I think that everyone working for a nonprofit can agree on two fundamental things. First, donations are the lifeblood of any nonprofit and second, credit card processing fees get expensive. That second fact is why some nonprofits are looking to alternative payment processors to cut down on that cost. One that they are looking at is Venmo.
I did some digging and discovered that Venmo is a terrible option for not profits. Why shouldn’t nonprofits use Venmo? Venmo does not offer a way to issue receipts to donors or a way to integrate into your donor CRM. These may seem like small issues, but when you get down to it they are huge.
Reasons Not To Use Venmo For A Nonprofit Payment Processor
Here are the top reasons why you should avoid using Venmo as a donation collection tool.
Venmo Can’t Send Tax Receipts
One of the requirements for any nonprofit is to issue tax receipts for any donation over $250. A failure to do this could result in your 501c3 license being revoked. While almost every traditional payment processor offers a way to send an email receipt, Venmo does not. In fact, Venmo does not even provide a billing or mailing address for the donor so a year-end receipt can’t be sent by mail either.
With no receipts, your donors are unable to claim their donations on their tax returns. This point alone should turn you away from Venmo as a payment processor. If it doesn’t, there are still a couple more reasons to stop considering it.
Venmo Has A Weekly Payment Limit
May standard users of Venmo are probably unaware that this is even a thing. Venmo caps weekly transactions at $5,000 for each user. While this may seem out of reach for some nonprofits, it is definitely within reason for a larger donor to make a donation greater than that. The last thing any nonprofit wants is to have to ask a major donor to make their donation in multiple increments over several weeks.
No Option For Recurring Giving
While one-time gifts are not to be overlooked, recurring giving is the new norm for many nonprofits. Being able to have a predictable cashflow makes any CFO smile. Also, according to a study put out by Classy, a nonprofit donation provider, the average lifetime donation of a recurring donor is 440% higher than that of a donor giving one-time gifts. It is clear that recurring donations should be the goal of every nonprofit.
Venmo, however, does not offer any way to set up recurring payments or donations. Venmo is designed for quick payment between individuals so any recurring functionality doesn’t make sense. If for some reason your nonprofit would decide to use Venmo as a payment processor, you could be leaving a lot of potential revenue on the table.
Venmo Doesn’t Integrate With Donor CRM’s
As the digital age continues to make its way into the nonprofit sector, one area that almost every nonprofit has taken advantage of is a donor CRM or database. As your organization scales, you need to be able to keep track of donor information such as the number of donations, total yearly donation amount, and donor contact information. Currently, there are two ways information can be added to your donor database. The first is through an integration with your payment processor or donation platform. The second option, which is much less appealing, is to manually enter the information into a database. This is typically done for donations that come in via check, cash, or bank wire.
Most processor and donation platforms allow for direct integration with a number of databases or connect to a 3rd party service that can then inject the information into your CRM. Venmo, again with its intended function of being a peer-to-peer payment portal, does not have this type of integration or functionality. Venmo has even taken down its API for new users, making it impossible to integrate with your current systems. This means that there would be a huge time cost of manually entering every single donation that comes in through Venmo.
Lack Of Credibility
Donors need to be confident that they are not being scammed when they make a donation. Internet scams are so common that every donor has is looking for something to give them confidence that their donation is actually going to whomever they are giving to. Most donors look for credibility indicators and the names of banks, merchants, and processors on a donation page to ease their minds before making a donation.
Venmo struggles to provide credibility to donors. Given that Venmo is only tied to a phone number and email address, it is easy for someone to set up a fake account that looks like an already existing nonprofit. This lack of trust and credibility would lead many donors to doubt the authenticity of your nonprofit and simply not give.
What About The Venmo Nonprofit Program?
Venmo launched a beta nonprofit program several years ago but closed the option off in 2017. Since closing off the program, Venmo has made no indication of reopening the platform or even mentioned desiring to work in the nonprofit space. It is safe to say at this point that Venmo has dropped the initiative. Instead, you are better off taking the financial hit and signing up with a traditional payment processor.
An Example Of A Nonprofit Using Venmo
The one example that often comes up when nonprofits are looking at Venmo as a way to accept donations is the small campaign by Water is Life that had a $10 cost and produced $800 in donations. The catch is that only hard costs are being listed here. If you are not familiar with the concept of hard and soft costs, a hard cost is a physical cost such as money and products. A soft cost is labor hours and focus/attention. While the hard cost of the campaign was only $10, it probably took several hours to individually message 1000 individual Venmo users.
Breaking it down to get an estimate, if we assume 1 message/minute and that the person writing the messages is making $15/hour the total soft cost for writing those messages is 67 hours of labor or another $250. While it might be tempting to think that you could consistently turn that into $800, I would hope that there is a better and more efficient use for your employees’ time.
Is Paypal free for nonprofits?
Unfortunately, there is no such thing as a free payment processor. Every credit card, bank, and payment processor needs to make money to survive, and they primarily do that through transaction fees. Paypal, like many other payment processors, does offer a reduced transaction fee for nonprofits.
How much do payment processors cost?
Most payment processors will charge somewhere in the range of 2-3% + $0.25-$0.50 per transaction. This covers the fees that the banks and credit card companies take plus the cut that actual processor takes. It is worth noting that if you are going to use a donation platform there may be additional fees that they charge as well.