Online donations usually account for about 10% of your organization’s income, so having a user-friendly and accessible donation platform is essential. When searching for the best online giving platform, many nonprofits automatically assume that PayPal is their best option. In the past few years, PayPal has become a recognizable payment method that is used by many large companies. While it’s true that installing a PayPal donate button on your organization’s website is fairly easy, there are other facets you need to consider before deciding if using PayPal for online giving is right for your organization. Before you sign up for PayPal, you might want to consider the following:
PayPal’s donation process can be confusing
In order to donate via PayPal, a donor must first click the donate button on the organization’s homepage, which will take the donor to a PayPal giving site. Although it is possible to embed the PayPal giving form into the organization’s website, it often requires the work of an outside developer, which ends up being complicated and costly.
If the donor is a new user, he or she may be asked to create a PayPal account— a process that requires filling out multiple forms, syncing a bank account with PayPal, and then verifying the bank account via email. Many donors may believe that this process is mandatory, and as a result will likely become frustrated with the amount of time donating takes. This can result in a donor’s transaction remaining unfinished, and could affect his or her relationship with your organization.
Fund Holding
Unlike other online giving platforms, PayPal often withholds funds for a period of time before depositing the donations into your bank account. Instead of having your donations appear in your account the day after the donation is made, contributions received via PayPal usually take about 10-21 days to appear.
While initially this can seem like a minor annoyance, delayed deposits can actually have far-reaching consequences. When you aren’t able to access your donations, it can cause a delay in your organization’s services, particularly if you are operating on a fairly small budget. When you miss opportunities to further your mission, it could hinder your organization’s ability to grow and take on new projects.
Less Flexibility
One of the most common arguments for using PayPal is their low transaction fee. If your organization is a registered 501(c)3, PayPal charges 2.2% + .30 per transaction. However, if your organization is not yet registered, fees are much higher (around 2.9% + .30 per transaction). Registering as a 501(c)3 with PayPal is also a time-consuming process since you have to submit your letter of determination and other official paperwork to be processed before you can begin accepting transactions at the lower rate. It is possible to have a lower transaction fee, but only if your organization makes over $100,000 in donations through PayPal.
This lower fee also comes with the inability to customize the giving forms. You won’t have the ability to designate where the funds should go, or create a branded giving page. The forms will all have PayPal’s logo, which can make donors feel as though their gift is impersonal and/or their information is vulnerable to being hacked. In the case of your donate page, simplicity and customization are key. In fact, according to a 2013 case study by Optimizely, when giving forms are customized and pared down to only a few fields, donations increased by 11%.
When considering an online giving platform, it’s much better to be a merchant, rather than going through a third party. When you have a merchant account, it means that you are authorized to process donations, and also that you will have security against mistakes and fraud. Although using PayPal may seem like a good current strategy, it can actually negatively affect your organization’s long-term goals and ability to thrive.