A Deposit Replacement Service (DRS) gives tenants the option to pay a smaller one-off fee at the beginning of the tenancy instead of the five weeks' rent that's usually required from a traditional deposit scheme. The DRS one-off, check-in fee is 1 week's rent (+VAT). However, the one-off payment is non-refundable and tenants are still liable for damages (allowing fair wear and tear) and any unpaid rent that could be outstanding at the end of the tenancy.
You may ask why someone would opt for a nonrefundable deposit over a refundable deposit. The reason why is because a DRS reduces upfront costs. With DRS, tenants can move between properties quickly and don’t have to wait for your traditional deposit to be returned. Securing a new property has less impact on a tenant's immediate cash flow, so they’ll have more cash upfront.
If you or the tenant need to dispute any charges at the end of the tenancy, Deposit Replacement Services are often adjudicated by an independent and impartial specialist who may also manage a government-authorised tenancy deposit protection scheme.