Nonprofit Food for Thought: Credit Card and EFT Sustainers

Steve here! As SankyNet’s new Director of Strategy and Analytics, I wanted to share some noteworthy online fundraising information. Steve MacLaughlin of Blackbaud recently took to Twitter to share a useful and a possibly surprising trend that could have significant implications for your fundraising tactics:

Direct debit monthly donors have the highest retention – higher than credit cards.

So while credit cards are being emphasized, maybe more energy should be focused on this highly overlooked payment method. To clarify, electronic funds transfer (EFT) donations are much more common in Europe, however, its US presence is growing because more large organizations are proactively converting their credit card donors. It’s only a matter of time before other organizations follow suit.

So why is EFT growing in popularity? For the answer consider some of the inherent problems with credit card sustainers:

  • Credit cards have a shelf-life and generally expire within 2 years of the issue date – and today, even that varies from bank to bank.
  • Ever-changing fraud prevention measures, initiated by banks, require more donor information be transmitted for “card not present” transactions. These measures limit the ability of organizations to “push” donors’ credit card expiration dates two years out to help keep sustainers active.
  • Bank sales and mergers often result in changes to credit card data, causing organizations to lose information required to process monthly gifts. The same applies when donors change their addresses and don’t notify the organization.
  • Credit card donors are more costly. The credit card “discount rate” charged for each payment can be 3% of the total gift amount, sometimes higher. The cost of processing EFT transactions is often a much smaller per transaction amount.

When organizations don’t have systems in place to meet these challenges, the risks can be costly. EFT has a significantly lower likelihood of causing “unintended attrition” of your monthly donors. The hurdle with EFT, however, is that US donors are generally uncomfortable with sharing back account information, though this seems to be slowly changing.

EFT has a way to go before it becomes mainstream in the US, but it can serve as a valuable safeguard against the challenges with credit cards and remains a lucrative growth opportunity. If you want to stay ahead of the curve, ETF is definitely worth looking into.

One last point – organizations with significant numbers of monthly credit card donors should check with their credit card processor about “Account Updater” services – a tool which helps to keep your donors’ credit data current. While this service can be costly, it’s usually far less than the costs of losing your most valuable donors!