85,000 back regardless of how much they had in their account. This is a risk for a lot of industries, such as property agents, who collect and hold masses of client funds.

EMI’s have to follow similar strict FCA regulations and requirements to a bank, to ensure the funds are protected and fraud is prevented.

What are the benefits of an E Money account?

Further to the added security against banks going bust, described above, E Money accounts can have further advantages, such as:

• EMIs can create E Money accounts immediately
• E Money accounts can automatically be linked to all the payment rails immediately
• Controls can be set on the accounts i.e. limits, floats, etc.
• All the funds in the E Money account are ring-fenced, so they cannot be misallocated to the wrong beneficiary
• All the data is digital and available via API, so no more downloading of bank statements or CSV files to view the data in the account
• Payments in and out are immediate

How do Open Banking, E Money, and LettsPay relate to landlord and tenant accounting?

Through Open Banking and E Money infrastructures, rental payments are able to be paid from the tenant’s bank account directly into the bank account of the landlord, without a need to use bank cards.

LettsPay is built on Modulr FS, a leading UK FinTech payment processing provider provider that powers Revolut, the UK’s leading challenger bank. LettsPay is a rental accounting platform that automates rental collection and payments.

RentLondonFlat’s system, powered by LettsPay, will assign each of our Owners a unique sort code and account number, allowing Guests and Owners the freedom and reliability of peer-to-peer transactions.

RentLondonFlat’s LettsPay platform will allow our Guests to set up standing orders and also direct debits with us. Rents can therefore always be paid on time, without lifting so much as a finger!

Why move to Open Banking now?

RentLondonFlat Managing Director EuGin Song, speaking to the time of the move to Open Banking, commented:

“As our rental payments will soon exceed £10m, we needed to migrate our traditional payments and business accounting processes away from legacy banking and accounting systems. These legacy systems are slow and administratively inefficient. After a year testing and examining different payment solutions, we selected LettsPay. Being a technology company like ourselves, they are aligned to our ethos of digital transformation supporting Open Banking and API accessibility. These are critical components to providing a seemless digital experience for our customers as we continue to scale our operations.”

What security exactly does Open Banking offer for Guest and Owners with future tenancies?

Aside from the future-proofing benefits that embracing the Open Banking and E Money model has for RentLondonFlat, it also improves the value and peace of mind that we give our customers.

LettsPay is built by Hanley Payments, which is a Financial Conduct Authority (FCA)-regulated company. Modulr FS is likewise FCA-regulated (see here and here). Our Guests and Owners can rest assured that this increased convenience for payments in upcoming tenancies that use this Open Banking method, will also come with security and peace of mind that their banking activity remains secure.

The Open Banking necessitates individually-designated client money accounts, as opposed to what we have currently — a pooled client monies account. This significantly reduces risk of loss for both our clients and ourselves. First, it greatly minimises the risk of mis-accounting. Secondly, it also removes the ponzi scheme possibility that all pooled client monies account setups carry.

Song continued:

“We also anticipate that future industry regulations will require individual client monies accounts. This is why traditional UK banks such as Lloyds are also offering such services. We are at the forefront of a wave of financial services industry transformations, which indeed bring us a step closer to the cryptocurrency revolution, with bankless self-custody digital wallets controlled by individuals. We at RentLondonFlat are sharing in that vision and playing our part.”