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Charitable Giving Goes Online — Now What?

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Online and alternative forms of payment are fast becoming a hallmark of the nonprofit sector, and complexity reigns amid gifts and donations. In an interview with PYMNTS’ Karen Webster, iATS Payments President Andrew Mosawi weighs in on how nonprofits make money in a variety of different ways and how processing technology must be both flexible and scalable.

 

Amid the holiday season, there’s a rush to give more than just presents.

No doubt your phone has rung more than once and your mailbox has seen its share of appeals for donations across all manner of charities and organizations, close to home and far-flung. You may not give it much thought, but the nonprofit has its own challenges once a check, pledge or credit card comes through to help the needy. Online charitable giving, as well, presents its own set of issues.

In an interview with PYMNTS’ Karen Webster and iATS Payments President Andrew Mosawi, the executive noted that, as iATS services over 10,000 clients globally with payment processing across credit card, direct debit and ACH conduits, one truism holds across the industry: Nonprofits are “quite complex in the way that they manage payments.”

Whereas a restaurant or retailer may be focused on accepting payments at a terminal, for instance, a nonprofit must accept funds across several methods and multiple software providers. The nonprofit can have as many as half a dozen independent software vendors (ISVs), said Mosawi, with a commensurate number of payments providers underpinning tech platforms.

It’s complex, to say the least. And complexity leads to high operating costs and reconciliation problems.

To cut down on the complexity, standardization proves a salve, said Mosawi. He added that his firm offers a single platform that integrates with more than 100 ISVs or technology partners in the nonprofit space. Depending on the function, capabilities span the gamut from membership to merchandise to donations. That flexibility remains key, he said, as charitable organizations scale.

By way of example, Mosawi offered up an example of a mid-sized nonprofit that raises money several times a year through auctions. They may also have a peer-to-peer fundraising event, such as a walkathon. At the same time, that nonprofit could be taking new donors into recurring giving programs or acquiring donations face to face on the street, which is becoming increasingly popular. “Each one of those transactions has a different method and a different process [for processing] that is required,” he noted.

This is, of course, the time when the phone rings and people take donations, through a number of channels, as the fourth quarter offers up a rush for gift-giving before the end of the tax year.

Giving is ramping up across mobile devices and new options, such as “text to give” and other technology-driven options. Technology also enables firms to follow up quickly on the heels of sudden events, such as hurricanes or tsunamis, and scale quickly to take donations “from wherever the donor is and where they want to donate.”

The volumes of the upstart methods, including mobile wallets and bitcoin, are not replacing stalwarts like direct mail, but they are indeed making inroads, he told Webster. “A lot of our customers are trying to implement those to see what the take-up is.” Some organizations have gone on to embrace bitcoin, he said, where “we are certainly seeing organizations wanting to adopt new methods, but not revamp their whole systems to support them.”

To get a sense of how the nonprofit industry stands in terms of size in the United States alone, Mosawi said that in 2016, roughly $390 billion was donated to nonprofit organizations. As measured as a percentage of GDP, nonprofit donations have been relatively flat across the last five years. Within that $390 billion, online giving was up 10 percent last year. Mobile accounted for about 15 percent of those online transactions, a percentage that is likely to grow as millennials become a stronger economic force.

This means that direct mail is less of a lure for the younger generation than donations enabled across mobile hardware, online platforms, crowdfunding and the like. But as technology takes flight, security remains top of mind. The nonprofits are sensitive to security issues “as they work hard to acquire their donors.” The last thing they want, of course, is risk their reputation to a breach. Mosawi said that as other providers might bundle security solutions, iATS does so as a standard part of its offerings — countering synthetic ID and other attacks — for all of their nonprofit clients.

With an eye on next year, the executive stated that there is “a globalization of philanthropy,” where the preferred methods of giving in other parts of the world are making their way across distant shores.

In Europe, for example, face-to-face fundraising and recurring donations are a prime form of revenue for nonprofits in the U.K. and other regions — and are now being adopted in the United States. There are some charities that process hundreds of thousands of monthly transactions just through the conduits of recurring gifts. The wrinkle, of course, is that these forms of giving are marked by large volumes of smaller transactions, and infrastructure becomes key.

“At the end of the day, they are incredibly resourceful,” said Mosawi of charities, as they seek out new ways of soliciting and processing donations.

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