In 2013, a record £1.1bn was pledged to charity in the UK via direct debit – according to Fundraising UK Ltd – which is an increase of £110m on the previous two years. In total, 58m individual direct debit donations were processed throughout the year.
This trend is supported by research, published by Charities Aid Foundation (CAF) and the National Council for Voluntary Organisations (NCVO). The UK Giving 2012-13 report found that direct debits accounted for a third of total donations to charity by value, up from a quarter during the previous year.
For charities, this should be a golden opportunity. As well as being more cost effective to process than cash or cheques, direct debits provide them with the ‘holy grail’ – regular voluntary income from one-off donations. So why do 91% of charities in the UK still not offer direct debit?
The answer, says Victoria Webster, proposition manager at CAF, lies in their perceived expense – both in terms of processing fees and administrative costs.
The problem, she says, is particularly acute for small charities, for whom registering and complying with BACs – the company responsible for clearing and settling all direct debit payments in the UK – can feel like a financial and bureaucratic headache.
“If you’re a fairly new or small charity, spending thousands of pounds to set up a direct debit facility can be immediately off-putting,” she explains. “It could take up to three months to get it up and running, and there are never any guarantees in fundraising – so you don’t know if it will work.”
Larger charities have been better equipped to take the risk – and reap the rewards – of offering donations by direct debit. But, that could be about to change.
Launched in June 2014, CAF Donate is a new donation platform that aims to level the playing field for small and medium–sized charities. “The idea is to speed up the process, take away the financial outlay, and make direct debits accessible to charities regardless of their size,” says Webster.
Using the CAF online portal, charities can fundraise via the web, mobile devices and Facebook, as well as process donations received by post and phone. It also offers charities a widget to allow supporters to donate to them without leaving the charity’s website. There is no set-up cost or monthly charge. Instead, CAF take a small fee per donation to cover the cost of providing the service.
The CAF Donate service also enables charities to offer one-off and direct debit donation options side-by-side. “People like to give in different ways,” says Webster. “If someone makes a single donation and says they’re happy to stay in touch with the charity, that can provide a great opportunity to talk about considering direct debit further down the line.”
The potential advantages are clear. For donors, direct debit is increasingly seen as a convenient and minimum effort way to give. They can control and amend their payment schedule, and can spread donations over a comfortable timeframe. According to the BACs Family Finance Tracker 2013, the average value of each charitable direct debit is £181 per year (just over £15 per month), more than any other donation method.
Without the customary administrative or upfront charges to set up direct debit payments, small charities are no longer taking a risk. As well as drawing in regular income with no fixed end date to donations (the average lifespan is seven years), it is also tax efficient and easy for charities to administer. The full CAF Donate service automatically includes Gift Aid reclamation to make every donation go further.
Webster says that charities thinking about setting up a direct debit facility should first consider their wider organisational strategy. “If it clearly supports their long-term thinking, then direct debits are a great idea,” she says. “If it’s trying to fix a short-term problem, it may not be the right thing.”
CAF also recommend that charities look closely at their supporters’ behaviour, for example, how they currently give, who has donated more than once, and what motivates them to give. It recommends making donors feel like they are in control – e.g. giving them different monthly donation tiers to choose from – and making it clear where their money is being spent.
If they can succeed in driving more of their fundraising via direct debit, the hope is that smaller charitable organisations can start to benefit from the revenue security that many larger charities have been enjoying for years.
“We all feel passionately about causes that we support, but we don’t always have the time to come back and give again,” says Webster. “By offering direct debit, charities can connect with donors at that crucial point of engagement – and help them support their charitable activities over the long term.”
If you would like more information on the online donation platform CAF Donate, please email: talkcafdonate@cafonline.org
Content on this page is paid for and provided by the Charities Aid Foundation sponsor of the Guardian Voluntary Sector Network’s Charity Money hub.
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