Picking a Nonprofit Payment Processor
How to Save Money and Start Accepting Donations
What is payment processing?
Payment processing is a broad term that refers to the backend financial processes that occur whenever a donor makes a contribution using an online donation form, text-to-give tool, mobile bidding app, or any other online fundraising method.
Why is a payment processor important?
Without a payment processor, your nonprofit can’t accept any online donations. While you may have a strong direct mail supporter base, it can’t be denied that online fundraising is the norm these days. Payment processors are necessary for online giving.
What type of payments can be accepted?
Most payment processors allow nonprofits to accept donations from most major credit card companies (MasterCard, Visa, Discover, American Express, etc.). Most processors also enable you to accept ACH direct debit payments straight from a donor’s bank account.
Basic Best Practices for Selecting a Payment Processor
In this section, we’ll highlight some of the fundamental best practices to consider when your nonprofit is looking at payment processors.
Each best practice will describe the tip and explain its significance for nonprofits. Click on one of the tips to jump ahead to that specific section.
Basic Payment Processing Best Practices
Choose a Dedicated Payment Processor, Not an Aggregator.
What is a Dedicated Payment Processor?
A dedicated payment processor lets your nonprofit choose and use your own merchant account.
A merchant account is basically a bank account that holds a donation while the payment processor verifies the transaction.
A merchant account does nothing but hold the funds, but you can’t accept donations without one.
The Problem with Aggregators
Aggregators process thousands if not millions of payments every day, and every one of them goes through the same exact merchant account.
The problem is that if something happens to one of the individuals using your aggregated account, it can cause problems for your organization’s ability to accept payments.
Additionally, if you run into problems with your aggregated merchant account support may take longer since you’re sharing the account with other companies or organizations.
Takeaway:
A dedicated payment processor will provide your nonprofit with more support and fewer delays when accepting donations.
Pick a Processor that can accept credit card payments and ACH direct debit payments.
Description
Credit card payments are exactly what they sound like: they’re donations made with a credit card. You may not be as familiar with the term ACH direct debit, but you’ve no doubt come across this form of payment processing.
ACH direct debit payments come straight from a donor’s bank account. Instead of inputting their credit card information on a donation form, a donor uses their bank account number and routing number to make a contribution. These numbers can be found at the bottom of a check.
Some payment processors will only allow nonprofits to accept credit card payments, but others will enable organizations to accept both credit cards and ACH direct debit payments.
Importance
Some of your donors will be more than comfortable giving with their credit cards, but others will want to use their bank accounts to donate to your nonprofit.
By offering both credit card and ACH direct debit options to your supporters, you increase the chances that more donors will be able to give with their preferred payment methods. Additionally, offering ACH direct debit payments specifically is an easy way for donors to set up recurring donations to your nonprofit.
A payment processor that has credit card processing abilities as well as ACH direct debit options can be the perfect solution for nonprofits that want to fundraise as effectively as possible.
Takeaway:
Credit card donations and ACH direct debit donations are both used by donors to give to the nonprofits they care about. Bring in more donations by offering both options to your supporters!
Pick a payment processor that only processes payments for nonprofit clients.
Description
Some payment processors only work with for-profit businesses, and some have a mixture of nonprofit and for-profit clients.
Better yet, some payment processors only serve nonprofit clients.
If nonprofit knowledge and expertise is something that you value in a payment processor (or any type of software, for that matter), make sure that you choose a payment processor who only works with nonprofit clients.
Importance
A payment processor that only works with nonprofit organizations can understand the unique challenges that charities face when fundraising.
A processor that has a variety of clients can’t offer that to nonprofits.
Instead of having a payment processor that struggles to interpret the specific needs that your nonprofit faces when fundraising, you could have a nonprofit-focused team working on all of the backend financial processes.
Takeaway:
They might be few and far between, but payment processors that only work with nonprofits do exist. If you can, try to sign up with one!
Choose a payment processor that integrates with your existing fundraising software.
Description
Most types of fundraising software rely on payment processing in some way, so it’s especially important that your payment processor can integrate with your other pieces of software.
It’s helpful to have different pieces of software that can “talk” to one another without a manual interruption.
Make sure that you look for a payment processor that integrates with your nonprofit CRM, membership software, online donation form, or peer-to-peer platform (or at least most of your other pieces of fundraising software!).
Importance
Choosing a payment processor that integrates with your other software solutions is arguably one of the most important points to consider when looking at payment processors.
If your payment processor doesn’t have integration options, you have to manually input all of the data you collect.
Not only is this time-intensive, but it also opens up your data to human error. When your payment processor integrates with most or all of your fundraising software, you can be certain that all of your data is being accurately synced up across platforms.
Takeaway:
Integrations are a must no matter what software you’re buying, but they’re especially important when purchasing a payment processor.
If you need to accept international donations, choose a payment processor that accepts multiple currencies.
Description
Some nonprofits don’t just raise money in their home country. They may have a strong supporter base in a country close by or even halfway across the world.
If this is the case for your organization, make sure that you choose a payment processor that can handle international donations and different currencies.
Most payment processors will offer different international fundraising options for credit card payments. And even though international ACH direct debit processing is a bit trickier to figure out, some payment processors also offer this option to their customers.
Additionally, some payment processors will help nonprofits set up separate merchant accounts in the countries they accept donations from.
Importance
This payment processing best practice is really only important if your organization currently accepts international donations or plans to receive them in the near future.
If you do have a strong international fundraising base, the importance of a payment processor with international processing abilities cannot be understated.
Having a payment processor that can handle international fundraising means that your nonprofit doesn’t have to rely on direct mail donations that have to come across borders and might get lost in the shuffle. International payment processing is much quicker and easier.
Plus, your international supporters will be so grateful that they have a simple way to give to your nonprofit that they may recruit more donors for your cause!
Takeaway:
If your nonprofit has international supporters, make sure that your payment processor will allow you to accept donations from them!
If you need it, choose a payment processor that offers other types of fundraising software solutions.
Description
If your nonprofit is still trying to figure out its fundraising options, you can use a payment processor’s fundraising tools to help you get started.
Not every payment processor is going to have other types of fundraising capabilities, but if it’s a priority for your nonprofit, then make sure you look into the other types of software options that a payment processor has.
These solutions may range from basic donation pages to CRM software to Facebook donation forms. Each processor will have different options for their nonprofit clients.
Importance
If your nonprofit is just starting out and is focused on getting off the ground, you might not be thinking about the types of software you need.
If this is the case, finding a payment processor with additional fundraising capabilities can be an easy way to set up a simple donation form and start asking for donations online without going to multiple vendors.
Of course, as your organization grows, you might outgrow the payment processor’s fundraising solutions. But that’s ok! If they integrate with other types of fundraising software, you’ll have nothing to worry about.
Takeaway:
If you need additional fundraising options and tools, ask about them when looking for a payment processor.
Make sure you know the payout schedule for credit card and ACH direct debit transactions.
Description
Because of the various processes and checks that take place when an online donation is made (either via credit card or ACH direct debit), it can take anywhere from 24 hours to a few business days for the funds to find their way to your nonprofit’s bank account.
While this is normal, it’s important that your nonprofit learns as much as you can about the payout schedule that a payment processor uses.
Do they deposit funds once a week? Twice a month? Once a month? Is there a different schedule for different credit cards and between credit card payments and ACH direct debit payments?
Importance
Knowing when your nonprofit will actually receive the money that your supporters have donated can help alleviate any worries you have when you sign up with a payment processor. Instead of wondering where your money is, you can rest assured knowing that the payments will be made on a timetable.
Knowing the payout schedule can also be useful when your nonprofit runs into issues with disputed charges or fraudulent transactions.
Having funds deposited on a regular schedule makes it easier for your accounting department to reconcile your various accounts and to report to donors who have questions about their contributions.
Takeaway:
Knowing the payment processor’s payout schedule will reduce confusion about where your funds are and when you’ll actually receive them.
Payment Processing Support and Setup Best Practices
Beyond the basic best practices to keep in mind when looking at payment processors, your nonprofit should also consider set-up and support.
How will you get in touch with the payment processor if something goes wrong? How long does it take to get up and running? Read ahead to learn more!
Payment Processing Support and Setup Best Practices
Choose a processor that’s easy to set up and allows you to accept donations soon after onboarding.
Description
Here’s the bottom line: your nonprofit doesn’t have weeks or months to work out the kinks with a payment processor (or any kind of fundraising software for that matter!).
You need to get up and running as soon as possible so that you don’t miss out on any online donations from your loyal supporters.
Make sure that you choose a payment processor that can be set up quickly and without too many issues.
Importance
Choosing a payment processor that takes weeks to set up and causes problems for your nonprofit isn’t a good way to get your fundraising efforts off the ground.
It’s crucial to pick a processor that can enable your nonprofit to start bringing in donations quickly and efficiently.
An easy setup process can also be an indication of how future problems will be handled and managed.
Takeaway:
No one likes a confusing and difficult set-up process. Choose a payment processor that can get you up and running in no time so that you can start accepting more online donations.
Look for a payment processor with support options that work for your organization.
Description
Is your nonprofit fairly tech-savvy? Or do you find yourself scratching your head every time a new technological advancement comes onto the scene?
Regardless of which category you fall into, it’s crucial to find a payment processor that offers the technical support that you need.
If you foresee several technical complications and questions, make sure that you choose a payment processor that will get back to you quickly with an email or a phone call. All nonprofits should work with a payment processor that offers timely and frequently available support.
Importance
Choosing a payment processor that has the support options your nonprofit needs is crucial for long-term fundraising success. It may not seem immediately important, but problems will arise sooner or later.
When these issues do occur, you want to make sure that you’re either able to handle it in-house or can turn to the payment processor’s support team.
It’s important that your vendor is not only easy to contact when needed, but also provides quick turnaround for solving your issues. Does the processor only have a troubleshooting page that isn’t very helpful? Do they only respond to emails with automated responses that don’t solve your problem? Or does the processor get back to you quickly via personal email or phone call? Consider support options before you buy!
Takeaway:
If your nonprofit requires comprehensive support options, make sure that your payment processor offers the assistance you need.
Best Practices for Payment Processing Costs and Fees
You should always be aware of the costs when purchasing any kind of software.
But payment processing fees can be tricky. That’s why it’s extra important to understand exactly what you’re getting into before you sign on the dotted line.
Read ahead to discover the best practices for payment processing costs and fees.
Best Practices for Payment Processing Costs and Fees
Be aware of the fee structure and any additional costs.
Description
Payment processors charge different types of fees for credit card processing and ACH direct debit processing.
The three most common types of fees are recurring fees, per-transaction fees, and incidental fees.
Recurring fees are usually taken out on a monthly or yearly basis. Some payment processors will charge a monthly or annual service fee or a monthly statement fee. Others waive this fee entirely. Most payment processors will also charge a yearly PCI compliance fee to ensure that the nonprofit is in line with data security standards.
Per-transaction fees occur each time a donor makes a contribution online. They differ for various types of payment methods, but they are usually a flat fee plus a percentage of the donation.
Incidental fees occur whenever something specific occurs. For instance, if a donor requests a refund, your nonprofit will incur a chargeback fee. There will be months where these fees will be more common, but there will be other times where you face nearly zero incidental fees.
Importance
Knowing the exact costs associated with your payment processor is an important part of the buying process.
If you aren’t aware of the fee structure, you might panic at your first monthly statement and realize that you’ve spent too much money on payment processing!
Some payment processors have their basic prices listed on their website, while others ask that you contact them by phone or email for a more detailed price quote.
Payment processors that work with for-profit companies and nonprofits might offer a discounted or reduced rate for nonprofit organizations upon receipt of proof of 501(c)(3) status.
Knowing the pricing structure for your chosen payment processor will eliminate any budgetary surprises.
Takeaway:
Payment processing fees and costs can be confusing and unclear sometimes. Before you sign a contract, make sure that you understand how much the payment processor will take from each donation.
Pick a payment processor with a simple and straightforward billing system and cycle.
Description
What does your payment processor’s billing cycle look like? Do they issue monthly statements? Quarterly statements? Do they take out their cut as your donations come in?
Make sure that you understand when your money is going to the payment processor before you buy the software.
Importance
You always want to make sure you have enough money on hand to complete the projects and host the events you have lined up. If you don’t, you might find yourself in a sticky financial situation.
Knowing when and where your nonprofit’s funds are going is crucial for long-term financial success.
Takeaway:
Just like you need to understand the fees that a payment processor charges, you must know when the processor will deposit the funds into your nonprofit’s bank account.
Payment Processing Security Best Practices
Security is one of the most important components of payment processing.
Not only do you need to keep your organization’s data safe, but you also have to protect your donors’ information from being stolen by fraudsters.
Read on to learn more about payment processing security best practices.
Payment Processing Security Best Practices
Choose a processor that adheres to the Payment Card Industry’s Data Security Standards (PCI DSS).
Description
The Payment Card Industry’s Data Security Standards (PCI DSS) are a set of rules that were put in place to protect consumers, donors, merchants, nonprofits, and anyone else that uses an online donation or payment form.
Adherence to PCI DSS means that your nonprofit is less likely to put your donors (or your organization, for that matter!) at risk for a security or data breach.
Choose a payment processor that maintains the highest level of PCI-compliance.
Importance
Without PCI-compliance, your nonprofit is at a much greater risk of compromising your donors’ information and your own data. You might even lose the ability to process donations if your payment processor isn’t PCI compliant.
Additionally, your nonprofit could face fines for every donation that you accept during a period of non-compliance.
The financial, legal, and moral implications of non-compliance make this security feature a must.
Takeaway:
PCI compliance is a non-negotiable security feature. If a payment processor doesn’t adhere to the highest level of PCI compliance, your nonprofit should not use it.
Look for comprehensive security features.
Description
Aside from maintaining the highest level of PCI-compliance, there are numerous other security measures that your payment processor might offer that can help keep your nonprofit’s data and your donors’ info safe.
Some of these security features will be standard and won’t cost your nonprofit anything extra. Others can be added onto a payment processing plan for a small additional cost.
An example of an additional security feature is AVS (Address Verification System). AVS checks the address that a donor uses during a donation process with the address on file with their credit card company. If the two don’t match up or if they look suspicious in any way, the payment processor will pause the transaction and alert the nonprofit.
Importance
Having a suite of security features at your disposal can give your nonprofit peace of mind. It also greatly reduces the risk of fraud and online theft of donor data or sensitive nonprofit information.
Nonprofits lose an average of $85,000 a year due to fraud and theft. Think about how much lower that number would be if every nonprofit had taken greater security precautions.
Researching a payment processor’s security features is a crucial part of the buying process. If a payment processor has a limited number of security measures, your nonprofit would do well to select another processor. If, on the other hand, you have a whole host of security features to choose from, you know that your data will be safe no matter what.
Takeaway:
Understanding a payment processor’s security features is tantamount when purchasing software. Make sure that the payment processor you choose has the security features that you want and need.
Neon’s Fundraising Software:
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