Options For Nonprofit Payment Processing

When looking for a payment processor, businesses typically also look for additional features like a point-of-a-sale (POS) solutions, inventory tracking, and sales management. Non-profits, on the other hand, require processors that contain recurring billing, donor outreach, and event planning. This means that traditional payment processors may not provide the tools necessary for a non-profit to grow its donor base, while keeping its overhead low.

Additionally, non-profits have to be aware of the transaction fees that processors apply. Most of the time this is a minimal 2 percent to 3 percent fee, but that means that you’re not getting 100 percent of the donation. So, for example, if the nonprofit uses a third-party processor like PayPal and received a $100 donation, PayPal would take $3 and the remaining $97 would go to the charity.

The good news is that there are several banks and companies that will deliver 100 percent of the gift. This includes:

• Capital One’s “No Hassle Giving” program.
• PayPal Giving Fund.
• Facebook’s "donate" button.
• Popmoney, which is a third-party payment service, allows nonprofits to set up an account in order to receive 100 percent of credit and debit card donations.

You could also accept cash and checks if you really want to avoid any transaction fees.

Besides the options listed above, here are the best payment processing solutions for nonprofits.

Merchant Accounts

Just like a traditional business, a nonprofit can sign-up for a merchant account with any bank or credit card company. If there’s a drawback with this method, it’s that these processors can charge setup and transaction fees, which can vary from processor to processor.

However, there are a fair amount of merchant accounts that offer low, transparent fees, and features like recurring billing, for nonprofits. These include Dharma Merchant, BluePay, Payline Data, Heartland Payments, Host Merchant Services, and CDG Commerice.

There are also merchant accounts that work specifically with nonprofits. For example, Blackbaud Merchant Services can be used as either a stand-alone program or integrated with donor management solutions, such as the Raiser’s Edge, NetCommunity, Altru, The Patron Edge, and eTapestry. Blackbaud has competitive rates, as well as no upfront fees, set-up fees, or monthly minimums. Other options would be Fundly and DonorPerfect.

The biggest advantage of using a merchant account for your nonprofit is that your nonprofit’s name appears on the donor's credit card statements, which is great for branding your nonprofit. Another perk is that funds are flowing directly into your nonprofit bank account.

The main problem is that merchant accounts often have complicated fee structures. You’ll also have to be approved after the merchant account banker conducts a credit check on you.

Third-Party Processors

If you don’t want to go through the hassle of applying for a merchant account, you can use a third-party processor, which uses its own merchant account, to process donations. This means that when a donation is made, the processor passes the donation onto the nonprofit, minus the transaction fee.

For instance:

• WePay and Stripe charge 2.9 percent + 30 cents
• Square charges 2.75 percent per swipe, 3.5 percent + 15 cents for manually entries.
• Amazon Payments charge 2.5 percent + 30 cents (for nonprofits with monthly volumes of $3K to $10K); 2.2 percent + 30 cents (for nonprofits with monthly volumes of $10K to $100K); 1.9 percent + 30 cents (for nonprofits with monthly volumes of $100K).

On the plus side, third party processors are easy and quick to set-up and they’re relatively inexpensive. PayPal’s transaction fees, for example, can range from 1.9 percent + $.30 per transaction for nonprofit organizations with over $100,000 monthly volume and 2.2 percent + $.30 per transaction for organizations with less than $100,000 monthly volume. However, as previously mentioned, the company also features the PayPal Giving Fund and the ability to place a widget that can be placed directly on your nonprofit’s website.

There are also third party processors that also work exclusively with nonprofits, such as Network For Good. Even though there’s a flat 3 percent transaction fee, and an annual bill from $79 to $179, this processors gives you everything you need to start and maintain a successful nonprofit, like donor management, donor pages, events, and peer-to-peer fundraising.

Payment Processors Designed Specifically for Nonprofits

Finally, there are numerous payment processors that have been designed specifically for nonprofits. They work pretty much like a merchant account or third party processor except that have features like fundraising campaigns, customer relationship management, integration of financial systems, and can be customized to meet your nonprofit's needs.

The concerns over these processors are that they can be pricey and they’re usually not designed for smaller non-profits.

I’ve mentioned a couple of these processors, like Blackbaud and Network For Good, but other solutions would be JustGive, CrowdRise, BrightFunds, Causes, iATS Payments, and GoFundMe.

The Future of Nonprofit Payment Processing

As technology continues to rapidly advance, there are several exciting and unique nonprofit tools, such as Pledgeling, Givolio, and Give A Dime. As for processing, digital wallets, such as Google Wallet, Apple Pay, Flint and Due will allow nonprofits to accept contactless payments from all donors, or simply accept payments by transferring the funds from a donor's account to your own nonprofit bank account.

Additionally, blockchain technology will reduce transaction costs and build trust since every transaction is recorded on a public ledger. For example, there’s BitGive, which is the world’s first Bitcoin nonprofit. This nonprofit has teamed-up with Save The Children and The Water Project, and has been able to deliver cheaper, faster, and more secure transactions.

Whatever type of payment options you decide on for your nonprofit, you will want to find the option that leaves you with the most money to take care of your special project for those who rely on your service.