4 min read
The word PropTech might not ring a bell to most right now, but it won’t be long before this relatively new term starts making headlines. It might actually already be making headlines if you pay close attention. According to a Future Market Insights report, PropTech sector will be worth $86.5bn by 2032, which is a big jump from the current state in 2022.
Today, we’ll go ahead and define the term, use examples to contextualise it but, more importantly, investigate the limitless potential of the technology when paired with open banking.
What is PropTech?
PropTech is the amalgamation of property and technology, referring to all the real estate tools used by industry professionals to optimise and streamline how people buy, sell, research, market, and manage a property.
The most obvious example is Airbnb, a platform that redefined how to search, book and even host holidays. Beyond Airbnb, PropTech companies examples feature:
platforms that match property owners with property management services
people who look for roommates/shared living spaces
property owners that want to sell with people interested to buy
When did PropTech emerge?
The industry has its roots in the early 2000s, when startups began to emerge that were focused on improving the efficiency of the real estate industry through technology. In 2012, PropTech Ventures was founded, which was one of the first venture firms to focus exclusively on PropTech startups.
Since then, the industry has continued to grow and evolve, with new startups emerging that are focused on everything from improving the home buying process to making it easier for landlords to find tenants. The future of PropTech is looking very exciting, with many different companies working on innovative solutions that could change the way we live and work.
So we can safely say that soon, we will be watching the rise of PropTech first-hand.
Investment in real estate technology
As the real estate industry progresses, so does the technology used to support it. By investing in new real estate technology, businesses can stay ahead of the curve and provide their clients with the best possible service.
One piece of new real estate technology that is becoming increasingly popular is drones. Drones can be used to take aerial photographs and videos of properties, which can be extremely helpful when marketing a listing. They can also be used to inspect properties before purchase, saving both buyers and real estate agents time and money.
Another area where real estate technology is progressing is in the area of energy efficiency. Smart home technology can help homeowners save money on their energy bills by monitoring and managing their energy use. This type of technology is not only good for the environment, but it can also help save homeowners money each month.
PropTech x open banking benefits
As explained in the previous section, PropTech is an all-encompassing definition of ‘technology meets the property sector.’ What happens when you zone into the benefits of open banking, specifically? What does OB bring to the table, and why should businesses and people alike be excited about the possibilities opening up?
The real estate sector is plagued by long, arduous and taxing lifecycles. Think of the most straightforward act in the real estate realm – wanting to buy a house. The process entails bank loan applications, review periods, paperwork, possible interviews, and a lot of sitting around and waiting.
With the advent of open banking, loan applicants share access to their account and transactional information, fast-tracking and enabling the process of building accurate and automated risk profiles. Collecting account information in real-time allows third-party apps and platforms to analyse data and create credit scoring reports and loan repayment projections.
Not only does that make the process faster, but it makes it more accurate, less error-prone and more customer-friendly.
Renting becomes a viable option for landlords and tenants alike
Moving past the loan and mortgage use cases comes renting. We’ve all heard of horror stories that feature a landlord making the wrong choice of tenants who couldn’t pay and were a nightmare to evict from the property. Why was that even an option for fraudsters? There was a loophole in the system which they systematically abused.
Landlords had no material way of checking a potential tenant’s financial background. Printed documents could easily be falsified, and references could have very well been made up. Enter open banking.
Open banking APIs connect landlords and renters automatically. They can easily verify their tenants’ ability to pay rent as they have digital access to see income, spending habits, and overall financial profile. Reliability is no longer a gut feeling, guestimating or based on hearsay, but the result of hard, cold facts. Open banking eliminates the potential for fraud and gives them the peace of mind they need to rent out their property.
On the tenant side of the equation, people who wish to rent a property also receive many benefits. Everything from submitting references, checking bank details and signing tenancy agreements can be done online, saving them time and stress. The fraudster scenario explained before had created a sense of fear and suspicion, making it hard for potential tenants to prove their eligibility. With open banking, people who wish to rent a property can simply submit the required information online and see their application progress seamlessly.
The real estate market becomes more inclusive
The gig economy is real, with people picking up short-term contracts, freelance and remote work to facilitate a more nomadic lifestyle. The changing employment landscape should have never been a reason to exclude people from real estate market opportunities. Unfortunately, digital nomads and gig economy workers were seen as unfit to rent, buy or explore real estate industry options. The reason? Lack of infrastructure.
The banking and loans system was set up to process a very standardised use case of people with a 9-5 full-time employment background. The new working paradigm did not fit the algorithm that was already in place. Open banking breaks the mould and makes the residential real estate industry more inclusive. The API technology allows banks and financial institutions that give out loans to adjust their risk assessment and create flexible and custom solutions.
How can open banking help even more going forward?
The PropTech & open banking love affair is still in its honeymoon stage, and if we had to make a prediction, they’re in a for a long-lasting happy marriage. How do we come to that conclusion? Open banking is set up perfectly to facilitate this use case, and the more it evolves, the more it will have to give.