Accepting Online Donations: The Breakthrough Guide

Why are Online Donations Important?

Online donations are convenient for both donors and nonprofits.

Donors are able to give whenever they want wherever they want (as long as they have an internet connection!).
Nonprofits can accept donations from all over the country and across the globe without having to wait for donors to send in checks or donate over the phone.

Glossary of Online Donation Terms

ACH Direct Debit
ACH direct debit is a form of online donating that allows a donor to give directly from their bank account as opposed to with their credit card. It requires donors to input their bank account number and routing number (found on the bottom of their paper checks). ACH direct debit is perfect for donors who want to set up recurring donations that are withdrawn on a monthly basis with minimal work on the donor’s part.

Address Verification System
An address verification system (AVS) is a fraud-protection method that compares the billing address a donor uses to make a donation and the address that is on file with their credit card company.

If the two don’t match or are suspicious in any way, your nonprofit will receive an AVS decline that you can then review.

An aggregator is a payment processor that handles multiple transactions from nonprofits and/or businesses. All of these transactions go through the aggregator’s own merchant account. These organizations are part of the aggregator’s “portfolio.”
PayPal, Stripe, and Square are examples of payment processing aggregators.

Credit Card Processing
Credit card processing is a common and easy way for donors to give to nonprofits. Most credit card processors will take a percentage of the donation plus a flat rate per transaction, while ACH direct debit processing normally only takes a flat fee.

However, credit cards are a nearly universal way to donate to nonprofits. Many donors prefer using credit cards over ACH direct debit because they believe it is more secure (even though both methods are equally safe!).

Encryption is a form of fraud protection that uses special algorithms to convert sensitive data (known as “plaintext”) into “cyphertext.” This cyphertext can only be read if it is decrypted using the correct “key.” Encryption and tokenization usually go hand in hand.

Merchant Account
A merchant account is essentially a type of bank account that allows nonprofits (and businesses) to accept credit cards online and in-person with card readers.

The fees associated with credit card donations are taken from the money that gets deposited into the merchant account. The remaining balance of the donation then goes to your nonprofit.

Payment Gateway
The payment gateway is the first point of contact after the donor hits the “Submit Donation” button. A credit card donation is sent to the payment gateway to verify that the numbers used are not fraudulent and that the donation is secure. If the donation is flagged as being suspicious, the nonprofit is notified immediately. If all goes well, the payment continues to be processed.

Payment Processor
A payment processor is the company or provider that helps your nonprofit accept and process donations.
A payment processor can offer a payment gateway, merchant account, ACH direct debit options, credit card payments, and more!

PCI Compliance
PCI compliance speaks to the standards set by the Payment Card Industry for payment processing. PCI’s data security standards (PCI DSS) help keep donor data safe and limit the liability that nonprofits incur when processing donations. Payment processors will usually charge nonprofits a yearly PCI compliance fee in order to keep all of their systems in line with the standards.

Tokenization is a form of online fraud protection that takes a donor’s credit card number and other sensitive information and replaces it with a string of alphanumeric characters.
Payment processors issue these “tokens” and are responsible for keeping donor data safe.

Different Ways to Accept Online Donations

Credit Card Payments

Credit cards are one of the most common ways for individuals to give to nonprofits online. Most people regularly use their credit cards to pay for online purchases, so making an online donation with a credit card is a natural way to contribute.

Unfortunately, the fees associated with credit card payments can be complicated and varied.
Usually, a credit card company will charge a flat fee plus a percentage.
Learn more about credit card processing.

ACH Direct Debit Payments

ACH (Automatic Clearing House) direct debit payments are donations made from a donor’s bank account. The donor uses their bank account and routing numbers to make a donation. This method is great for recurring donations, since the funds are automatically deducted from a donor’s bank account (similar to an automatic online billing). ACH payments are also cheaper to process than credit card payments. There is simply a flat fee (usually less than $.30 per transaction!), making ACH an affordable option for nonprofits.

Many donors are hesitant about using ACH direct debit payments because the process can seem intimidating or not secure, resulting in fewer ACH direct debit donations for nonprofits.
However, this assumption is incorrect.

ACH direct debit is actually very easy to use and has the same amount of security as credit card donations.
Learn more about ACH direct debit payment processing.

Facebook Donations

Facebook donations are usually made with a credit card using a donation page that is similar or identical to the one found on a nonprofit’s website. The great thing about Facebook donations is that they take place within the social media site itself; donors aren’t directed to another site or form.

Not all of your donors will have Facebook, and those that do might not know that they are able to give to your nonprofit on Facebook. This can easily be remedied by promoting your Facebook donation page on Facebook and with other social media sites.

Mobile Donations

Mobile giving allows donors to support your nonprofit from wherever they are (as long as they have cell service!). Donors can either text to give to your organization or they can donate via a mobile-responsive donation page.

Some people are hesitant to give with their mobile devices, and many more simply don’t know how. Your nonprofit could receive more online donations from mobile users if you let your supporters know about this giving option.
What Nonprofits Need to Accept Online Donations

Fundraising Software
Fundraising software is the first thing your nonprofit will need if you want to start raising money online. Fundraising software is a broad term that can encompass:
    •    Online donation forms
    •    Mobile bidding software
    •    Text-to-give tools
    •    Peer-to-peer fundraising platforms
    •    On-site giving kiosks
    •    And more!

Accepting online can be simple if you have some (or all!) of these fundraising tools in your toolkit.

Payment Gateway
For an online donation to be processed securely, it must pass through a payment gateway. This gateway verifies that the credit card being used is not fraudulent and that the donation is legitimate. If the credit card is marked as fraudulent, the payment gateway will alert your nonprofit. If everything checks out, the payment continues to go through the payment processing system.

Your payment processor should be able to provide you with a payment gateway.

Merchant Account
To process donations online, you’ll also need a merchant account. A merchant account can be provided by your payment processor or by your nonprofit’s bank.

A merchant account holds the donation until the donation is verified. Each merchant account has different fees for their services, though, so it’s wise to shop around and discover which one works best for your nonprofit.

Promotional Materials
If you want to people to give to your nonprofit via your online donation page, you have to let them know that that’s an option!
The most obvious way to promote online giving is online through your website, social media, and email, but traditional marketing materials like direct mail and public advertisements can be just as effective.

How Online Donations Work
Credit Card Processing

These are the steps that must take place in order for a nonprofit to accept a credit card donation.

    1.    Donor makes a contribution with an online donation form - When a donor visits your website and feels compelled to help you accomplish your mission, they usually make a donation via your online donation form. This is the beginning of the payment process.
    2.    Donation information is sent to the payment gateway - Before any money changes hands, the payment gateway checks to see that the credit card isn’t fraudulent. If the credit card is flagged for any reason, the nonprofit is notified. They can then reach out to the donor. If the card is good to go, the payment gateway sends the transaction to the payment processor.
    3.    Processor sends transaction to the credit card network - The payment processor submits the donation to the credit card network (i.e., Visa or MasterCard).
    4.    Credit card network sends transaction to the donor’s credit card bank - After going through the donor’s credit card network, the transaction is then sent to the donor’s credit card bank. The bank either approves or denies the charge. The credit card network then sends the results to the payment processor.
    5.    Approval or denial is sent to the donor and the nonprofit - The payment gateway notifies the donor and the nonprofit that the contribution went through successfully. At this point, info from the donation is stored in the nonprofit’s donor database.
    6.    Donor’s bank sends money to the nonprofit’s bank.

ACH Direct Debit Processing

These are the steps that must take place in order for a nonprofit to accept an ACH direct debit donation.

    1.    A donor makes an online contribution - A supporter finds their way to your donation page and decides they want to use ACH direct debit to make a donation. They input their bank account number and routing number (found at the bottom of a paper check) and hit “Submit Donation.”
The donor can also set up recurring donations with ACH direct debit. If this is the case, the ACH direct debit process will occur monthly (or however often the donor set up donations to occur).
    2.    The donor’s bank enters the ACH entry - In this process, the donor’s bank is called the Originating Depository Financial Institution (ODFI). When a donor makes an ACH donation, they signal to the ODFI that a payment is about to take place.
    3.    The ODFI transmits payments in batches - The donor’s bank sends groups of ACH payments (called “batches”) to an ACH Operator (either the Federal Reserve or the Clearing House).
    4.    The ACH Operator sorts and processes the batches - After sorting the batches of transactions, the ACH Operator will make the payments available to the Receiving Depository Financial Institution (RDFI), in this case, the nonprofit’s bank. It usually takes one to two business days for the entire process to take place.

Shopping for an Online Payment Processor

Can't our nonprofit just use PayPal to accept donations?
Technically, yes. Many small nonprofits use PayPal to accept credit card donations.
But there are drawbacks to using PayPal.
First, you can’t customize the form. Donors will be redirected off of your website onto PayPal’s payment form. This redirection can cause donors to question the validity and security of your donation page. Some of these cautious donors might even leave your donation form for good!

Second, PayPal is what is known as an aggregator – they process donations and provide the merchant accounts and payment gateways for a multitude of nonprofits and businesses. Your nonprofit doesn’t receive the personal attention that it likely needs (especially if your part of a small, growing organization).

Finally, it’s been shown that average donation sizes on PayPal are lower than those made on a nonprofit’s branded donation form.

If you want to give your donors a truly customized donation experience (and raise more money!), you should consider getting a separate, nonprofit-focused payment processing provider and a branded donation page.

What are the different payment processing fees?
The answer to this question depends on the type of donations that you accept. 
ACH processing will take a flat fee per transaction, usually less than $.30 (regardless of the donation amount).

Credit card processing will take a flat fee plus a percentage of each transaction (i.e., 2.5% + $.30). These fees will differ depending on the type of credit card that the donor uses.

There also might be different fees like set-up costs, monthly or yearly fees, or other charges. Make sure that you ask your payment processor what fees they charge before you start using their services.

How secure is online payment processing?

Online giving is actually very secure! Thanks to security measures like tokenization and encryption, fraudsters are finding it harder and harder to steal donor data and use it for their own purposes.

However, there is some risk whenever funds are transferred electronically. 45% of all U.S. credit card fraud occurs online.
But if your payment processor adheres to PCI compliance standards and makes use of fraud protection tools, your nonprofit has a much lower risk of being susceptible to fraud and deception.

How long will it take the processor to deposit the funds into our account?

Again, this question has multiple answers depending on the type of card used in the online donation.
Here are some of the general standards:
    •    Visa, MasterCard, and American Express - every 24-48 hours
    •    DiscoverCard - weekly
    •    ACH Direct Donation - weekly

What’s the difference between ACH and credit card processing? Do we need both?

Credit card processing is done using a donor’s Visa, MasterCard, AMEX, Discover, or other credit card.
ACH direct debit processing deals directly with a donor’s bank. The donor must use the bank account and routing numbers to make an online donation.

Your nonprofit can choose one over the other, but it’s wise to offer both.

Well, not all of your donors will have credit cards and not all of them will want to use their bank accounts to give a donation. It’s better to have options for everyone than alienate a segment of your donor population from giving online.
Can our payment processor integrate with our current fundraising software?

Your payment processor should be able to integrate with the various pieces of fundraising software your nonprofit uses.
In fact, it’s highly advised that whoever you choose as a payment processor has multiple integrations with all of the other providers you use.

If not, then you’ll have to have a different payment processor for each and every piece of fundraising software you use, making reconciliation a burden for the financial department in your nonprofit.
Considerations to Make Before Buying an Online Donation Tool

Before you ever sign up with an online fundraising provider or a payment processor, you’ll need to know about their fee structure and be aware of any incidental or recurring charges that may be present.
Make sure you ask about monthly or yearly fees, any service fees, and other types of incidental fees.

Nonprofit Knowledge
Many payment processors and aggregators work with both nonprofits and businesses. And while these companies may have some background nonprofit knowledge, they’ll never know the ins and outs of your organization like you do.
That’s why it’s so important to choose a payment processor or an online donation tool that knows about fundraising and has insight into a nonprofit’s concerns or challenges with raising money online.

Customer Care
Having a great team behind your online donation tool is just as important as the tool itself. You want to be able to go into the world of online fundraising knowing that your payment processor and fundraising software provider have your back.
Take a look at what their customer service values are. Does the company respond to problems over the phone in a timely manner (with a solution to the issue), or do they contact you via email two days after the problem starts (with no real help)?

Integration Options
Your nonprofit is likely using several different types of fundraising software to ask for and receive donations. You probably have auction software, event software, mobile giving software, a donor database, and more!
When looking at online giving solutions and payment processors, you want to make sure that the vendor you choose has integration options that fit in with all of your existing software solutions.

Ease of Use
The online donation tool you choose should be simple to use for both you and your supporters.
And while the specifics of payment processing may be complicating, the tool itself should be fairly straightforward.
Your software provider should also provide your nonprofit with easy-to-understand documentation, instructions, and guides to help you get started and answer any initial questions that you might have.

Other Fundraising Capabilities
Some online donation tools can also help your nonprofit raise money in other ways! Some common fundraising features that may be included are:
    •    Mobile giving options
    •    Text-to-give software
    •    Peer-to-peer fundraising platform
    •    Giving kiosks, terminals, or other on-site equipment

If you need additional fundraising software, look into an online donation tool that can offer you that and more!
Credit Card Fraud and Your Nonprofit: What You Should Know

What is Credit Card Fraud?
There are essentially two types of credit card fraud: application fraud and account takeover. Application fraud occurs when someone applies for a credit card under a false name and address. For our purposes, we’ll just be talking about account takeover credit card fraud.

When a credit card account is hacked, the fraudster can use the stolen credit card information to buy large purchases.
However, in order to make sure that the card will actually work, many fraudsters will test it by making a small donation on a nonprofit’s donation form.

Because nonprofit donation pages are often less complicated than online retailer shopping cart pages, they are easier for hackers to test stolen credit cards on.

While online credit card has always been a concern, the move to chipped cards has created a slight uptick in online credit card fraud. In the past, fraudsters could easily steal credit card information during in-person purchases. Because chipped cards have made it more difficult for these in-person thefts, hackers have moved to online credit card fraud as an alternative.

Why Do Nonprofits Need to be Thinking about Credit Card Fraud?
There are a couple reasons that nonprofits should be thinking about credit card fraud.
First, if a nonprofit experiences credit card fraud on a regular basis, it can damage the organization’s reputation. People are far less likely to give to an organization with insufficient fraud protection tools. A nonprofit’s past experiences with fraud can impact people’s perceptions of the organization and limit future donations.
Secondly, a string of fraudulent credit card donations can lead to a multitude of fees and costs for nonprofits. Individuals whose credit cards have been used to make fraudulent donations and purchases will dispute the charges; the nonprofit has to refund the money and pay a chargeback fee to process the refund.

How Can You Avoid Credit Card Fraud?
There are several different ways to combat online credit card fraud. But be careful! Use too many of these methods, and you may see a decline in real donations.

The key is to strike a balance between an easy donation experience and a secure one. Go too far in either direction and you expose yourself to fraudulent activity or missed donations.

We’ll look at some of the most common fraud prevention and protection methods out there. Some of them can be provided by your payment processor while others will take place internally, led by members of your nonprofit’s tech team.

Use an address verification system (AVS)
AVS checks the address that a donor gives on a donation form with the address that their credit card company has on file. If they don’t match, the donation is flagged and your nonprofit is notified.

Use velocity checking
Velocity checking is a fraud-detection technique that looks at the volume of transactions that are associated with one credit card number, bank account, or donor. If you see that a large number of small donations have been made in a short amount of time, they might be linked to a stolen credit card.

Look out for small and random donation amounts
This internal process will help you detect possible fraudulent transactions. Many fraudsters will try to make a small donation in a random amount (i.e., $1.73). If you see a series of these types of donations, it should raise a red flag.

Set a minimum donation amount
Some donation forms automatically have this feature. Requiring donors to give at least $15 or $20 will discourage fraudsters from using your donation form to test stolen credit card information.
Maintain PCI compliance
Choosing a payment processor that adheres to the payment card industry’s data security standards (PCI DSS) will help cut down on fraudulent credit card donations. It also saves you money down the line; any organization that processes transactions online must pay a fee if they are not in compliance with PCI standards.
Require a security code
A credit card’s security code is a 3 or 4 digit number found on the back or top right corner of the credit card. By requiring that donors use this security code when making a donation, your nonprofit can minimize credit card fraud.
Learn more about online fraud and how your nonprofit can detect and avoid it.

How iATS Can Help With Online Fundraising

Nonprofit Knowledge
Unlike other dedicated payment processors or aggregators, iATS only does business with charitable organizations.
We recognize the unique needs and worries that charities face when learning about and implementing online fundraising solutions.

Our nonprofit specialization helps us work better with organizations of all sizes that are just trying to raise money to further their causes.

Integration's with Other Software
iATS integrates with various nonprofit fundraising software providers. Whether you are using a text-to-give tool, mobile bidding software, or anything in between, we probably integrate with it! Because we have so many channel partners, we can offer your nonprofit the best service, regardless of the other software you have.

Our various integrations also help your organization consolidate your reports and analytics when it comes to payment processing. With iATS, everything is centralized, making the nitty gritty of fundraising a little simpler.
Learn more about how iATS Payments can help you accept more donations.

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