There are several ways charities can save costs by just knowing what questions to ask. Often small charities in particular rely heavily on volunteers and part-time staff. As staff are time poor, quick decisions based on limited research are often made on platform selection that can lead to paying a premium relative to other options available in the market. Once a platform decision is made – whether that be in relation to a payments service provider (PSP), customer relationship management (CRM) software, or peer-to-peer (P2P) fundraising site – it can be difficult and costly to unwind later.
After completing several pro bono projects for small charities over the last few years aimed at reducing their payments acceptance costs we discovered a series of common mistakes that can be avoided by asking the right questions:
1. Do you offer a lower rate for Australian registered charities?
Visa, Mastercard and eftpos do not charge interchange fees for payments made to Australian registered charities, i.e. those endorsed as a Deductible Gift Recipients (DGR). Interchange fees are built into the merchant service fees (MSFs) charged by PSPs, so charities should expect to receive lower MSF rates from their PSP than the standard retail rates. Hence, when signing up with a PSP to accept donations, charities should always ask whether a lower rate is available for charities with DGR status.
We found many charities using Stripe were on the standard retail rate – 1.75% + $0.30 for domestic cards and 2.9% + $0.30 for international cards. This is an easy mistake to make as Stripe does not disclose that it has a lower rate for Australian charities on the Stripe Australia pricing page.
To access Stripe’s charity rate the primary account holder needs to send an email to firstname.lastname@example.org and request to be on this lower rate as a registered charity with DGR status. A lower 1.4% + $0.30 rate will then be applied for non-Amex domestic cards and implemented in 5-7 business days. The rates for Amex domestic cards and international cards will remain unchanged.
Similarly, we found one charity was on PayPal’s standard retail rate. PayPal acknowledged this error and kindly backdated the refund for the excess fees from the commencement date.
PayPal’s Australian charity rates are 1.1% + $0.30 for domestic cards and 2.1% + $0.30 for international cards.
Charities should also check out and enrol in the PayPal Giving Fund which allows supporters to make a donation via PayPal, Facebook and GoFundMe. PayPal does not charge a fee for payments transferred to the charity from the PayPal Giving Fund.
But if you compare rates from other PSPs it’s often possible to obtain better pricing while not compromising service or functionality. Some PSPs will offer charities (even to smaller charities) Visa and Mastercard MSFs around 0.50% plus a transaction fee for online donations (major charities should be able to achieve rates below 0.30%), and around 0.30% for instore payments.
Many charities may not be aware that Salesforce, a Pledge 1% founding member, offers registered charities the first 10 subscriptions of the Non-Profit Success Pack (NPSP) for free. If customisation and on-going development and support of Salesforce is of a concern then consider the Payments2Us platform by Salesforce partner and Pledge 1% member, AAkonsult.
Payments2Us integrates with the Salesforce NPSP and multiple PSPs, providing one-off and recurring payments processing, support for multiple payment methods, subscription/membership management, campaign management, P2P fundraising pages and the ability to import third party data.
AAkonsult will also provide charities that have been referred by Payments Consulting Network up to $15 per month of free add-on services, just mention our name and this offer. If you select Windcave as your preferred PSP to connect with Payments2Us then contact us first to access the lower charity MSF rates we have negotiated directly with Windcave.
2. Is least-cost routing enabled?
While interchange fees are zero for Australian registered charities, scheme fees and a PSP margin will still be charged. Hence, least-cost routing (LCR) of dual-network debit cards to the least-cost card scheme to lower costs is important for charities too. LCR is available with all PSPs that support in-store payments in Australia, and also most PSPs that support online payments. If your PSP does not support LCR nor has a short-term plan to enable it, then consider alternatives as you will be paying more than needed.
3. What is the payment processing cost involved in crowdfunding?
Most P2P fundraising platforms provide an option for the donor to contribute to the platform fees and payments processing costs and many donors choose this option, but not all. Donors want their funds to be used wisely by the cause they are supporting to create the maximum impact. Nothing is more irksome for a potential donor than seeing their donated funds reduced by excessive platform fees and payments processing costs and this can put some donors off making a donation to the charity.
If a donor is being asked to contribute more than 2% of the donation cost in the form of fees (sometimes total fees exceed 5%), then charities should check out other available fundraising platforms – there are plenty of low cost feature rich options available. Costs below 1% are achievable with the right combination of fundraising platform and PSP.
While many fundraising platforms have no platform fee, they are often locked into a specific PSP. But as mentioned earlier, this means charities using these platforms (and their donors if the costs are passed on) are likely to be paying a premium for payments processing versus leveraging other PSPs.
In contrast, Shout (powered by ANZ Bank), currently charges 0% MSF on Visa and Mastercard credit and debit transactions – yes, you read that right, zero fees.
If you use Salesforce, another option is Payments2Us, which also has crowdfunding functionality, and connects with multiple PSPs – Authorize.Net, DataTrans, EziDebit, NAB Transact, Stripe and Windcave – allowing you to compare and negotiate better pricing directly.
4. Do you provide pro bono / volunteer support?
Many organisations, e.g. Atlassian, a Pledge 1% founding member, provide skilled volunteers for projects. There is competition for these volunteer project teams so make sure you have a well thought out project brief – click here to apply for a skilled volunteer project team.
These are a just a few examples of the free or discounted services we came across during our work. To make it easier to communicate the range of different offers available to charities, we have created a new Charities page in the Industry section of the Resources menu. If you know of any other offers available to charities, please let us know by sending an email to email@example.com and we will add them to this page.
Author: Mangala Martinus, Managing Director, Australia, Payments Consulting Network and Merchant Advisory.
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Note that Payments Consulting Network and Merchant Advisory do not receive any referral fees, commissions, product placement or advertising fees from any of the service providers mentioned in this article or the Charities resource page.
If you are part of a charity, large or small, and require support with optimising payments acceptance for donations, or product/service sales – online or instore – please contact us to discuss your challenges and how we can assist.