The Great Charity Struggle

Jun 28, 2017, by Russell Wes

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The UK continues to donate as generously as ever, so why are 1 in 5 charities struggling to survive? And what needs to change?

2017 has seen the UK rife with tragedy, but also with love. In the wake of the Manchester attack, the Manchester Evening News set up a fundraising page to support the victims and their families. It raised over £1.5m in one day. At the time of writing, the support fund for the survivors of the Grenfell Tower fire is over £4m and will rise far higher. When disaster strikes, Britain gives. It’s unquestionable.

The UK’s philanthropy is nothing new. The charity sector in the UK has over 800,000 employees and is worth over £39b. 44m Britons donate an average of £16 a month to charity. However, according to the Charitable Aid Foundation, 1 in 5 UK charities are struggling to survive. How can this be, in a country where people are so willing to donate?

The Innovation Blockade

The charity sector faces barriers towards innovation which are not matched in other sectors. Any funds used for in-house improvements are funds that are taken away from charitable causes. ‘Money cannot be wasted’ is an understandable approach, but one that creates a reluctance to innovate.

However, in other cases it is not reluctance, but circumstance, which shackles charities and prevents technological innovation. As the CAF report, “many charities are finding funding and income generation a challenge, which may be preventing them from investing in the technologies that they need”. Indeed, generating income/achieving financial sustainability is noted to be one of the top three most pressing challenges for 62% of charities in 2017. It becomes a vicious circle. They cannot innovate due to lack of funds, yet without looking to innovate they are struggling. But money can be saved - primarily at the payments stage.

Cost Stings and Surprises

The largest charity fundraising platform in the UK is integrated with over 13,000 charities. They charge a 5% fee on all donations, regardless of donation size or the volumes a charity receives. In the payments world, this approach is unnecessarily costly.

“As the volume of transactions increases, the price of processing them decreases. Why then, is this saving not being passed on to the charity? ”

Despite an already high processing fee, this charge also applies to the Gift Aid donation. A £125 donation (including £25 Gift Aid) will see the charity receive £118.75. Considering that £106m is donated in the UK every day, a substantial sum of donated money is being taken by the payment platform.

If other donation platforms seem cheaper, be wary. Some of the large platforms separate out the costs to appear cheaper, offering, for instance, a 2% charge but charging an extra 1.45% for card fees. Card payments will of course account for the vast majority of donations.

Furthermore, some payments providers insist on minimum incomes or lengthy contracts. This means that if charities do not receive the amount they originally forecasted, they will still be charged the processing fee agreed for the higher value.

Less money and disproportionately high fees - a double sting.

Structural Disadvantages

What is even more troubling about the statistics from the CAF report, is that the smaller and medium-sized charities are being hit the hardest. Out of all charities with an income < £1m, 28% described themselves as ‘struggling to survive’. The top three challenges facing charities were reported as: generating more income, meeting increased demand for their services and reduction in public/government spending. The main concerns are not related to lack of skilled staff or increased competition within the market, but simply that the charities need more money.

With smaller charities forming 97% of the charity sector, the CAF is concerned that these issues could have ‘potentially dangerous implications’ for the future support of many beneficiaries.

Paybase wants to change this. More importantly, it can.

A Fair Cost Structure

Paybase operates its payment processing through a tiered system. The more money that a charity receives through donations, the lower the fee becomes. Does this mean that Paybase is only beneficial for the larger charities? Absolutely not. We will be at least 50% cheaper than the largest charity fundraising platform at our highest pricing tier, and at least 85% cheaper at our lowest.

Moreover, we offer transparency and flexibility from the very beginning. No high setup costs. No monthly minimums. No hidden fees.

The eMoney infrastructure that we have developed enables us to process money in a cheaper, easier, and more flexible way than our competitors.

Supporting the Smaller Charities

Whilst our pricing structure also benefits larger organisations, the ultimate goal of Paybase is to democratise payments. We are set up to help smaller and younger organisations get to market faster - charities or otherwise. As part of this we cover all compliance and regulatory needs to allow charities to focus on fundraising.

Paybase wants to help smaller charities get the exposure they deserve and help donors find the charities that resonate best with them. By providing one unified API that fully takes care of payments, we let the charity use their own, branded frontend. This enables them to process donations within their own site, in place of creating a pre-templated page on a site alongside 13,000 other charities.

Shaking the Sector

One thing to make clear - the innovation is there. Companies such as Thyngs are confronting the cash issue of donating to charity by allowing people to donate through scanning QR codes. Whether there’s a bake sale at the local library or a sponsored walk in your community, lack of cash need not be a problem in the near future. Thyngs, like Paybase, understand the innovation blockade charities face and want to help them overcome it. As long as charities are willing to partner with new companies, they will find innovators determined to increase their income and offering them fair rates in order to do so.

Paybase believes it can help many industries with the service it provides, but the charity sector is very high up our list. Partnering with Paybase quite simply means - money saved. This enables charities to focus their limited resources on what really matters: their beneficiaries.

We are currently speaking to both charities and charity aggregators, and will be integrating with our first partner by the end of this summer.

If you like what you read and are interested to find out how we can help you with your payments, compliance and risk requirements - get in touch . We’d love to hear from you.

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