For any organization that depends on donations, having a secure and well-functioning payment processor is key. Asking for donations is already a lot of work. The last thing you want is a payment processor that makes the donation process complicated or insecure.
Studies indicate that donation abandonment stands at 60%. That means that 6 in 10 potential donors get to your donation page and leave without completing the transaction. Having the right payment processor can go a long way in bringing this rate down.
In this article, we will look at what a payment processor is and discuss some of the best payment processors you can work with.
What is a payment processor?
A payment processor is a tool that can help you accept donations, collect membership fees, sell merchandise and tickets. Payment processing refers to a series of steps aimed at processing the financial data of donors whenever they transfer funds from their accounts to yours.
Key terms to know in payment processing
- Merchant account: This is a special type of bank account that allows a nonprofit or business to accept payments, usually card-based or electronic.
- Third-party processor: This refers to a company that enables nonprofits to receive payments or donations without the need to have a merchant account. Essentially, you use the third-party’s merchant account.
- Payment gateway: This is a tool that validates if the information the donor has provided is correct and ensures that they have the funds to make the transaction. Payment gateways prevent fraud and also protect credit card details.
- VPN: Since security is of paramount importance during online transactions, payment processors use VPNs (virtual private networks) to encrypt payment details (protecting data from being accessed by unauthorized users) and stop fraudulent payments.
- Aggregator: This is a company responsible for processing transactions and donations for several small nonprofits. Examples: PayPal and Stripe.
- ACH: Automate Clearing House (ACH) refers to a network that is used to electronically transfer funds between accounts. ACH is essentially an electronic check.
Importance of payment processors in virtual fundraising
Choosing a payment processor isn't a decision you should take lightly. 54% of donors prefer to give with a credit or debit card and 9% say they like PayPal. Offering familiar payment options to donors will help you increase the rate of donations.
And remember that most virtual fundraisers, including events like raffles and sweepstakes, have a dedicated landing page that encourages visitors to donate or purchase tickets. For this to happen, it is essential to have a payment processor that’s intuitive and seamless to reduce drop-off rates.