Paying security deposits, who doesn’t hate that? Especially, because the existing methods are so old-school. Not only is it a rigmarole to transfer the funds across, there is also the trust issue. Will I get my deposit back?, we often wonder.
And, in an ever-globalizing world, the sending of deposits across international borders have become commonplace. Of course, this in itself presents delays and often also extra fees.
The bad news is, the demand for deposits isn’t going away. In fact, it’s on the increase and closely in sync with the meteoric rise of the global sharing economy.
But, the good news is, there is a great solution. Please continue reading to see how RxEAL is stepping in to rescue both, receivers and payers, from the traditional pains associated with the exchanging of security deposits.
Deposits, deposits, everywhere
By definition, a security deposit is a measure that covers rental assets against loss.
And, it can relate to any asset or arrangement imaginable; but, for everyday purposes we usually associate them with accommodation and car rentals.
Normally, a landlord requires you to sign an agreement and pay a deposit before handing you the keys to the house or apartment. While, care hire companies would generally reserve an amount on your credit card by means of “pre-authorization” to cover the deposit.
In our globalizing world, people are on the move, more than ever before as opportunities arise everywhere and geographical boundaries become increasingly blurred. Emerging economies across the planet are attracting workers and entrepreneurs on large scale; also, easier and cheaper travel options keeps us mobile.
The real estate and car rental industries are among the largest in the world, generating hundreds of billions in turnover. And, market trends show that these numbers are rising steadily as our highly mobilized society -with millennial characteristics- is increasingly embracing “instant” living and transport options, as preferred options over actually owning cars or dwellings.
Statistics show that the global real estate industry generates revenues of over 3.5 trillion dollars annually and this amount grows by 4% every year. One third thereof -approximately $1.1 trillion- is attributed to property rental transactions.
And, added together, North America, Europe & the Asia Pacific region make up 95% of all property rental payments. In the US alone, there are approximately 23 million landlords and 112 million tenants, while more than 600 thousand new households get added to the renters’ pool every year.
Of course, more tenants means more security deposits. In the US, landlords generally require the equivalent of 2 months’ rent for that purpose; in the UK it’s around 4 weeks, in Europe between 1-3 months and in Asia sometimes even up to 6 months.
The global car rental market is valued at approximately $58 billion annually, expected to reach around $125 billion by the year 2022.
The security deposit rules of the different car rental companies vary significantly. A scrutiny of multiple websites revealed that it may range anywhere between $200 -$800 even for the economy vehicles.
From the above facts and figures, it is clear that the exchanging of security deposits in the accommodation and car rental industries involve astronomical volumes and amounts globally.
And, especially while demand is continuing to skyrocket in line with modern lifestyle trends, our traditional way of doing things is simply just not cutting it anymore.
The current system is clunky and old
Looking at it in the most simplistic way possible, currently the deposit-taker really has the upper hand over the deposit-giver in most instances.
Although the parties to rental transactions normally agree on the terms -such as the length of the agreement, the initial condition of the property, the rental price and the sum of the security deposit- the deposit payer doesn’t have much choice other than relying on trust alone for the deposit refund.
The paying party cannot be certain that the deposit has been stored safely and that it will be returned intact. Despite the fact that the negotiated terms are placed within the contract, often a significant number of disputes occur afterwards.
In some cases of dispute, the deposit takers may have acted maliciously by wilfully squandering the money in what’s dubbed as “deposit fraud’. While, in other instances, it’s a matter of waiting weeks and even months to get the money back. Or, the deposit is only partially returned.
As far as car rentals go, evidence is not conclusive on the extent of the disputes globally. But, for accommodation, industry sources puts the instance of disputed security deposits as high as 40% in countries where the system is not regulated.
And, even where regulation does exist on tenancy security deposits –e.g. the UK, New Zealand and some US states- disputes levels can reach up to 15 percent.
And, concerning car rental deposits, the inconvenience factor for credit card owners is extremely high when renters do not release the blocked pre-authorization amounts, as –especially for international travel purposes- the former normally rely extensively on the credit limit allowed by the card companies.
The fact remains, should disputes arise, the only recourse available to deposit payers is to pursue a course of mediation or even go to court. Either way, it’s often a protracted and costly process with no guarantee of success; therefore, in a lot of cases these options are abandoned and even legitimate claims turn into dead losses.
Therefore, while it’s of utmost importance that rental agreements are well documented, the same goes for the safe and independent storage of the deposit over the course of the contract. And, of course, it is also essential that the deposit is distributed fairly and promptly at the end of the agreement. Current systems cannot guarantee this.
Also, the efficient administering of security deposits by landlords remains a challenging and time-consuming task, even where no disputes are involved. Existing processes are largely ad-hoc, still done manually and fraught with risks or the opportunity for error.
Normally, the transacting parties have to exchange banking details, transfer the funds across from bank to bank, wait for payments to clear and confirm receipt, before the agreement can advance to the next stage. And, most of these steps are exploitable should any of the parties have malicious intent.
Not to even mention the time and costly labour involved when the procedures have to be repeated over and over again as tenants come and go. For instance, in large skyscraper, apartment buildings or where a whole chain of accommodation clusters are administered from a central point, the transactional volumes are massive.
In steps RxEAL – the blockchain solution for security deposits
RxEAL represents the long-awaited, one-stop solution for rental security deposit protection. It is a platform for trustless deposit storage and dispute resolution, focusing on the real estate and automotive industries.
RxEAL is easy to integrate into the existing workflows of rental companies, also extremely user friendly, perfect for everyday use by individuals.
Why is RxEAL the answer to traditional security deposit pains?
RxEAL is smart
RxEAL removes the need for trust in the security deposit process. The Ethereum-based platform uses Smart Contracts to safely store the security deposit. And, to return the deposit to its owner at the end of the rental period when contract conditions have been met.
Once locked in and agreed by the parties, the smart contracts are immutable and cannot be tampered with.
Because smart contracts are executed by means of pre-coded cryptographic computer protocols and not by fallible human beings, the deposit owner has the peace of mind of being fairly treated, in line with the original agreement, when the time arrives to receive the security deposit back.
And, because smart contracts are fully automated, thousands of transactions can be executed securely and quickly, thereby eliminating the high manual workloads, costs and risks that landlords and rental companies currently face when administering deposits.
RxEAL is secure
The RxEAL smart contract ensures that the deposit amount is stored securely on the Ethereum blockchain throughout the course of the agreement.
There is no risk that the deposit payer may lose the funds due to malicious or fraudulent activity by the deposit taker.
RxEAL is independent
In the event of disputes regarding the return of the security deposit to its owner, RxEAL provides a decentralised and independent arbitrage facility conducted by qualified members.
Both parties to the transaction therefore have the assurance that deposit-return issues will be resolved objectively, efficiently and amicably as and when they do arise.
How does the RxEAL platform work?
The RxEAL solution is a simple, six-step automated process on the platform as illustrated above.
It is initiated by the deposit taker who creates a smart contract, which is funded by the deposit payer. For the duration of the agreement, the deposit is securely stored within the smart contract on the blockchain and is not accessible unilaterally by either party during that time.
At the end of the rental period, the smart contract automatically releases the deposit back to its owner once all pre-programmed condition are met. Or, the case is independently arbitrated where disputes exist.
RxEAL provides the ideal, high-tech solution for fixing classic security deposit pains. It truly personifies the answer to our modern requirements for the Digital Age that we live in.
The RxEAL blockchain platform offers rental security deposit protection by ensuring secure deposit storage and efficient dispute resolution.
Although the RxEAL solution is perfectly functional for use in fiat-currency environments, it promises to be even more so as the world steadily migrates to crypto adoption. For example, London-based property company The Collective, also CheapAir car rentals, of which both entities conduct transactions by means of digital currencies.
Users are sure to flock to the RxEAL platform for the enjoyment of peace of mind and simplicity whilst administering security deposits in an ultra-modern, highly efficient and convenient way.