The Green Sheet Online Edition
October 10, 2016 • Issue 16:10:01
Nonprofit payments: opportunities and challenges
When it comes to selling payment processing, many merchant level salespeople (MLSs) choose to build a portfolio within targeted industries. And for good reason: the legwork invested in becoming a recognized payments expert in a specific industry pays dividends.
Indeed, the expertise gained from supporting the unique requirements of a single vertical often develop into long-standing, mutually beneficial customer relationships. These are the types of relationships competitors have a difficult time breaking up. Moreover, such customers are excellent sales conduits for reaching their peers, since word-of-mouth referrals are highly regarded.
A multibillion-dollar industry
These factors are prominent, yet often overlooked, in the not-for-profit sphere. Nonprofit and charity organizations tend to develop tremendously loyal vendor relationships, and professionals in this sector also interact regularly with their industry peers.
According to Charity Navigator, U.S. not-for-profit organizations raised over $373 billion in 2015. This number reflects a 4.1 percent increase over 2014, the sixth straight year giving has increased and the second consecutive record-setting year.
The majority of these donations were made electronically, making nonprofits a viable vertical simply based on volume. Many of the entities also used innovative fundraising methods for collecting contributions and donor behavior data. Thus, payment providers have significant opportunities to provide new, automated solutions for gleaning donor information at the transaction point, enabling cause-driven organizations to better understand donors and build sustainable relationships with campaign donors.
Why nonprofits are overlooked
One reason the not-for-profit arena is passed over by MLSs is a common belief in the payments industry that nonprofit organizations are difficult to break into and their service demands outweigh the margins. It's true, nonprofits are careful about the payment processing partners they choose. They also tend to have specialized processing needs when it comes to setting up card-not-present donation channels or supporting community-based fundraising programs.
Jim Barney, Vice President of Sales and Marketing at Click & Pledge, told The NonProfit Times, "You can go to 500 different places, and someone will open a merchant account for you. It's easy to find the lowest price; just shop around. The key to getting value is what do you get with it?"
Nonprofits also operate on lean budgets to ensure overhead stays low and revenues remain high. As a result, they typically seek the greatest processing efficiency for the lowest pricing possible.
Serving those who serve
In addition, the nonprofit sector can produce both tangible and intangible benefits for any merchant processing business. However, like every specialized industry, it is important to understand and cater to its constituents' needs.
The Green Sheet asked Chicago-based educational nonprofit Midtown Educational Foundation for a few tips on what payment professionals can do to sign more not-for-profit clients. Chelsea Gibson, the foundation's Marketing and Development Associate, offered the following insights.
"As the decision maker for a nonprofit's website and the payment processing interface, we are looking for transparency and flexibility," Gibson said. "Rather than a one-size-fits-all model, which are often simpler, it is helpful to have the components and fees broken down with tiered-subscription services, so we can pick exactly what we need with no extra frills."
Gibson feels that the "cafeteria approach," which allows nonprofits to piece together favorite web-services for the most appropriate, cost-efficient solution, makes the most sense. She also pointed to third-party solutions as an excellent way for nonprofits to select elements that most efficiently serve their organizational needs.
She mentioned JotForm Inc. as one such company that offers multiple third-party widgets and a menu of payment processors. "We can have the most user-friendly form with the lowest fees for payment processing," she said.
Gibson suggested that legacy processors offering fluctuating fees based on card and transaction type consider updating their services and pricing models for nonprofits. "Their forms and plug-ins are not as user-friendly and streamlined, which is why specialty form providers (where you can plug your low-r
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