Wednesday October 22, 2014

Credit Card Payment and Donation Options for Nonprofits

It's safe to say that credit cards are ubiquitous with modern day purchases. In fact, the U.S. Census Bureau reported in 2012 that there were over 1.1 billion cards. That means that if you don't have a credit card, someone else has yours, or maybe your two or three cards. With over 2 trillion dollars in credit card debt, it's safe to say that Americans are comfortable making purchases using them. But how does the internet factor in? Not surprisingly, the Federal Reserve System highlighted that retail sales are shifting to the internet, and the use of online credit card purchases is rapidly expanding.

Although you're almost certainly familiar with the increase in credit card usage, it has a couple of important takeaways. First: your clients, volunteers, donors, and overall community are comfortable making online purchases with their credit cards. They're doing it everyday. Don't be swayed by the our clients might be worried about security or the donors aren't familiar with online purchases arguments. We're living in a digital world, and people are accustomed to paying for it with their credit card. Secondly, proper security is simple to put into place. Although you may not be familiar with implementing payment systems, someone else has already figured out all the hard parts. Any correct implementation of an online credit card processing system will be secure.

Generally speaking, there are two methods through which you can accept credit card payments. The first is a Merchant Account. A merchant account is a type of bank account that allows businesses to directly accept credit card payments. The second is a Third-Party Processor. This account type (such as PayPal) is where a company accepts credit card payments on your behalf, and then you can transfer the money between that third-party account and your nonprofit's bank account. Setting up and maintaining a merchant account removes the middle man, but introduces a number of setup and processing hurdles, contract-specific terms, IT security issues. Unless your nonprofit processes a high dollar amount ($500,000+ per year) and you have the accounting and IT infrastructure to manage the additional overhead, WebSprout strongly recommends a third-party processor. In light of that, we'll focus exclusively on third-party processors for the rest of the article.

So, what really is a third-party processor? Basically, it's a company that uses their own merchant account to accept credit card payments on your behalf. More importantly, they work to provide easy and secure integration for accepting credit cards on your website. For the purpose of this article, the idea of 'accepting payment' or 'accepting donation' will be the same. It is simply the point that a user is paying money to the nonprofit via a credit card. The third-party services compared below all provide at least:

  • Allows individuals to make payments online using their credit card
  • The significant majority of PCI Compliance (IT security requirements) are handled by the third-party processor
  • The ability to integrate easily into an existing or new website
  • Does not require that the payer creates an account to make a purchase
  • Money can be deposited directly from the third-party processor into the nonprofit's bank account

The third-party processors we'll cover are:

Although there are a number of minor differences and additional service offerings between the companies, our focus will be narrow. Many nonprofits operate in an environment with limited funding and technical expertise. As such, we'll focus on a few key characteristics to compare between each service:

  • Cost The fee paid to the third-party processor. This is typically a per-transaction fee.
  • Integration How simple payments can be integrated into your website.
  • Funds How money is handled transfered between the third-party processor and your nonprofit's bank account
  • Support The quality and availability of support
  • Benefits Any incentives or benefits provided to nonprofit 501(c)(3) organizations.

The focus of this article is simply on accepting credit cards. Nonprofits should also consider the additional benefits and overhead posed by their own business needs. This includes items such as: donor records integration, integration into existing financial systems, international laws and escrow considerations, and any legal and ethical ramifications.

Service Cost Integration Funds Support Benefits
PayPal 2.9% plus $.30 per transaction. However, the percentage drops to 2.2% either if you are a 501(c)(3) or do more than $10,000 in business per month. PayPal offers a relatively simple 'Buy Now' or 'Donate Now' button integration. However, unless you have PayPal Pyament Pro, the website user will be redirected to PayPal's website during payment. See the PayPal demo video about the Buy Now button. Whether this is a positive or negative for your organization depends on your availability of technical resources and desired implementation. In general, money received into a PayPal account will remain there until explicitly transferred to an external bank account. Some PayPal accounts do allow for automatic transfers though. In general, it takes 3-4 days for money to be transferred from PayPal to your bank account. Historically, PayPal has presented itself as something similar to a bank account - were funds are intended to be left within PayPal. As a large company, PayPal does offer robust support options. However, waiting for and connecting with the best support individual can be difficult at times. PayPal offers the 2.2% discounted rate for 501(c)(3)s. Additionally, PayPal is a well-recognized company. Some donors or website users will likely find its use to be familiar and comforting.
Stripe 2.9% plus $.30 per transaction. Stripe offers simple drop-in functionality with Stripe Checkout. If your organization requires a more custom and inline look, a secure on-page form can be created. However, anything beyond a simple Stripe Checkout implementation would require someone with at least some technical skill. Unlike PayPal, Stripe automatically deposits all received payments into your bank account on a rolling basis, after a pre-defined holding period. They use either a 7 business day or 2 business day window. As a relatively new company, Stripe's support is one-stop and typically quite fast. However, they focus largely on online support, rather than phone. Stripe provides no special benefits to nonprofits
Braintree 2.9% plus $.30 per transaction. However, Braintree offers no transaction fees on your first $50,000. Braintree operates on a more technical level. Unlike the other services that handle the entire money flow from customer's credit card to your bank account, Braintree can operate simply as a payment gateway. Adding Braintree to your website will almost certainly require a web developer. Payments received via Braintree will take between 2-5 business days to automatically transfer into your bank account. Braintree is a relatively new company that was acquired by PayPal last year. Their support is likely more than adequate. Braintree provides no special benefits to nonprofits
2Checkout 2.9% plus $.30 per transaction. 2Checkout offers both a standard and inline payment experience. They provide Payment API, which should allow you to get 'integration in minutes'. More than likely, you will need someone with some web development experience. 2Checkout does however focus largely on existing shopping cart and e-commerce system integration. For websites with existing shopping carts, this should largely simplify integration. 2Checkout offers a number of payment disbursement options to bank accounts. Typically, it will take between 2-5 days. 2Checkout's website offers the standard set of support documents, along with a support phone number. Braintree provides no special benefits to nonprofits
WePay 2.9% plus $.30 per transaction. WePay offers integration into an existing or new webpage with an embedded form (iframe) or custom form. However, using this method requires the inclusion of some code. You will most likely require a web developer or very saavy tech individual to get things going. Payments can be set to automatically be deposited from your WePay account to bank account daily. Depending on your particular merchant threshold, payments are transferred either instantly or take 7 days. WePay offers a number of support documents and online support. WePay provides no special benefits to nonprofits

Since nonprofits differ in their needs and resources, it's very difficult to say which third-party service might be the 'best'. In light of that, we can make some rough and general recommendations for each. If you're strictly worried about costs and have limited resources, PayPal seems to have the best offering. If you need a solution that integrates in a clean visual manner, Stripe is good. If you have some web development resources available and need to save money at the start, Braintree has a good offering. If the received funds must be distributed to multiple or a variety of accounts, take a look at 2Checkout. Finally, if need money available to your bank account as soon as possible, WePay has a unique payment disbursement system.

Accepting credit card payment or donations on your website is secure and largely commonplace. There are a number of credit card payment solutions available, so take your time looking at their offerings. Also, be aware of your organizational needs and resources. When searching, be cognizant of website user expectations, available organizational funds and resources, and web development and technical skill. If you need help integrating credit card payments or donations into a new or existing website, WebSprout can help your nonprofit. Contact with questions or for more information.