The financial effect
Traditionally, a significant portion of donation revenue goes towards individual transaction fees and annual service hosting costs. According to business website, Startups.co.uk, each card transaction takes a typical fee of between 1-3% meaning processing costs can quickly add up.
In contrast, the cost of receiving payments via open banking tends to be far lower compared with credit or debit cards, online or in-person. This means more revenue going directly to their funds.
There is also often near-instant settlement and access to any money coming in. Thanks to the UK’s retail payments system, Faster Payments, transactions are typically completed within a few seconds meaning donations are on account and available typically more quickly than card-based payments.
Opportunities for savings
Small charities make up 96% of the charitable sector and with over 80% of charities seeing an annual income of less than £100,000, additional cost savings or funding would be welcome.
A leading charities’ payments provider believes open banking offers extensive savings in processing fees.
Another option is using a real-time donation processing service such as Wonderful Payments, which calculates that with a £100,000 per year income, a charity could save up to £1,900 each year on some payment platform fees using its service.
This could mean upgrading accounting systems and reallocating valuable admin hours and resources towards service output. It could also mean the ability to provide more services and meet scaling demand with greater ease.
Unexpected bonus
Both JustGiving and Wonderful have seen additional benefits with using open banking payment options too. Kieron James, CEO of Wonderful, pointed out that the platform has seen a drive from fundraisers preferring to work with charities that don’t use an intermediary with processing fees. While Oliver Shaw-Latimer, Director of Global Fintech at JustGiving, said: “With no middleman, JustGiving is now seeing savings of 50%, as well as the displacement of more expensive payment options, such as mobile wallets.” Could open banking options via platforms like these help your charity?