Increase Your Donations While Providing Added Convenience to Worshipers
By Matt Whitaker
Smart Payment Solutions, Inc.
www.smartpaymentsolutions.com
Mwhitaker@smartpaymentsolutions.com
703-516-4282
Originally published in the NACBA Ledger.
Matt Whitaker is the founder and president of Smart Payment Solutions, based in Arlington, Virginia. A native of the Hudson Valley region of New York State, Matt completed his MBA from the University of Chicago in 1995 and has worked in financial services and payment processing since then. Washington residents may have spotted Matt participating in one of his favorite activities, performing as an extra with the Washington Opera. Matt is a member of St. Charles Borromeo Catholic Parish in Arlington.
Electronic payments are on the rise nationally, and that has been a blessing for hundreds of churches across the country. An August 11, 2002, New York Times article ("The Collection Plate? Charge it, as Churches Embrace E-Giving", Sarah Kershaw, NYT, 8/11/02, p.29) claimed that Lutheran congregations, Greek Orthodox Parishes, and at least two large Catholic Dioceses have begun to offer their members an option to donate through automated giving programs. Worshipers have welcomed these programs, as more and more US consumers have gotten used to paying many if not all of their bills through electronic payment systems or automated bank drafts. And while data is hard to come by, some processors have claimed that churches can increase their donations by 10—30%, while steadying cash flow and freeing up dozens if not hundreds of volunteer hours previously spent counting cash and paper checks. With an ever-increasing array of payment options and providers in the market, any church, no matter how big or small, can easily set up its own automated giving program.
The benefits of electronic giving programs are easy to comprehend. Just take a look at your church’s weekly receipts for the last year or two. For one Catholic parish with 1800 members, we looked at their top seven weekly receipt totals, excluding holidays, and compared those with the average week. The difference was almost $3,000 per week, mostly attributed to attendance. Think about summer vacations, winter weather, and other distractions that may keep people and their donations away from services. One processor’s website claims that the average worshiper misses seven services per year, so by simply capturing those donations, churches can increase their receipts by 15%. Donors may also pledge more when making the decision annually instead of donating based on what is in their wallets each week.
Other benefits are tangible as well. That same Catholic parish spent 24 labor hours per week opening envelopes, counting cash, and entering data. By freeing up many of those hours, they could refocus their volunteers on other useful projects. The church is also able to reach out to occasional attendees, increasing their involvement and commitment. A Harvard Business Review article of September, 2002, ("Pricing and the Psychology of Consumption", by John Gourville and Dilip Soman, HBR, 9/02, p.91) cites a study that shows that frequent payments lead to a higher level of involvement. For example, people who pay their health clubs monthly tend to use the health clubs more often than those that pay annually. The same is true for churches, where an electronic giving program may be one more tool to increase involvement and commitment from the occasional attendee.
Some churches have questioned whether automatic payments would interfere too much with the traditions of the service, sending your gifts to the altar in a wicker basket. But others have found a way to accommodate electronic donations, by mailing coupons or stickers which say "I donated electronically." These programs also encourage enrollment, because some worshipers may be uncomfortable sitting on their hands as the collection basket flows down their aisle.
Another tough decision can be whether to accept credit card payments or to limit electronic donations to bank drafts through the Automated Clearinghouse (ACH) network. The major advantage of credit cards is their pervasiveness. People have become accustomed to using them for all sorts of payments. However, credit cards have several disadvantages, including their costs and the danger of pushing vulnerable consumers further into debt. Credit card processing fees are typically 2-5% of the donation amount. And, while many US consumers have credit cards, many of them are tapped out and struggling under high balances. Many churches have made the choice to not add to that pressure. ACH payments, or bank drafts, are ideal. Processing costs are are usually a low per transaction fee, and since the funds flow directly from the consumer’s bank account, they can only give what they have.
There are several ways to implement a program. On one end of the spectrum of providers are full service providers who charge fees to manage your collections program completely. In these programs, your donors may have to register online, and then the service provider will collect their donations on behalf of the church and credit the church’s account. The advantages of these programs are the convenience for the church staff and ease of implementation. The disadvantage is the cost. But before selecting a web-only solution, you should carefully consider your members’ demographics, as some older congregations will simply not use the web for payments.
In a simpler solution, your church can ask donors to sign up and provide you with a voided check. Then, once per month, or at any frequency that you arrange with your donors, you can send a file for an electronic bank draft through to your bank or to a third party processor. Some banks can provide this service, while others are still developing the technology. There are many small companies, called third party providers in ACH industry-speak, which can process the files through the banking system. When selecting a provider, be sure to ask about their reporting capabilities, as good reporting will save you a lot of time during tax season. Many donors will be more comfortable providing their checking account information to the church directly instead of to an outside company.
No matter what type of program you choose, electronic giving programs can help your bottom line by providing a more steady cash flow and increasing net receipts. Your members will appreciate the convenience of not having to remember their checkbooks each week, and they can take their summer vacation or sit out the winter blizzard comfortable with the fact that their donations will keep flowing into the church coffers.
