Selecting an Online Donation Tool, Part 1

There are a number of excellent options that allow even small nonprofits to accept credit card donations on their Web sites. Unfortunately, there are even more options that are overpriced or unimpressive. And it is hard to know which is which: choosing an online donation tool can involve a bewildering array of jargon, fees, and surprisingly unhelpful sales information.

We wanted to get to the bottom of all the options. We reviewed 27 different vendors that offer lower-priced online donation tools that can be used with an existing Web site. We talked to nonprofit staff members and consultants who have used these tools, read existing reviews, discussed the tools with sales representatives, looked at current clients’ donation forms, and played with administration interfaces.

Analyzing all this data required a healthy dose of interpretation, opinion, and consideration of different nonprofit needs. Unfortunately, there was no way to just add up a bunch of numbers to define what tool was best. But there were clear differences between the tools that allowed us to compare them and to recommend a set that, in our opinion, are likely to meet the needs of the majority of nonprofits. What we found was good news: many affordable tools are also powerful, friendly, and flexible

Who Is This Report For?

This report is intended to be used by small- to medium-sized nonprofits with some specific needs: those that already have a Web site and are hoping to add online donation functionality. While we focus on the needs of U.S.-based organizations, nonprofits outside the United States may find some of the tools of use to them as well. For instance, this report may be helpful for:

• A small grassroots organization that would like to receive online donations without investing a lot of time or money in adding functionality to their Web site.
• A human services agency that has had some small success with online donations in the past and is looking for a tool that will better support their needs.
• A museum that wants a full featured online donation system but doesn’t want to maintain it in-house and doesn’t need sophisticated email or outreach tools.

But this does not include everyone. There are a couple of key types of tools that are not included. Are you taking in a $5000 or more per month in online donations? Do you also need substantial functionality for product sales, event ticketing, or member registration? Are you planning sophisticated email campaigns that need to be tightly integrated with your online fundraising? Are you considering redesigning your website or the way you update the text on it? Are you dissatisfied with your current method of storing donor or member data? These are signs that you may need to look beyond the tools included in this report to the wider world of custom and integrated tools.

This report is intended to be a snapshot of the available options as of October 2005. The products available and the features they offer change rapidly; please verify information before relying on it for decision making purposes.

What's Available?

At a basic level, all online donation tools work pretty much the same way. A “donation” button on your Web site links to a donation form. Donors enter their contact and credit card information into the form and the tool takes care of the rest, first verifying the credit card and then ensuring that the donor’s money gets to your organization. Online reporting tools allow you to see what’s been donated and export the donation information to another database.

But beyond these similarities, donation tools come in a lot of different packages. Some are intended to stand alone as a donation tool, while some come in suites intended to support much more.

Donation Portals:

Vendors like Network for Good are focused around their own donation portal, a centralized Web site that allows visitors to view information or donate to a wide variety of organizations. You can link your Web site to your organization’s page on the portal, but it’s quite clear to the donor that they are leaving your website to go to a different website that will process their donation. These tools are inexpensive, typically charging about 3 percent of each donation with no other fees.

Donation Specialists:

Groundspring DonateNow is in a group by itself, specializing in providing donation functionality that match the organization’s website. Because this vendor handles only donations, it is quite reasonably priced for the customization and features it offers, charging 3 percent of the donation and monthly fees of $15 to $25.

Online Payment Specialists:

GiftTool, Contribute, CharityWeb and others provide support for various online payments: event registration, product sales, membership dues, donations, and more. Many of these tools are a good option even if you only need to take donations, but can be even more powerful if you want to collect additional kinds of payments. Fees vary in quantity and type, but typically include either 3-8 percent of the amount paid, monthly fees of $20-$50, or some combination of both.

Integrated Online Solutions:

A growing number of tools are becoming integrated solutions that support donation, email, Web site content management, and more, all powered by a central online database. These products, such as MemberClicks, eTapestry, or Democracy in Action are intended to serve as your primary donor or constituent database and provide suites of tools to communicate with and manage your constituents. For instance, Democracy in Action provides tools to process online donations, send bulk email, contact legislators, post news and press releases, and more. These vendors typically charge about 3-8 percent of the amount collected in donations plus monthly fees ranging from $15-$1000 or more. Note that we have only included the less expensive products (under $100 in monthly non-transactional fees) that make sense for organizations looking only to take online donations from an existing Web site. A wide variety of powerful integrated solutions merit a report of their own (for instance, GetActive, Convio, Kintera, LocalVoice, and Artez, among others).

Custom Payment Systems:

There are two more options that will not be covered in detail in this report. If you are willing to do some coding, consider integrating a shopping cart package to process your online donations. If you have a high volume of donations ($5000/month or more) or very specific needs, it is worth considering building your own payment system from component parts. This requires a significant up-front investment ($2000 to $10,000 or more) but could well pay for itself over time.

Features and Functions

The donation process begins with a request for donations on your Web site. This might be a “Donate Now” button or a link with information describing all the good work you do and how you use donors' money. When donors click the button or link, they are taken to a form where they can determine how much they would like give, enter their billing and credit card information, and fill out any other information you request.

The actual look of the form is one of the big differentiating factors between the tools. Some tools -– such as PayPal and Network for Good -– make it obvious to the donor that they have left your site and are now being asked to donate through a different Web site. A majority of the tools allow you to tailor the appearance of the donation form to match the colors, fonts, and images to your own Web site. A key factor is whether the donation form can include the navigation bar from your Web site: unless the form has the same global navigation as the rest of your Web site, it will not look like it is part of the same site.

All donation tools ask the donor to enter their credit card number and contact information, but the other fields shown on the donation form vary substantially from vendor to vendor. Most allow the donor to choose to target their gift to a specific program or to sign up for a newsletter. Some provide support for tributes, memorials, premiums (i.e. thank you gifts) or employer matching. Customizable donation amounts and text tailor the donation choices shown to the donor. The ability to include custom fields in the form allows you to collect organization-specific functionality -– or to support targeted gifts, newsletter sign-ups, tributes and other functionality in an alternate method.

Different vendors allow for different types of payments. All support Visa and Mastercard; many support American Express, Discover, or other cards. PayPal is increasingly used as a payment method. Many vendors provide recurring donation functionality so that donors can automatically give the same amount every month. eChecks (also known as EFT or ACH transactions) allow donors to enter check information and have money automatically transferred from their checking account. Some can also handle donations from outside North America; U.S.-based vendors need a specific setup to be able to verify credit cards issued by foreign banks.

When donors enter their information and click to finalize their payment, the backend payment process begins. The credit card is validated, to ensure that the number is acceptable and that funds are available. Some vendors provide additional checks to try to reduce the number of fraudulent charges: Does the CSV code (the three digit code on the back of the card) and/or the billing address match the one in the credit card issuer’s record? Does the donation match a fraudulent pattern, likely resulting in a charge that is not a legitimate donation? If the payment information passes the screening process, the card is charged.

There are two backend entities that facilitate this process.When the money is received from the donor, it is deposited into a type of bank account called a merchant account. This merchant account may be in your name or the vendor’s name. The actual process of communicating with the credit card company and bank is done by a service called the payment gateway (also referred to as an internet gateway or payment processor).

The whole transaction process happens in a matter of seconds. When the transaction is complete, the visitor is shown a confirmation page and sent a confirmation via e-mail. Usually the donor is sent a tax-ready receipt via e-mail; some vendors will account for less than 100 percent deductible donations in these receipts (for instance, to account for a thank you gift). A few vendors provide a donor Web site to allow donors to see and edit their donations.

At this point, a record of the transaction contact and donation information is typically available in an online reporting tool. A few tools allow you to see a summary of donation tools over time, enabling you to compare what you received this month to last month, or this year to last year. More sophisticated filtering, when available, can help you analyze your donations. If you will need to include a record of the donations in an external database, make sure you can export to a text file. Files that are compatible with a specific database or features that allow you customize the export file will help to make this data ready to import into your database. Some vendors provide programmatic access to data, for instance through secure FTP or Web services, that allow you to program a custom routine to automatically pull data into your database.

Actually receiving the money takes a little more time. If the merchant account is in your name, the donated funds will be electronically deposited into your bank account in three to five days. If you are using your payment vendor’s merchant account, you will get the money from the vendor by check or electronic deposit (EFT). Most vendors pay monthly; a few pay twice a month or even more frequently.

How to Choose

Consider whether donations are just a small piece of a larger puzzle

This report is geared to those whose primary concern is adding online donations to an existing Web site -– but that might not include you. Do you need substantial functionality around product sales, event ticketing, or member registration? Are you planning sophisticated e-mail campaigns integrated with your online fundraising? Are you considering redesigning your Web site, or the way you update the text on it? Are you dissatisfied with your current method of storing donor or member data?

If so, you should consider a tool that addresses those needs as well as donations. Unfortunately, many of the best options for you may not be included in this report.

Decide whether to use a vendor’s merchant account or your own

To take online donations, you will need to use a bank account that accepts online credit card payments, called a merchant account. Some vendors will allow you to use their account, or you can apply for your own. If you already have a merchant account (for instance, for taking credit card payments over the phone) it is possible that you can use it for online payments as well – but there will still be some verification and paperwork to do.

Why would you use a vendor’s merchant account? It is easier to use a vendor’s account than to do the paperwork for your own account, and is likely to be cheaper for small organizations. The vendor will also answer donor questions if the donor has concerns about the charge they see on their credit card bill.

Why would you establish your own account? For one, you receive the money faster –- generally within five days rather than in bulk once or twice a month. This also assures that your organization’s name is shown on the donor’s credit card bill, rather than the vendor’s (however, some vendors can display your name even if you use their merchant account). If you have a high volume of donations, using your own merchant account is generally cheaper. It also gives you more flexibility to choose the merchant account that has the rates most favorable to your typical donation volume, or even to build your own payment functionality down the road.

In general, it makes sense for organizations that are just getting started with online donations to use a vendor’s merchant account, while those who are ready to invest more seriously should consider setting up their own account. Most vendors who require you to have your own merchant account will recommend several with whom they work. In fact, the vendor may limit you to using one of a specific set.

Calculate the size and volume of donations you expect to get

Different vendors use different pricing structures. It’s important to estimate the donations you expect -- how many donations you expect to get per month, and how large a typical gift will be -- in order to compare fees across vendors. Remember that if the vendor does not provide a merchant account, you will need to pay for that separately.

Decide if the donation form needs to look like your Web site

Some vendors’ donation forms look nothing like your Web site, and some even display prominent logos for the vendors themselves. Others offer forms that are tailored to match your organization’s Web site and navigation -– but you typically pay for the privilege. If you are just getting started, it may make sense to get your feet wet with a cheaper tool that doesn’t allow as much flexibility –- a recognized brand like Network for Good or Paypal could even lend additional credibility to your donation processing. However, you will appear more professional and likely raise more money with a donation tool that matches your site’s look.

Weigh the time required to import donations into your donor database

If you need to pull the data from the donation tool into another database, consider how much you are willing to spend to save yourself time doing it. Nearly every tool will let you export your data as a text file in order to import it to a separate donor database -– an investment of about an hour a week. However, some tools make this data integration process much easier. Some allow you to create a text file that specifically matches your donor database. Others allow you access to your data programmatically so that you can set up an automatic process to synchronize the data.

Use care when considering the online donation tools offered by vendors who specialize in offline donor databases. These donation tools typically allow you to export the data into a text file of the right format, but otherwise have little integration with the offline donor database. For instance, the company that offers GiftMaker Pro also offers an online donation tool. Using the donation tool, you can create a text file that is in a GiftMaker- friendly format, but you then must upload that file into GiftMaker by hand every time you would like to synchronize the data.You will get as much from any tool that supports the creation of custom text files -– and often a more robust donation tool as well.

Decide on critical features

Is it vital that you be able to accept tribute or memorial gifts? Support employer matching? Include organization-specific custom fields? Handle recurring gifts, eChecks, or donations from outside North America? Receive the donation money more than once a month? Define what features you can’t live without, and narrow the list to those that can support these features.

Now that you've read about ways to assess your needs, check out the next part of this article, Selecting an Online Donation Tool, Part 2, which includes Idealware's reviews of online donation tools.