Proptech and Fintech Move Closer Together

Fintech has joined proptech as the newest technology cohort for the real estate industry.

Experts in the two technology sectors agree that fintech is growing fast as the latest addition to the subsets that make up the vast real estate tech market.

“The total addressable market (TAM) for financial services within proptech is substantial and growing,” Ashkán Zandieh, managing director at the Center for Real Estate Technology and Innovation (CRETI), a Dallas-based proptech research organization, said in an email. “Proptech is projected to reach around $86 billion by 2030, with fintech services — such as digital lending, home equity solutions and alternative investment platforms — representing a significant portion.

“Estimates suggest that the TAM for fintech applications within proptech could approach $30 billion in the next few years as digital financial solutions become essential to property transactions. This reflects the high demand for streamlined, technology-enabled financial products within real estate, positioning fintech as a key driver of growth within the proptech ecosystem.”

Several fintech companies have developed platforms specific to real estate that cater directly to market needs for improved access, transparency and ease of financial transactions, said Zandieh. “Bilt, for example, is creating real value for renters by making rent payments work harder for them through rewards, similar to what traditional credit card points do for travel or retail,” he said. “Roofstock and Cadre are similarly making investment in real estate accessible to more people by simplifying and digitizing the property investment process, while Divvy Homes provides a path to homeownership, where renters can gradually build equity over time.”

One such startup in the real estate ecosystem is Tongo, a Brooklyn-based online financial services platform that provides commission workers with an easy way to access future commissions.

“We define ourselves as at the intersection of fintech and proptech,” said Brandon Wright, CEO and co-founder of Tongo. “Our platform is very much fintech, but proptech is a place that has millions of participants that are self-employed. They do not have the automated savings or cash flow alignment that salaried professionals have. And because it is such a self-employed vertical, it’s a very natural place for us to start before we bite off the larger multi-vertical ecosystem of self-employed.”

Among the aspects that made the proptech sector attractive to Tongo was the enormous amount of data readily available, said Wright. “The agents and participants that are facilitating the transactions are licensed, so we don’t have to worry as much about identity fraud,” he said. “The properties themselves are listed and published in publicly available ways, and, because of that data availability, we can now build financial products that empower the people that are facilitating transactions in a way that we haven’t before.”

The startup is essentially a payroll company that offers self-employed, commission-based professionals the ability to draw early on a commission up to 60 days prior to closing, Wright explained. 

“In order to do that, we need to work with brokerages to give them a safe and secure way to distribute commission and with agents to connect multiple accounts so that they can automate saving and the distribution of funds, just like salaried professionals,” he said. “They can draw on up to 75 percent of those pending commissions. That money would not be available unless we had the data and value of transactions from which they were earning commissions.”

While companies have been able to build software for proptech for a long time, the overall amount of data available creates an environment that has attracted fintech companies to proptech, he added.

“There’s a lot of data that’s available and there’s really efficient distribution,” said Wright. “If you work through, say, brokerage, property management or property owner channels, you can get these one-too-many effects. For fintech companies that need scale, that combination of low risk through data availability and efficient distribution is really compelling.

“The next thing that’s going to happen as these fintech companies kind of enter proptech to either empower the people that are transacting or that own or create liquidity for these assets, is you’re going to have more software. So you’re going to have fintech that comes in and creates these new opportunities. Proptech software companies are going to come in, and they’re going to build around those things. It becomes this mutually beneficial cycle.”

Like all tech companies, the end user for the product usually determines the answer to the chicken or the egg question as to whether the concept or the technology leads in creating the startup, said Rowland Hobbs, CEO and co-founder at Manhattan-based Stake, a payments and cash-back rewards platform for renters.

“For us, it’s all about how to be able to incentivize with the right amount of cash back, how to be able to help renters use that cash back to build more savings, and how to move money on rent payments that helps properties perform better,” said Hobbs. “All those are fintech problems for us. I would say that we’re bringing fintech into the proptech world.”

Hobbs sees continued growth in fintech, as well as more mergers with proptech.

“Definitely we think that more consolidation is going to happen,” he said. “Part of this is because as you’re building anything, networks start getting built out, and those networks need to add and consolidate the technology. Renters and owners don’t want 50 different places to go.

“Will there be more fintechs? Yes, but I think it really depends on what the end goal is,” Hobbs added. “For instance, some are bringing in financial technology that isn’t in the best interest of renters. They may have interest rates or a lot of hidden fees that are not necessarily a net benefit for them. But there’s also ways to bring financial technology that doesn’t have interest rates over 15 percent, which are incredibly difficult for renters to meet.”

Similarly, CRETI’s Zandieh sees further fintech consolidation with proptech.

“The momentum of integrated fintech and proptech solutions suggests that these combined platforms will indeed become a significant portion of the real estate tech field,” said Zandieh. “A prime example is Procore’s acquisition of Levelset, a platform managing lien rights and payments. The 2021 merger brought financial control and transparency into Procore’s construction management suite, solving persistent cash flow challenges that can delay construction projects.

“The industry increasingly values comprehensive, one-stop solutions that support the operational and financial needs of property transactions. For example, in property management, landlords can now leverage platforms that offer rent collection, tenant screening and financing solutions within a single ecosystem. As adoption grows, it is likely that companies blending fintech and proptech expertise will not only capture a large market share, but will also set the standard for what real estate tech should deliver in terms of convenience, efficiency and functionality.”

Manhattan-based and Tel Aviv-founded real estate investment management platform Agora is a fintech-centric startup — kind of, at least, said co-founder and CEO Bar Mor.

“Sometimes I call it real estate tech,” said Mor. “We have some sort of fintech solutions as well. I think that the term proptech for me is more around properties, right? At the end of the day, I’m very tactical and straightforward in terms of how someone can define it. There isn’t a Wikipedia definition for each one of these things.

“We have fintech solutions for the real estate industry, but sometimes we are also called a proptech company, because proptech captures everything that really touches real estate. There is another definition. We call it a vertical SaaS [software as a service]. That’s also a term that is getting a lot of traction.”

Agora uses fintech companies such as Blend, which authenticates bank accounts, and Unit, to transfer money, as financial tools to power its platform, said Mor.

“These two companies basically enabled us to also become some sort of fintech,” he said. “If I would have tried to do these things, let’s call it like five or seven years ago, I couldn’t, because I would have to build three different companies — Agora, Blend and Unit.”

Mor drew on an analogy. 

“Think about Shopify,” he said. “It’s a software for e-commerce websites. But today most of the revenues are from payments and fintech solutions. So they became a fintech company. Think about Airbnb, the marketplace. So I think fintech is starting to get into a lot of different niches, a lot of different industries, and basically become an enabler for companies like us to use as solutions.”

Another blended fintech proptech company is Realfinity, which helps residential real estate agents provide mortgage services, said Luca Dahlhausen, co-founder and CEO at the Miami-based startup.

“We typically say proptech-slash-fintech in our descriptions and submissions for certain things,” said Dahlhausen. “And I do think it’s a very relevant topic, because a big part of any residential real estate transaction, real estate being an asset class, is the financial services part of it.”

However, educating agents and getting them up to speed in using platforms like Realfinity remains a challenge, he said.

“About 4 percent of the real estate agents hold both a real estate and mortgage license,” Dahlhausen said. “So this is not something that is already like Main Street. There’s absolutely some educational work that has to be done — and also some willingness from real estate agents to go ahead and evolve in their value proposition. I always like to give the example of search. Prior to Zillow and Redfin, search was a huge value proposition of the real estate agent. That has changed. Most people are now looking for their own homes and they’re asking their real estate agent very specifically, ‘Hey, I saw this property on Zillow. Can you show it to me?’ ”

That has agents hustling to catch up, Dahlhausen said. “The consumer is way more demanding today than he used to be, and they’re expecting the agent to know things about financing as well, which they currently are not as educated on. So they’re taking the step to better serve their consumers.”

Stella Han, CEO and co-founder of Fractional, a property investment platform, sees her company as a fintech and proptech startup. It’s also “a really big social and community piece” designed to draw investors together to co-own properties. 

“We host a lot of different communities where investors can find like-minded people that they want to partner with on an investment opportunity,” Han said. “A lot of the products that we’re building are providing the financial technologies to be able to build a business together with a team. Stuff like KYC [know your customer], setting up bank accounts, transferring of funds, and all the money movement that I think is very tech. But people are ultimately coming to the platform to purchase investment real estate. 

“So, then, that piece is also very proptech. I would say it’s a very happy marriage of proptech and fintech.”