Globally, technology is transforming every industry with the greatest impact on the financial sector. Out of the numerous finance services affected by FinTech, the most notable one is the Commercial Real Estate (CRE) industry.
As the global population keeps rising, commercial real estate is becoming increasingly important due to its role in the existence of office properties, skyscrapers, and shopping malls.
There are numerous factors that have brought about this change in the CRE industry. According to a report published by KPMG, the global investment in FinTech companies in Q1 2017 hit USD 3.2 billion and it was just the beginning.
Moreover, Statist estimated that the global revenue of FinTech will reach a whopping USD 295 billion by 2027. So, it is clear that investing in FinTech for changes in the CRE industry can help you take advantage of numerous benefits.
Interested to know more about the impact of FinTech on the Commercial Real Estate (CRE) market? Check out the article below as we break down the different aspects of FinTech and CRE and help you understand the benefits you can reap.
So, what are you waiting for? Jump right into it and get ready for some pointers on how to better your CRE investments with FinTech!
Challenges of The Traditional CRE Industry
Before we discuss FinTech and its benefits on the CRE industry, it would be a better idea to get an idea about the industry’s pre-FinTech scenario.
As of now, the CRE industry has several challenges that can be easily overcome with the help of modern technologies and applications. Some of these are:-
- Reduced transparency – Since traditional CRE relied on manual processes, a lot of CRE transactions are still not completely automated. This can make it difficult to track the CRE transaction to verify its details.
- Highly inefficient – Compared to automated processes, manual processes, and transactions are quite time taking. Moreover, these need to be recorded with the proper paperwork which takes up all the more time. Since it requires human effort, the chances of inaccuracies and mistakes are also present.
- Difficulty in finding capital – Often, small and mid-sized investors have trouble securing financing for their projects. This can lead to lesser CRE projects and the absence of competition in this business segment.
- Outdated technology – Most businesses in the CRE industry have been slow to adopt advanced technologies and tools. This means that they are still behind on the industry’s latest technologies and not in sync with other industries across the globe.
- Inaccurate data – Another downside of relying on manual processes is the high chance of data inaccuracy and improper data maintenance. This does not only create problems when owners and investors need to make decisions, but can also lead to improper analysis of customer behavior, investment, and business growth.
Other than the challenges mentioned above, it is also no secret that collecting receivables from multiple tenants and managing a number of properties can be quite difficult for CRE companies.
An effective platform to better communicate rent changes, overhead fees, CAM fees, and tax details with multiple consumers across different locations can be the solution. This is where FinTech comes in and is the most-sought answer to the problems faced by CFOs and Property Accountants.
Rise Of FinTech In CRE
With the advent of technology and increased usage of internet-connected devices, users prefer digital platforms for added convenience and accessibility. It is high time for CRE businesses to adapt to this change and develop technology that better satisfies these needs.
Moreover, it will help improve customer experience, streamline business processes, and offer access to real-time data to enable you to make better business decisions.
In the past few years, FinTech has disrupted a lot of financial services and changed them for the better.
The positive change witnessed by companies convinced them to invest in FinTech for CRE. This includes investing in blockchain to remove transparency issues in CRE transactions and using AI & ML to better the efficiency of property management.
A/R Automation – The Most Notable Contribution of Fintech To CRE
Out of all the technologies mentioned above, the most popular one gaining traction among CRE businesses and investors is tenant platforms that implement accounts received (A/R) automation. These advanced and modern platforms can easily help owners manage all tenant charges, payments, overheads, and payment collections using cloud-based solutions.
This ensures that the data is safe while all necessary business processes get automated. So, A/R automation platforms can help CRE businesses save time and effort so that they can invest in crucial business processes like analyzing future investment opportunities and resolving tenant issues.
But, can A/R automation be helpful to your business and should you invest in it? Here are the top reasons why automating your invoice-to-cash and other payment processes can be beneficial:-
Save Paper
With an automated A/R system, your invoice generation and creation get completely automated. So, you can eliminate the need to use paper to mail tenants their invoices and other relevant documents.
You can directly email your tenants with their digital invoices, or better yet, let your automated AR system do it.
For better user access and more efficient business processes, you can create a portal that allows tenants to change their account details, check transaction details, and complete payments.
Notifications
Automation AR platforms not only come with invoice delivery but also send notifications. This means that whenever an invoice is generated and sent to your tenants, you will receive a notification about the same.
The platform tracks the status of the invoice: not delivered, delivered, and viewed, to ensure businesses with certainty that tenants have received their invoices and payment notices. Moreover, tenants have access to the portal, meaning they can view their invoices 24/7 and complete payments all around the day. Whenever they perform any action or initiate a CRE transaction, you get automatically notified.
Better Communication
Often, tenants complain that they cannot reach landlords for repairs and important discussions. On the other hand, businesses might also face communication issues which can cause a lot of frustration on both sides.
An online AR platform not only allows businesses to send invoices to tenants but also offers real-time communication with them. This will help you create a better channel of communication with your tenants and ensures you have proper records in case of an audit.
Overview of Collections Process
Every CRE business with a manual collections process knows how difficult and time-consuming it is. In the manual process, you have to look for the current outstanding accounts report, organize them into buckets, and assign collectors to every property.
As a business owner, you must stay updated on the collections process, which in this case can be quite difficult. An AR platform offers your team a real-time dashboard that lets them easily track outstanding payments for each tenant, send reminders, and provide detailed insights.
Moreover, the platform also comes with a payment gateway that allows tenants to complete the payment when feasible.
The Impact Of Fintech On The CRE Market
From the above section, it is clear that FinTech can help us better the CRE market and the processes followed.
But, what business impact can you anticipate and how does FinTech help you? Read the section below to know more about the impacts of FinTech on the CRE Market.
Rise Of Crowdfunding
Although FinTech firms are striving to make major changes to the CRE industry for its betterment, there are still plenty of challenges they must tackle
For example, online lending in CRE is still in the early stages with a few crowdfunding firms that have updated their models. On the other hand, some FinTech companies have taken over as direct lenders and intermediaries in the investment process.
But, with the launch of platforms like Crowd Street and Realty Mogul, real estate investment is an option for everyone. This means an increase in crowd funding and a higher chance of companies receiving finance.
Simpler Lending Of Commercial Real Estate
Just as peer-to-peer lending has modified consumer loans, the growth of FinTech has given rise to a number of alternatives that those seeking loans can use.
This has led to an optimization of CRE financing and accelerated CRE lending and other associated business processes.
Now, with the help of FinTech, the paperwork takes less time and after due diligence is conducted, lending can be done within a short framework.
Blockchain
CRE owners can easily alleviate some of the business challenges by using blockchain to maintain their transactions.
Some of these include:-
- Removal of fragmented listing data to search for properties quite efficiently
- Speeding up time-consuming paperwork and due diligence processes that used to be held offline
- Less usage of paper which is also beneficial to the environment and can improve sustainability
- Reduced complexity of proper management of ongoing property leases, pending invoices, and cash flow documentation
Some Examples of Fintech In CRE
It is clear from the above sections that FinTech can revolutionize the CRE industry for the better and you must invest in it as soon as you can.
But, are there any existing FinTech solutions that have also gained a lot of popularity?
Yes, there are and some of these are as follows:-
- PropTech – The use of technology to improve the efficiency and business profitability of the property market is called proptech. Some common solutions include property search, property financing, and property management.
- Blockchain-based platforms – With blockchain, businesses can create decentralized ledgers that cannot be tampered with once a transaction is recorded. This can not only help make the process more transparent but also ensures businesses have access to accurate data.
- Crowdfunding and P2P lending solutions – To ensure CRE companies do not face any issues in securing funding, these platforms connect small and mid-sized investors to businesses.
Conclusion
The CRE industry needs to be revolutionized with the help of modern FinTech technology and solutions. This can help improve efficiency and transparency leading to better business processes and use of accurate data.
We recommend investing in FinTech solutions as soon as possible to ensure you take advantage of the market growth potential as soon as possible.
Want to build a platform that utilizes these advanced technologies and FinTech solutions for greater business efficiency?
Get in touch with a professional app development company that specializes in developing financial solutions and get ahead of your competitors today!
