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Digital Payments for Nonprofits: Challenges and Solutions

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Two professionals collaborating on digital payment solutions for nonprofits.

When It Comes to Digital Payments, Nonprofits Have Different Challenges and Different Needs

 

Throughout virtually every industry, digital payment processing and solutions are modernizing the way businesses accept payments. For nonprofit organizations, however, adopting new ways of processing payments is not always so simple.

The not-for-profit sector represents a significant force in the U.S. economy, contributing over $1 trillion—about 5% of the country’s GDP.1 With such a substantial impact, ensuring nonprofits have access to modern payment solutions is critical.

To keep up with donors’ expectations, these organizations must invest in digital payments technology. Payment cards now represent over 85% of the payment methods used with both ACH and cash declining.2 Today, a majority of donors (63%) prefer giving online with a credit or debit card, while 10% prefer PayPal, 1% prefer to use a digital wallet, and 1% prefer text-to-give.3 What’s more, nonprofits with a digital-first approach are growing 12.7% faster than organizations that do not have digital payment technology.4

Yet, a range of niche needs and challenges make nonprofits a unique case when it comes to digital payments. By understanding these needs, enablers—providers of tools and services that make it possible to accept, manage, and process digital payments—can help nonprofits overcome the obstacles that have made it difficult for them to fully adopt digital payment methods. Enablers can tailor solutions to fit the needs of nonprofits, making digital donations simpler and easier—and ultimately helping them raise more funds toward fulfilling their missions.

 

The unique challenges of processing donations

Like any organization, nonprofits need digital payment processors that make receiving funds seamless and fast. However, there are unique factors that determine whether a payment solution is well suited to the more detailed requirements of nonprofits. Understanding these needs and meeting them is essential for enablers to succeed with nonprofits.

These needs are only becoming more pressing as certain nonprofit segments continue to expand. Fundraising, crowdfunding, and worship organizations are experiencing significant growth.2 This amplifies the demand for payment solutions that can handle increasing transaction volumes while meeting the distinct requirements of these groups.

For example, donors’ contact information is extremely valuable to nonprofits because they rely on a consistent community of donors who give repeatedly. For this reason, they need payment solutions that both gather and secure crucial donor information so that the organization can continue to stay in touch with every donor. Striking this balance is essential to doing business with nonprofits because protecting information from security breaches gives donors the confidence to continue to give through digital channels.

Digital payment enablers working with nonprofits should also look to provide payment processors that accept all payment methods across multiple currencies. This is crucial as 33% of donors give to organizations located outside of their country of residence.3

Accepting payments in the preferred currency of their donors helps give nonprofits the opportunity to grow without limits, from grassroots efforts to global initiatives.

 

 

Going after big goals with small budgets

Nonprofits often have extremely tight budgets by design—with the intention of putting as much funding as possible toward their missions. Two-thirds of nonprofits have an annual budget of less than $500,000, and nearly 30% have budgets of less than $100,000.5

In addition, recent challenges over the past few years have made balancing budgets even more difficult. Inflation is one issue. Although total giving grew 1.9% in 2023 among U.S. individuals, bequests, foundations, and corporations, giving growth did not outpace the high inflation rate (4.1%).6 Changing tax incentives is another challenge. High inflation over the past two years has also caused giving growth yearover-year to slow down.3 Changing tax incentives is another challenge. In 2017, the Tax Cuts and Jobs Act (TCJA) reduced the value of all tax dedications. By one estimate, the TCJA reduced the federal income tax subsidy for charitable giving by one-third.7

It's no wonder then that in a recent survey of U.S. nonprofits, “rising operating expenses” was named the biggest challenge, with 46% of survey respondents naming it. The second biggest challenge reported was “lack of adequate finances/resources,” an issue for 41% of respondents.8

High prices and hidden fees can therefore create a major barrier to payment processing, making it difficult for nonprofits to fully adopt digital payment solutions.

 

Issues can include:

  • Hidden platform fees
  • Higher charges to accept certain payment methods
  • Ineligibility for discounts until they receive 501(c)(3) status

 

To provide solutions that alleviate these challenges, enablers can offer digital payment processors with fair, transparent pricing. This makes it possible for nonprofits, especially small ones or those just starting out, to invest in the technology they need while continuing to allocate every possible dollar toward their goals.

Additionally, by making it possible for nonprofits to accept their donors’ preferred payment methods, enablers can help remove some of the barriers to giving. Other strategies, such as bundling payment processing fees into the donation amount, to remove the burden from the donor, could also make an impact.

 

New solutions are breaking down barriers

PayFacs (Payment Facilitators) and ISVs (Independent Software Vendors) are the leading payment providers serving the nonprofit sector, accounting for over 70% of the marketplace.2 Their tailored solutions help nonprofits streamline donation processing, enhance security, and integrate seamlessly with donor management systems, making digital payments more accessible and efficient.

When seeking to provide solutions for nonprofits, enablers can find inspiration in some of the payment processors that were founded with them in mind. These processors provide solutions specifically designed to remove the barriers that prevent many organizations from fully adopting digital payment processing.

 

Some examples include:

  • Anedot—A payment processing platform designed specifically for nonprofit organizations. It enables donors to contribute with a single click from any device, leading to higher donation conversion rates for the organizations that use it.
  • Ministry Brands—A comprehensive platform that provides customized solutions through its DonorDirect software. This tool strengthens donor relationships by integrating CRM capabilities, offering access to profiles, giving history, pledge details, end-of-year tax statements, and other key insights to keep donors engaged.
  • Blackbaud—A cloud-based solution built for nonprofits, helping organizations embrace digital transformation while offering flexible payment services to enhance the donor experience.

These processors show what’s possible in the payment processing space when considering the niche needs of nonprofits.

 

Social media and the future of fundraising

In addition to offering digital payment solutions that fit the needs and budgets of nonprofits, enablers can continue to succeed with these organizations by considering how donations are evolving.

Among younger donors, charitable giving is often something they do when it fits into their daily lives—during checkout, at an event, or when they see something on social media—with 42% of Gen Z donors reporting that they engage with nonprofits and causes spontaneously.9 In fact, social media has become a powerful way to connect with donors of all ages, as 32% report they are most inspired to give via social media.3

Social media has also become the second most effective fundraising tool (behind websites) with platforms launching fundraising capabilities now used by nonprofits worldwide. In 2023, 37% of nonprofits used Facebook fundraising tools and 58% reported having the “Donate” button feature on their Instagram profiles.10

Enablers can continue to win with nonprofits by creating solutions tailored to the social channels where their donors and potential donors are ready and willing to give.

 

 

An opportunity for enablers

It’s clear that nonprofits have specific requirements when it comes to processing digital payments. What’s more, tight budgets—squeezed further by diminished giving relative to high inflation—make it difficult to implement new technologies, especially when they come with hidden fees or higher costs to process certain payment methods. As nonprofits contend with these issues, they must also keep pace with new generations of donors and their preferred ways of giving.

All these challenges present payment enablers with the opportunity to step in to help nonprofits solve problems and achieve goals. The enablers that can rise to the challenge of understanding nonprofits’ unique needs and provide tailored solutions will be the ones to win their business.

 

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  1. (2021, May). Time to Consider Not-For-Profit Board Service. Forbes. Retrieved 26 March, 2025.
  2. (2024). Non-Profit Vertical Intelligence U.S. and Canada Final Report. Be Shaping the Future. Published January 2024.
  3. Double the Donation. Nonprofit Fundraising Statistics. Retrieved 4 November, 2024.
  4. NextAfter. 2023 benchmarks: Nonprofit performance across fundraising, digital, and more. Retrieved 4 November, 2024.
  5. The overcrowded nonprofit market. Grapevine. Retrieved 4 November, 2024.
  6. (2024, June). Giving USA: U.S. charitable giving totaled $557.16 billion in 2023. Indiana University Lilly Family School of Philanthropy. Retrieved 4 November, 2024.
  7. (2024, Jan). How did the TCJA affect incentives for charitable giving? Urban-Brookings Tax Policy Center. Retrieved 4 November, 2024.
  8. Statista. Biggest challenges for nonprofit organizations in the United States in 2023. Retrieved 4 November, 2024.
  9. New Report Illuminates Gen Z Philanthropic Giving Behavior. Blackbaud. Retrieved 4 November, 2024.
  10. (2023, February). Nonprofit Tech for Good. 2023 Global NGO technology report. Retrieved 4 November, 2024.

 

The information provided herein is sponsored by Discover® Global Network. It is intended for informational purposes, and is not intended as a substitute for professional advice.