Title industry trends continue to evolve, especially the popularity of digital depository applications such as venmo, paypal and zelle. these peer-to-peer payments are replacing the traditional banking and credit infrastructure such as paper checks, wires, and certified funds. millennials currently make up the fastest-growing segment of buyers today, according to a recent National Association of Realtors report. Additionally, according to a study by NerdWallet, 94% of millennials use mobile payment apps compared to 87% of Gen Zers, 88% of Gen Xers, and 65% of baby boomers.
Given this trend, we had a discussion with Cathy Ceci, our FNF National Agency Audit Director and regarding these peer-to-peer payments and how these are not acceptable depository and disbursement platforms for real estate closings. Our audit program, for our FNF Family of Companies, tests for these applications as part of the escrow review. If found to be in use, the risks are discussed at the completion of the audit.
Here are a few important points:
- Timeliness of transfer – most of these apps require a waiting period for funds to be available which may interfere with states requiring Good Funds
- Instant payments cost money (Venmo currently charges1.5%)
- Fairly low transfer thresholds
- These types of transfers are not compatible with positive pay
- Payment revocation is a challenge – if an agent sends the funds to the wrong account, they will more than likely not get the money back
Attached for your convenience are documents that Jason Nadeau, FNF’s Chief Digital Officer, who Chair’s ALTA’s Digital Process Workgroup, produced on this topic as well as a podcast that further explains what to watch for and what are the current best practices.
As we strive to continue to provide information in understanding potential risks to your escrow account, we encourage you to review the above attached information and include it as part of your agency’s escrow account controls.