“The market potential is massive. Our work with Griffin has sparked significant interest in LettsPay. But for us, the most exciting thing is working with a bank that truly understands our business needs.”

The vision: Automating the letting agent’s back office

For letting agents, managing the flow of funds between tenants and landlords has always been a time-consuming and error-prone manual process.

While working on a payments collection start-up with letting industry clients, Garrett Foxon, founder of LettsPay, saw an opportunity to simplify and automate the letting agent’s back office.

“We wanted to give agents more time to focus on the core of their business and reduce the time they had to spend on reconciliation and back-office admin.”

The main challenge for letting agents is that, by law, they are required to hold funds received from tenants in a client money account, entirely separate from their operational accounts. While this is important for protecting consumers, the client money bank accounts available on the market were creating a huge operational lift behind the scenes.

Until recently, most banks would offer a letting agent a single pooled client money account to manage all their landlords’ funds. This meant agents had to manually reconcile money received from thousands of tenants, making sure rents, deposits, arrears, advances, fees and maintenance costs were all linked to the correct landlord and property in their book. Losing track of even one payment could expose the letting agent to risk: if they were found to be non-compliant with reconciliation requirements, they could lose their membership in their Client Money Protection (CMP) scheme. Such schemes are compulsory, mandated by the government to protect and compensate landlords and tenants if a letting agent goes into administration.

So, as Garrett observed, fast and accurate reconciliation was crucial, but still a cumbersome, manual, error-ridden process that was creating unnecessary risk for letting agents. When Garrett founded LettsPay in 2019, his vision was to merge all the complex payments flows and the required client accounting into one efficient, automated platform.

At the heart of this vision was the idea of offering letting agents a dedicated bank account for each landlord. This prevents the reconciliation problem: rather than trying to differentiate funds in an enormous pooled account, inflows and outflows are instantly associated with the correct landlord. This also enables other enhancements to make letting agents’ and landlords’ lives easier, like real-time payment notifications, balance alerts, and statement generation.

The challenge: Navigating regulatory changes

To get around the pooled account problem, LettsPay built its platform on a fintech with an Electronic Money Institution (EMI) licence. This allowed letting agents to funnel landlord funds into dedicated virtual accounts, before passing them into the agent’s pooled account in a bank.

But in 2023, LettsPay faced a serious regulatory hurdle. The Department of Levelling Up, Housing, and Communities (DLUHC), the government body responsible for the real estate sector, mandated that all letting agents need to hold funds received from tenants in a bank or building society.

This was a major problem for LettsPay, as their EMI partner would soon not have permissions to hold deposits from tenants and LettsPay could end up in breach of their regulatory obligations. They needed to find a banking partner, fast. But going to a traditional bank would mean a return to pooled bank accounts and legacy tech, undermining the entire purpose of the platform they had built.

“With the pooled bank accounts available from many traditional banks, integration, automation and reconciliation were extreme sports. Agents usually had thousands of pounds sitting in pooled bank accounts with no clarity on where it had come from. This was a major compliance problem during annual audits by Client Money Protection (CMP) schemes.”

LettsPay needed a bank that not only offered the same speed and agility as a fintech, but also one that was willing to get to grips with the complex onboarding and risk management requirements of offering dedicated bank accounts for every landlord in a letting agent’s portfolio.

The solution: Harnessing Griffin’s expertise for LettsPay’s success

As a fully licensed UK bank with dedicated client money accounts on offer, Griffin was an easy choice when it came to solving the regulatory problems that LettsPay faced.

“It was a clear case of a square peg in a square hole. Not only did we share the same values of honesty and transparency, Griffin’s technology was easy to use and the team were willing to do the work to understand the problem and provide a future-proof product for the lettings sector.”

Dedicated client money accounts

LettsPay’s model is built on its platform’s ability to immediately identify the source and purpose of a rental payment and manage its flows between all the parties involved, in line with sector regulations. This means that LettsPay’s customers do not need to spend hours manually tracking funds via bank statements from pooled accounts. It also means customers can get instant notifications of payments received and instantly match those payments to the source, which enables automated reporting and creates robust audit trails for regulatory purposes.

LettsPay can open a dedicated bank account for each landlord of a letting agent via Griffin’s customer app. Unlike traditional banks, these accounts can be opened in minutes. This is possible due to workflows designed specifically for the proptech sector, integrated into Verify, Griffin’s automated onboarding product.

As LettsPay scales, the next phase will be integrating with Griffin’s API so that dedicated accounts can be opened programmatically via Lettspay’s own platform.

“Automatically matching and reconciling rental payments is a game-changer for rental management, saving agents money and countless hours that they can spend on nurturing quality client relationships.”

Onboarding workflows for proptech

Most traditional banks can’t offer dedicated client money accounts to letting agents because the onboarding requirements are too complex. A large number of checks needed for customers in the real estate sector still have to be carried out manually before the bank can open an account for them.

Given that a single letting agent may serve hundreds of landlords, most traditional banks are simply unable to meet this need at speed or at scale.

Griffin has solved this problem with an automated end-to-end onboarding solution, Verify. LettsPay onboards each landlord via an onboarding workflow customised for the real estate sector. All necessary checks are automated, and Griffin gets full visibility on the activities and risk profiles of their end customers (the landlords). Combined with transaction monitoring and ongoing compliance checks throughout the customer lifecycle, this gives both Griffin and Lettspay assurance that they are onboarding the right customers and managing risk in line with regulatory requirements.

“Our platform is modular, which means our customers can use different onboarding workflows for different types of clients depending on their needs. For example, HMRC-registered letting agents have a different onboarding workflow from those who are not. This way we can open accounts for both kinds of agents and still meet our customer due diligence obligations."

Other reading: Powering the proptech sector with embedded finance