Online Donations: Sorting Out the Chaos

Online fundraising is the "flavor of the month" in nonprofit technology circles right now. In virtually every sector of the nonprofit community, there is tremendous excitement about the potential to use the Internet as a fundraising tool. In the dot-com world, there has been an explosion of new companies offering tools and services geared towards helping nonprofits make the most of the Internet in their fundraising efforts. There are so many services and opportunities competing for our attention--and so few hours in the day--that it can be hard to figure out which are the most worthwhile to pursue. This article is intended to help you make sense of this new and rapidly-changing landscape, and give you the knowledge you need to begin moving forward into the uncharted terrain of online fundraising.

A note: "Online Fundraising" is kind of a misnomer. If you build it, they will not (necessarily) come.  Having a quick, convenient way to accept gifts online does not constitute an online fundraising program. You still have to raise the interest in giving to your organization via appeal letters/emails, special events, other types of campaigns. Having the capability there is crucial, but does not stand alone as a source of revenue.

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THE BASICS
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The goal of all online fundraising efforts is to make the transaction as easy as possible for both you and for your potential donors. As all e-commerce businesses have learned, if it isn't easy, folks won't do it. This is why the simplest "online fundraising" technique--the "clip and mail" form--is not particularly effective; it's the just too much effort for most online users.

The easiest way for most people to give money online is to use a credit card. For this reason, the fundamental concept underlying all online fundraising is developing the capacity to have a donor enter their contact and credit card information into a secure Web page, and have that information securely transmitted to you. The challenge is making this quick, convenient and comfortable.

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STATE REGISTRATION
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There's one potential catch, though. Laws in 39 of the 50 US states require nonprofits to register as a professional solicitor in order to solicit donations. These laws could be construed to apply to online solicitations. You should consult with your own legal advisor as to the necessity and method of registering for your particular situation. For background information, see:

http://www.nonprofits.org/npofaq/16/21.html

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CREDIT CARD CAPABILITY: WHERE IT ALL STARTS
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If your organization already has the capability to handle credit card transactions, you're a step ahead of the game. If you don't, you may want to acquire this capability before you plunge into online fundraising. You'll set this up in the process of setting up your online capability, but if you want to be able to offer your "offline" donors the same convenient payment options as your online donors, it's probably a smart move to have a merchant account already in place. You may want to be able to accept credit card transactions at "in-person" events, or over the phone. Or even by regular mail. Being able to take credit cards also allows you to offer your members the option of giving regular monthly amounts, rather than writing one large check per year. Bottom line: accepting credit cards is an increasingly important convenience to offer your donors.

Unfortunately, getting a credit card merchant account set up can be an extremely frustrating experience; we recently went through it at U. S. Health Care Reform, and found that the banks are often simply confounded by the idea of a nonprofit organization that needs a simple, inexpensive, low-volume credit card processing capability.

If your organization is large enough to have a development officer, and/or you think you'd be likely to generate at least $50-100/month in credit card activity, we strongly encourage you to look into setting up credit card processing capability--independent of any online fundraising efforts you undertake. Costs and specific technologies/systems will vary greatly depending on your needs, your transaction volumes, and what services your bank can offer.

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STRATEGY #1: BUILD IT YOURSELF
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There are two components to building your own donation processing system:

1) The capacity to receive credit card information via a secure Web page
2) The capacity to authorize the credit card transaction and deposit it to your bank account based on that information

RECEIVING CREDIT CARD INFORMATION SECURELY ONLINE

In order to receive credit card information from your Web site, your Web hosting company will have to support a technology known as "SSL" (Secure Sockets Layer), which enables information--such as a credit card number--to be transmitted securely between a user's Web browser and your Web site. Many "basic" Web hosting accounts, such as those that are provided for free with a dialup Internet access account, do not support SSL or don't support it at a reasonable cost. You may need to consider moving your Web site to a dedicated Web hosting company. (See our article on domain-hosted Web Sites for more info.) Most good Web hosting companies support SSL under their $30-35/month hosting plans--only $10-15/month more than "basic" Web hosting.

Once you have a SSL-enabled Web site in place, you then need to build the online donation form. There are lots of ways to do this, and all of them require that you have some knowledge of developing simple form pages on a Web site. Virtually all Web-authoring software has form-building tools that are fairly capable. More experienced Web developers can also use scripting technologies such as ColdFusion or Active Server Pages to build more advanced business logic into their donation pages.

AUTHORIZING CREDIT CARD TRANSACTIONS

Authorizing your credit card transactions is an essential step in the process. When you set up a merchant account (if you haven't already), you will need to decide how you want to authorize the transactions. This can involve filling out the paper slip with an imprinter and calling a 1-800 number, using a dialup terminal and modem, or using an online system such as CyberCash. Tell your bank representative what your expected volume will be. S/he should help you decide what authorization method makes the best financial sense for your organization. Automating your authorization capability--rather than just the capability to receive credit card information securely online--is a separate (but related) issue, and is the most complicated and expensive part of building your own online donation processing system. If you elect to authorize via 1-800 number or modem, then all you need to do is design your donation page � the page that will "deliver" the credit card numbers securely to you for authorization and processing.

The main advantage of this "do-it-yourself" approach is that you have total control over the content, look and feel of your donation pages. The pages are seamlessly integrated into your site, and look exactly the way you want them to.

However, there are some disadvantages to the DIY approach. Unless you have a person on staff or a volunteer who is comfortable wading into HTML code, you'll probably find this approach too technically demanding. The other major disadvantage is the cost--an additional $15/month with most Web-hosting providers, plus additional annual fees if you have to provide your own SSL "certificate," and possibly the significant expense of establishing online credit card authorization services.

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STRATEGY #2: OUTSOURCING: DONATION PROCESSING SERVICES
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For those organizations that can't or don't wish to build their own capability to accept credit card information online, there are a rapidly-increasing number of organizations that will provide you this service--usually for a fee. There are several different varieties of these donation processing services. Generally, these services are (or are affiliated with) a nonprofit entity that exists solely to receive the donations, and then passes them through to your organization.

The number one rule is "Always read the fine print!" And believe us, there's a lot of it! Before you plunge into online donations, it's absolutely essential that you take the time to read and understand the terms of your agreement with any outside entity that will be handling money or names on behalf of your organization. Caveat emptor always applies.

It's also important to note that donors who use a donation processing service are often not making a direct donation directly to your organization, but to the nonprofit pass-through affiliated with the donation processing service. While this generally isn't a problem in terms of image, there can be bookkeeping and administrative issues. You should also keep in mind that donors who give to you through a donation portal can elect to remain anonymous from you. All online donation services have lengthy privacy policies; you should read these (along with all other fine print) before moving forward.

The four most important factors to consider when evaluating potential donation processing services:

1) Costs � both upfront and ongoing
2) Method of donation transfer
3) Access to and privacy of donation data
4) Integration with your Web site

Based on these factors, we've found three online donation services whose services should be attractive to World Wide Web reform groups. Keep in mind, though, that the e-commerce world is a fast-changing place, and this information may well be out of date by time you read it.

Helping.org  http://www.helping.org/

Helping.org is a non-profit created by the AOL Foundation, and advised by nonprofits and nonprofit technology organizations, including U. S. Health Care Reform. Helping.org has partnered with GuideStar, which has complied a database of all 501(c)3 nonprofits that submit 990 forms to the IRS. This means that your organization is already "pre-registered" with Helping.org. However, you can (and should) enhance your GuideStar record with additional pertinent information, including your mission, Web site address, and other basic information.

Helping.org retains only the bank's credit card processing fees (generally under 2%--and probably less than your bank would charge you if you had your own credit card processing capability!), and can either send you a check, or establish Electronic Funds Transfer (EFT) directly to your bank account. (Obviously, the latter is faster, paperless and strongly recommended.) EFT transactions are processed as soon as the credit card clears; sending you a check can take up to two weeks.

The first time you receive a donation through Helping.org, you'll receive a secure Web site that gives you data on all donations made to your organization through Helping.org.

Helping.org has a "front door" which is a cumbersome searchable database of U.S. charitable organizations. Quite frankly, it's not very good. (Typing in "U. S. Health Care Reform" produced a list of over 1100 charities that had "one" or "World Wide Web" in their names or missions!) So, if someone comes to Helping.org looking for you, they may be in for some frustration. But that's OK, because Helping.org also gives your organization a customized URL (and a graphical button) that goes directly to your group's donation page. You can put one or more hyperlinks from your site directly to this page.

For an example, see:

http://www.guidestar.org/helping/donate.adp?ein=91-1972832

(You can even make a donation to U. S. Health Care Reform, if you want!)

Although at present, the page has a generic look and feel, Helping.org is exploring ways to give you the ability to customize its design.

Entango.com  http://www.entango.com/

Entango is one of the leading for-profit online donation processing companies.  A number of World Wide Web reform groups have had good experiences with Entango.  Entango provides a secure, customizable giving page that mirrors the look and feel of your existing Web site, and direct, automatic transfers into your organization's bank account.  Entango charges a 5% fee, which includes credit card processing costs--not quite as low as Helping.org, but very reasonable for what you get.

If you use any online donation service, it's essential to establish a well-designed, well-written "giving" page on your Web site BEFORE you send people hyperlinking off to the donation service. If people don't understand what's going on and have confidence that it's safe and secure, they won't do it.

eGrants.org   http://www.egrants.org/  

eGrants.org is a nonprofit, Internet foundation created to facilitate online donations for nonprofit groups working for positive social change.  One of the newer players on the block, eGrants.org is a project of Tides, a major nonprofit incubator based in San Francisco.

eGrants.org works much like Helping.org, in that it is a 501(c)3 that accepts donations online and passes them through to your organization.  eGrants.org does not use Electronic Funds Transfers, but instead sends you a check each month (each quarter if you have less than $50 in donations).   eGrants.org allows you to easily download detailed donor information in Excel format, and allows for a moderate amount of customization, much like Entango.

eGrants.org charges a $100 setup fee (waived through 1/1/2001), and 6% of each donation under $2000.

CONCLUSION

Online donation services represent a low-effort way to add a basic online giving functionality to your Web site. Technically sophisticated organizations, or those that need total control over the look and feel of the donation page should look into developing their own capability, or at other donation services that, while higher-cost, do offer some customization options.

Will online fundraising dramatically boost your bottom line? Probably not, and definitely not right away, unless you launch a corresponding online campaign pointing people to your donation page. Should your organization pursue online fundraising? Almost certainly. Spending money online is an idea that's here to stay. We ignore the opportunity that the Internet presents at our own peril. It's always wise, though, to move forward one step at a time, with realistic expectations, and a constant eye on the results.

For more information

Benton Foundation's Online Fundraising "Best Practices" resources

http://www.benton.org/Practice/Toolkit/fundraise.html

06/29/2001

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