Introduction to Payment Processing
Payment processing describes the handling of financial information from donors whenever they make an online donation transaction, whether submitting a donation or registering for an event. The payment processor is a company that deals with credit or debit card transactions between donors and your non-profit.
Introduction to Payment Processing
Before we launch into an explanation of payment processing, we should define some key associated terms.
Merchant Account
A merchant account is a bank account that allows a nonprofit to accept online donations via credit or debit cards. This account is set up under a contract between a nonprofit and a merchant-acquiring bank.
AGGREGATOR
An aggregator is a large company that processes transactions and donations on behalf of many smaller businesses and non-profits that are in its portfolio. PayPal and Stripe are examples of aggregators.
PAYMENT GATEWAY
A payment gateway is a fraud prevention method practised by payment processors. Payment gateways protect donors’ credit or debit card information during and after the donation process.
Why You Need a Payment Processor
TO ACCEPT DONATIONS
The most common reason nonprofits need a payment processor is to accept donations online. Without a payment processor, collecting online donations is difficult, if not impossible, for most nonprofits.
With a payment processor, nonprofits can accept donations from supporters in the USA and abroad.
TO SELL EVENT TICKETS
When non-profits host fundraising events, they need a way to accept ticket payments and other fees from attendees.
With a payment processor feature, non-profit organizations can quickly and easily accept donations that come in the form of online ticket sales.
Why We Avoid Using PayPal, Stripe, Sum-up or Square to Process Donations
EXCESSIVE TRANSACTION FEES
Aggregators such as PayPal, Stripe, Sum-Up and Square charge high fees for processing donations. That means less money for your cause. They also charge a monthly fee for the payment terminals. If you’re a small non-profit, these costs can be crippling.
YOU DON'T NEED BLUETOOTH DEVICES
Smart Giving empowers your members to make donations directly from their mobile phones so you save money on renting Bluetooth payment terminals. Payments through smartphones allow us to capture a mass volume of donations at once and allow you to split donations automatically between different causes.
YOU CAN BE SHUT DOWN AT ANY TIME
If you use a payment aggregator such as PayPal or Stripe, you can be shut-down at any time. Plus you’re at their mercy when it comes to drawing payments. If they feel you’re processing over your normal volumes they can shut your account down and hold onto your money for months!
Why We Partnered with CardConnect
We’ve in partnership with CardConnect who offer our members competitive payment processing rates and don’t bind you to long-term contracts. They offer:
- 12-month contract
- Next day settlement
- No charges to join or leave
- Personalised packages
- Specialist joining team
How Does Payment Processing Work
1. The Donor Makes a Contribution
Payment processing begins when a donor makes an online donation or purchases an event ticket.
Supporters can contribute to a nonprofit using their computers, tablets, or smartphones.
Any donation not made with cash or cheque must go through a payment processing system to be verified before the funds are accessible to the nonprofit.
When donors use your online donation page or a text-to-give service, they must input their debit or credit card information. This information then triggers a series of backend activities that are performed by the payment processor.
2. Information Goes To the Payment Gateway
Once the donor initiates a transaction, their donation goes through the payment gateway.
A payment gateway is used to ensure that the credit card is not fraudulent and to verify that the person making the donation or purchase is a human, not a robot.
The payment gateway checks the credit card number’s validity and might look at addresses, names, and security codes.
If a card is rejected for any reason, the payment gateway communicates the problem to your nonprofit’s website or mobile app so that you can alert the donor.
If all goes well, the payment processing goes on.
3. Donation is Sent To Your Account
After the credit card has been verified, the payment gateway starts the transfer process. The donation goes from the credit card company to your bank account.
The merchant account only holds credit card donations, and many nonprofits can open one through their regular bank.
Merchant accounts are like any bank account, each with a different rate. This rate determines the amount your nonprofit will pay per donation or transaction.
4. Donor Information Goes To Database
Whenever a donor makes an online contribution, they submit a certain amount of information to your nonprofit. Often, this information includes:
Name
Address
Email address
Phone number
This information will be logged into your donor database automatically.
5. Money is Deposited in Your Bank Account
The result of this process is that you receive the supporter’s contribution!
The funds will automatically be transferred into your charities bank account in one business day.
What Is PCI Compliance and Why is it Important?
DEFINITION OF PCI COMPLIANCE
The Payment Card Industry (PCI) Security Standards Council set up data security standards (DSS) in 2007 to protect customers and merchants involved in online transactions.
There are a dozen major PCI DSS compliance requirements. Nonprofits who have PCI DSS violations can face penalties and fees. Some organizations can even be suspended and have their card-processing capabilities retracted.
IMPORTANCE OF PCI COMPLIANCE
Maintaining PCI compliance is crucial for nonprofits that want to continue to accept online donations. It also helps reassure donors that their credit card and personal info are safe.
It is estimated that nearly half of all donors give up on a donation process because they feel it isn’t secure. If you aren’t using a PCI compliant payment processor, you’re not only putting yourself at risk of a breach, you’re also missing out on donations!