Full disclosure: I do advise small/beginning NPs to use PayPal so I feel somewhat obligated to defend it (though I have no loyalty to the brand and would abandon it at the drop of a hat if need be). Or, in case that’s bad advice, I feel obligated to understand why.

Very interesting point about Amazon; I noticed an NP vendor using it and now I understand why.

11% is outrageous…

As an aside, I think the Paypal PDF is inaccurate when it comes to Google’s chargeback policy. It clearly states that “Chargebacks resulting from claims of unauthorized purchases and non-receipt of items” are covered under a policy that will reimburse chargebacks for up to $10,000 a year. For every million in revenue, they will cover up to 1% in chargebacks.

Google and PayPal claim to do “advanced risk modeling” when it comes to chargebacks so that’s very useful for beginning nonprofits like us. I’m not sure what the risk modeling activities are at Network for Good, JustGive, PayPay, et al.

BTW, I talked to a nonprofit yesterday about their online donations processing fees. They’re getting charged 11%. I immediately suggested they should switch to another payments processor. I think I can safely say that 11% is pretty high but I’m not entirely sure what is the lowest percentage when we can say — ok, switch to something else. Would that lower limit be at 5.5% or so? I bet in 2010, we’d be saying 4% would be too high.

>And frankly, the way these solutions are architected (with dedicated support staff and an in-house data center) will never beat a PayPal

In response to that statement and to the PDF that is linked to, I would like to point out that while PayPal doesn’t have a support staff per se, it does come with some level of support in the form of technical documentation, not just for basic usage, but for its open API.

Its API does allow for one-page checkout, 100% control of look and feel, custom parameters for storing values like source codes, appeal/campaign codes, thank you letter codes, etc.

Paypal does offer recurring payments.

The state by state registration costs thousands of dollars, and will result in prosecution if not taken care of. Hmmm, I think the verdict is out on this point, no?

PayPal costs 1.9% to 2.9% +.20…

Honestly, the one thing PayPal doesn’t offer is the marketing expertise.

No polemical conclusion — just my observations. PayPal doesn’t seem like *such* a bad alternative.

Maybe there just aren’t enough PayPal API programmers in the NP world?

Clearly, there are a ton of variables to decide upon. Is it time for a matrix and a Google Spreadsheet? Hmmm… how would I weigh these issues?

I’m very curious about the 50 state registration feature that Stacie mentioned. Jon, does Donorperfect do that? I’ve done some research on my own and I’ve noticed that it’s not always true that you have to do it but that you ought to if you’re getting a substantial sum of donations outside the state you’re registered in. However, the law seems to be pretty murky about the guidelines. Stacie, can you discuss this further? How serious is that requirement?

Those of you who are vendors of donation processing services are also invited to speak about the way your company is handling donations and why you feel it’s the best way to do things. I want to hear everyone out as it’s a pretty useful thread.

Glad to see that poking around reveals a much higher percentage fee than most people realize.

As I posted earlier, DonorPerfect charges one of the lowest transaction fees in the industry- 2.99% +.95, and that’s the list price. For organizations that transact significant volume (> 500 transactions/month), the prices are even lower. Plus, we never hold onto the money- funds are deposited directly into the non profit’s merchant account within 24-48 hours.

What’s important to a non profit is the ability to track the incoming donations correctly. This means assigning items such as General Ledger, Appeal, Source, and Thank You Letter code (just to name a few) to each incoming electronic donation. This is even more critical if the nonprofit lets the donor designate their donation- and most do.

Then there’s providing the social network fundraising infrastructure for a non profit. Again, there’s very real costs to these as well. We launched ours last month, and I know it’s very competively priced:

http://www.donorperfect.com/fundraising-software/online-social-network-fundraising.asp

The problem with Google and others is that NONE of them support these integrated components, which means that every time a non profit imports the transactions, they are left to fend for themselves and typically correct everything by hand (which is a HUGE cost). In addition, when you pay nothing for something, what kind of support do you expect? That’s right- nothing. My guess is that Google hasn’t gotten back to you yet- I wonder why?

There’s a very real cost of supplying the right solutions for non profits that fits their needs so that it provides the value they need. I’m glad that you think that 5% or more is too much (I agree!) and I hope you see that Zero actually costs more in the long run.

-Jon Biedermann
Vice President
DonorPerfect Fundraising Software
http://www.donorperfect.com

The 4.75% fee covers credit card charges, bank disbursement fees, securing the transaction online and our administrative costs. Our administrative costs are registering with the state attorney general offices in all states that require it, creating a tracking report for charities to be able to access information on all the donations they receive, dispersing the funds to all the charity(ies), issuing a tax receipt for the donor, storing donation records, and handling donor customer service and questions on behalf of charity(ies).

As Allan noted in terms of breaking out the costs, we also offer a Custom DonateNow service with a monthly fee of only $29.95 where the transaction fee (3%) is broken out from the monthly charge. To help charities evaluate our solution we have outlined how it can be affordable even for small nonprofits at http://www.fundraising123.org/article/network-good-custom-donatenow-numbers.

We welcome any questions on this topic, feel free to contact us.

And frankly, the way these solutions are architected (with dedicated support staff and an in-house data center) will never beat a PayPal or Google at transaction processing costs. The business case is tough to make if the reporting tools from a Google Checkout for Nonprofits or a PayPal hit 80% of the needs for small nonprofits.

The bad part I see is that those extra services that Kintera and FirstGiving provide are improperly charged as part of the transaction cost. If you actually broke out the processing cost, you would see that the actual costs are certainly in the 2% range or less. It’s clear that reports building is expensive but it’s very unclear that it’s as much as an additional 2.75% or 5.35% charge. I think it would be better for our sector if vendors were to charge a minimal transaction fee but break out the costs for the reporting tools separately.

The pure donation processing model will become increasingly commoditized and price-driven, while add-on functionality will become the differentiator.