Online payment processing may sound "high-tech" and complicated, but
even the smallest nonprofit can easily get set up to receive payments through its website.
Many people hold some discretionary funds in an online payment system account so it's easy for them to buy or donate online, but credit card payments are still the norm. If your organization can accept online credit card payments, you maximize the number of people who are able to donate, pay membership dues and event registration fees, or make a purchase through your website.
To bring it down to the absolute simplest terms, your nonprofit will
need 3 things in order to handle online payments by credit card:
- a link or button for people to click when they want to send you money,
- a payment gateway — the online equivalent of a credit card “swipe” machine, and
- a merchant account, to handle the backend business with the banks.
The link or button is the easy part — most online payment processors
will supply copy-and-paste code for buttons to put on your website, or
a link to include in your emails and other communications.
To get a
merchant account, you can talk to your bank or financial institution or
you can get an independent sales provider to set you up.
If your organization already has a merchant account that allows you
to process credit card payments offline, a payment gateway solution
(such as Authorize.net or PayPal Pro)
will enable you to process credit card payments directly via your own
website. The tech requirements to set this up can be a consideration,
however (as PayPal’s own
documentation says, “You need a shopping cart pre-integrated with
Website Payments Pro, programming skills, or the resources to hire a
web developer”), and the fees can vary quite widely.
For a nonprofit that deals with hundreds of donations
a month, and especially if you already receive offline donations for
which you need to be able to accept credit cards, then this method may
be right for you.
Many worthy nonprofits work at a much smaller scale, however, and
have no need for a full-fledged e-commerce setup — or perhaps your
organization is having second thoughts about carrying the costs of a
merchant account, in these times of belt-tightening? You can still
accept credit card payments online, through a third-party payment processor.
Third-Party Online Payment Processors
Your supporters can easily use their credit cards to send money to you through a hosted payment processing service, such as PayPal, Network for Good, or Google Checkout for example. In this situation, the service’s own merchant account will handle the transaction for you — for a fee.
This sort of service is generally the quickest and easiest way to
set up your organization to collect donations and other payments
through your website. The “Donate” or “Buy Now” button goes on your
website, but people click through from there to carry out the financial
transaction on the service’s own secure website. When a payment is
made, the payer automatically get a receipt by email, and you’ll get an
email to notify you that the payment has been made.
Be aware that not all payment processors do business in all parts of
the world, or there may be extra hoops to jump through for users
outside North America (and sometimes for those outside of the United
States).
In choosing an online payment processor for your nonprofit, you’ll also likely want to take a hard look at these 3 factors:
- Trust
- Ease of use
- Cost
The first two considerations here are important from your
organization’s perspective, but even more so from that of your
supporters who’ll be trusting the service with their personal and
financial information.
Trust
Just as a “brand name” product can engenders trust in a consumer,
compared to a product they’ve never heard of, a payment processor
that’s familiar to your supporters is likely to give them greater
confidence in making online payments.
When you think of buying and selling online, which services come to
mind as having a solid reputation?
If you’re not sure what payment
processor(s) your supporters would feel most comfortable in using, can
you do a quick poll on your website or ask around at your next general
meeting to get a sense of their habits and preferences?
Ease of use
Ease of use is a huge factor — if the payment process is a big
hassle for you to set up and manage, there may be an investment in time
and/or tech support that’s more than you can manage right now.
Further, a membership payment or donation may be abandoned before
it’s completed if the process is not quick, simple, and relatively
painless from the online donor’s perspective. Users will be quick to
abandon a payment if they are uncertain about what they’re doing, for
fear of making a costly mistake.
Sometimes, “trust” and “ease of use” come together to create a barrier to donation:
Fundraising expert Robert Weiner has identified some barriers to using Google CheckOut for donations,
along those lines. To begin with, a donor must open a Google account
and associate his credit card with it, storing that personal financial
information with Google, before he can proceed to making a payment. As
Weiner points out, “the transaction is set up so I become a Google
customer, rather than a donor to a nonprofit.”
Cost
In a recent TechSoup discussion of online payment processors,
one nonprofit reported paying more than $100 in transaction fees for an
event that brought in $2000 — obviously a significant cost!
Another nonprofit group, Sacramento Loaves & Fishes,
found a clever way to share the costs — they added a custom field to
their donation page, giving supporters a chance to choose to pay the processing fees
on their donations. This may require a greater level of technical
expertise than is available to many small nonprofits on a tight budget,
but it’s an interesting approach that may be worth looking into.
What works best for one organization may not work as well for
another, with different patterns and volumes of payments — but here’s a
look at a few online payment processing services, to give you a sense
of what’s out there:
AlertPay
charges different fees for receiving funds (2.50 % + $0.25) and for
receiving credit card payments (5.00 % + $0.25). No reduced rates are
available to nonprofits.
You may have heard that Google Checkout
is free for nonprofits? That used to be true, but the rules are
changing. Effective 1 March 2009, nonprofits will be charged at the
same as merchants — 2.0% plus $0.20 per transaction (1.5% + £0.15 for
UK merchants) — but you’ll get a break on transaction fees if your
organization also uses Google Adwords to advertise, and Google Grants
recipients are eligible for free donations processing until 2010.
Documented 501(c)(3) status is required to apply for Google Grants and
to potentially qualify for reduced nonprofit transaction fees.
The official Google Checkout blog notes:
If you apply for Google Grants by March 1, 2009 and you’re
accepted, we will retroactively credit you for any Checkout fees
incurred while your application was pending. For anyone who falls
outside of our guidelines or who decides not to apply for a Google
Grant, we realize this news may come as a disappointment, and hope that
you’ll still find Checkout’s ease of use and competitive rates
compelling reasons to keep using our product.
Network for Good,
powered by Groundspring and designed for nonprofits, bundles two
services together for TechSoup subscribers: CustomDonateNow (which allows nonprofits to place a
“Donate” button on their website and handles the transactions on
Network for Good’s own secure server) and EmailNow, an email messaging
service. The cost is $725.00 for one year of service, after which
CustomDonateNow and EmailNow each cost $29.95/month.
Alternatively, new customers can choose to sign up for just CustomDonateNow alone, for a $199 set-up fee, then $29.95/month plus 3% transaction fees — with the opportunity to include a custom question on your donation page to ask whether donors would prefer to cover that 3% or
have it deducted from their donation [updated 14/02/09].
PayPal.com
offers a special rate on transaction fees for registered US non-profit
organizations: 1.9% +$.30 per transaction for organizations with over
$100,000 monthly volume, and 2.2% +$.30 per transaction for
organizations with less than $100,000 monthly volume. To be eligible
for the reduced nonprofit transaction fees, you must have documented
501(c)(3) status. All other organizations are charged the standard fees — and these will vary according to what type of transaction it is and what country you’re operating in.
ProPay has a
range of packages based on features and volume. The basic package has
an annual fee of $34.95, with 3.50 % plus $0.35 per transaction, a
$0.35 fee to transfer funds out to a bank account, with a starting
montly transfer limit of $1,000.00. No reduced rates are available to
nonprofits. Contact the company directly to inquire about their special rates for nonprofit organizatons [updated 14/02/09 — see also related comments, below].
Read the fine print. Do the math. As Idealware.org’s Laura S. Quinn (A Few Good Online Payment Multitaskers) advises:
Whatever payment option you choose, study its fee structure
carefully, and calculate what you would pay based on the number and
size of payments you expect to process. Fee schedules are often very
detailed, and small differences in transaction fees can add up over
time.
Does your organization accept donations or other payments online?
Please tell us about your experience, and share your recommendations!
