How Nonprofits Can Use Zelle And Why They Shouldn’t


With the wave of peer-to-peer money transfer options becoming available, it is easy for a nonprofit to envision a future where they are receiving thousands of donations from these apps and cutting down on their processing fees. The reality is, it can be done, but it’s probably not a very good idea.

Can nonprofits use Zelle? While Nonprofits can technically use Zelle to collect donations, it is not recommended. There are transfer limits set in place for each individual and it quickly becomes a receipting nightmare.

What Is Zelle?

Zelle is a direct transfer financial tool developed by US Bank primarily intended for peer-to-peer use. It directly connects to the user’s bank account through either a verified email or mobile phone number. Once Zelle has been set up, funds can be sent to anyone with a bank account in the US. This is done by entering the recipient’s email or mobile number. The individual then receives a step by step guide from Zelle on how to receive the funds.

This is very attractive for many for two big reasons. The first is that there are no processing fees associated with Zelle. With nonprofits today trying to squeeze every dollar out of their donations, this is a very attractive feature and most likely the primary reason they would look at Zelle as an option. The second reason is that unlike other peer-to-peer options like Venmo, both parties are not required to have the app to receive money. This doesn’t apply to nonprofits as much because the sender is the one always required to have their bank account connected with Zelle.

Basic Strategies For Using Peer-To-Peer Money Transfer Apps

While it is not recommended for nonprofits to use money transfer apps, here are a couple of basic strategies if you decide to go down that path.

Conferences And Events

The best use case for tools like Zelle would be at a large event. The power from peer-to-peer money transfer tools is their lack of transaction fees, meaning that small donations go a lot farther. Ideally, a call to action from a stage would be given, setting a goal for the end of the event. Then a projector could be connected to a phone or computer to display the total amount of donations that have been given. This will give the donors a sense of contributing towards a greater goal as well as increase excitement.

Social Media

The other way to leverage a system designed for higher volume, low dollar donations is through a social media campaign. If your nonprofit has a sizeable social media presence, it may be possible to engage your audience through that channel and request a small donation using Zelle or other apps. This has the same effect as using a conference but does not require the upfront costs associated with putting on an event.

Why Nonprofits Shouldn’t Use Zelle

While there are different strategies for using Zelle and even a couple of nice features like free processing, it is still not advised to use Zelle to collect donations. Here are some of the big reasons to avoid going down this path.

Impossible Receipting

According to 501c3 regulations, nonprofits are required to provide a receipt for any donation equal to or greater than $250. While most Zelle donations may be under that threshold, if you receive a donation over that amount, you are not required by law to provide that donor with a tax receipt. The amount aside, most donors expect to receive a tax-deductible receipt in response to their donation.

Zelle does not offer a way to provide that receipt. Due to it’s intended purpose of being peer-to-peer, address and contact information is not included in the transfer process. This means that you have no way to send a paper receipt to your donors. Any financial processing tool that doesn’t allow you to collect the information required for generating year-end receipts should be a big red flag for any nonprofit.

The Time Issues

There are two issues around time when it comes to using Zelle. The first is that if your bank is not partnered with Zelle, it can take as long as 3 days for the donations to reach your bank account. For some nonprofits this is inconsequential, but for others on a tight budget or fundraising for an emergency project, every minute counts.

The second issue is more related to the time it will take to enter information into your financial and donor software tools. Almost every nonprofit has a CRM or donor database where they store information about their donors. Zelle does not offer any type of integration to connect the payment received to a database. This means that every donation that comes in will need to be manually entered. For some smaller nonprofits, this might be okay, but it is definitely not a scaleable process. As more donations come in, there is an increased labor cost to enter all of the donations into your donor database.

Individual Transfer Limits

This issue might not apply to some nonprofits. If a donor is using the Zelle app and their bank is not connected with Zelle, then they are capped at sending $500/week. This limit may prevent larger donations from reaching you. Banks that do have a connection with Zelle often offer much higher rates but still put a hard cap on the amount that can be send through the platform.

Scams And Scandals

The last big issue with using Zelle to collect donations has to do with credibility. There have been a number of scams associated with Zelle where a caller will pretend to be the victim’s bank. Over the call, the scammer will collect the basic information needed to access the victim’s Zelle account and will then transfer money out of the account. These scams have caused Zelle to lose some credibility among users. This might be a reason to avoid using the system. The last thing you want is for your nonprofit to be associated with a system known for scams and scandals.

Related Questions

Can nonprofits use Venmo?

While the answer to this question is technically yes, most of the same issues apply to Venmo as do Zelle. Venmo is unable to issue receipts, does not integrate with donor CRM’s, and can lack credibility. You can read more about Venmo for nonprofits here.

Is Paypal free for nonprofits?

Paypal is not free for nonprofits, but they do offer a discount on their processing fees. You will need to provide proof of your 501c3 status to them but then you can receive a lower fee rate for card transactions.

Can Zelle send recurring payments or donations?

This is the area in which Zelle may be considered superior to Venmo. Zelle is able to handle recurring donations or payments. There is a huge advantage to requesting that donors make recurring donations as their lifetime value tends to be significantly higher to the nonprofit.

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