A new year. New opportunities. A renewed focus on donors, mission and impact. To kick off 2023, here are my top three recurring giving predictions for 2023:
1. Offering Donors the Easiest Way to Give
The No. 1 reason why monthly donors give is because they want to help, so it’s up to you to offer the best way for them to do exactly that. To be more donor-centric in 2023, I predict there will be a continued interest in recurring giving by straight recurring gifts, as well as via donor-advised funds and buy now, pay later options.
It’s important to remember that the target groups in each are different. Most recurring gifts will come from smaller donors (usually less than $250 one-time gifts). DAF gifts, as well as donate now, pay later gifts, will most likely come from donors who can give more than that.
Straight Recurring Gifts
In my view, recurring gifts will always be the ideal solution for donors who want to spread out their giving. They want to help but cannot make the big gifts yet. Here are the perks of recurring giving:
Donors can get started for $5 or $10 a month.
There’s no end date.
Donors are in control and can change their amounts at any time.
Donors can give by credit card and, in many cases, via electronic bank transfer, PayPal, Google Pay, or Apple Pay.
If stewarded correctly, recurring donors will stay with the organization for many years.
If stewarded correctly (and asked), recurring donors will make extra gifts and upgrade their giving.
If stewarded correctly (and asked), recurring donors will leave the nonprofit in their will.
Recurring donors typically care about the relationship they have with the nonprofits.
Nonprofit fees can be zero if the donor chooses to pay the fees, which happens most of the time when offered.
It’s truly a long-term approach to help nonprofits become more sustainable.
Recurring Gifts From Donor-Advised Funds
If we look at the overall trends in the growth of DAF giving, I expect this to continue in 2023, especially as some DAF providers have lowered the thresholds. I expect more donors to make recurring gifts from their DAFs as well. The donor can choose to do so with or without an end date. The minimum gift is usually $50 per month.
Recurring Gifts Via Donate Now, Pay Later Options
With donate now, pay later options, the donor can make a substantial donation now and, indeed, pay later. I have heard about two players in this field — B Generous and Givzey. Here is an overview of each option:
Payoff timeframe. B Generous allows the donor to pay off their debt over nine months whereas Givzey spreads it over four months. That means there’s an end date.
Donation limit. B Generous allows donors to make substantial gifts — up to $50,000 — while Givzey limits it to $5,000. So, the minute a donor decides to make a gift, they’ll get the tax deduction (just like with funding a DAF), but have a predetermined number of months to pay it off.
Nonprofit fees. B Generous charges a considerable fee to the nonprofit, although it’s possible for the donor to cover the fees. Givzey charges a subscription fee (up to $500 a month) to the nonprofit.
There’s certainly a place for the donate now, pay later approach, but here are two things to consider:
Who owns the relationship with the nonprofit?
If the donor does not pay their debt, B Generous or Givzey will have to chase the gift and it’s really out of your nonprofit’s hands. While both B Generous and Givzey indicate they’ll take the risk, I’d be rather uncomfortable having someone else follow up with my donors.
Do you really want your donor to go into debt to make a gift to your organization?
I’m personally struggling with this. Donors can make gifts from their credit cards to spread out payments over time and the nonprofit wouldn’t know how much debt the donors are carrying. They’ll still be able to deduct a full year’s worth of gifts, but they may not be as worried about tax-deductions.
There are definitely concerns about perpetuating the easy debt culture, especially for young adults. And I think there is already a backlash on the retail side that is concerning investors in the buy now, pay later platforms.
One nonprofit told me:
“By far, the big attraction to nonprofits is getting the full amount of the gift up front — less the substantial fees. But it portrays charitable giving as a retail transaction rather than a relationship engagement.”
2. A Larger Focus on Recurring Donor Retention
So much of retention is in the details. A focus on tracking at-risk recurring revenue is a big first step. Small things can have a huge impact.
Map out the process. What happens when a payment doesn’t come in? How soon does an email go out? Can you send a letter or postcard? Can you make a phone call or send a text?
Check with your current platform. Ask what can be done to improve recurring donor retention.
Make sure to optimize every avenue. Many systems already offer the credit card updater, which has been a gamechanger for recurring donor retention. Next, nonprofits will implement smart retry systems already used by subscription-based companies. Some already work with nonprofits. A few options I’ve seen include Chargebee, FlexPay, Payway and Recurly. For a small investment, nonprofits can keep more recurring donors, which will help your sustainability.
3. Growth in Recurring Gifts Via Electronic Bank Transfer (EFT)
I’m starting to see some organizations make the EFT/direct debit/echeck option the default to grow the number of automatic bank recurring donors.
Two countries are in the process of doing away with checks (the Netherlands and New Zealand). While we in the U.S. may be a while off from that, eventually, that change will come. With about 85% of gifts still received offline right now, it behooves nonprofits to become less dependent on checks. Not to mention the fact that it’s becoming increasingly more expensive to have a lockbox, open the mail, deposit the checks and manual or scanned data entry.
Now is the time to plant the seed about giving automatically from the donor’s bank account. I predict that we’ll see more requests with EFT as an option, along with special switch requests, either during the retention process or during the year. The more payment platforms allow for EFT, the easier that process will be.
Offering donors to give via EFT will help you skyrocket your retention to the highest level (some 95% of recurring donors will keep on giving compared to between 62% via checks and 87% via credit/debit cards, according to Blackbaud’s donorCentrics Sustainer Benchmarking Study). Younger donors are comfortable paying from and giving from their bank account.
There you have it. You have a whole new year to start growing your recurring donors to the next level.
Published by NonProfitPRO on January 18, 2023. with slight edits.