Passion may be a key player in determining a nonprofit’s success, but without the necessary funds to make it happen, your nonprofit will only get so far in making a difference.

That’s why in order to gain real traction with donors, your nonprofit must first set up a reliable source to accept online donations. In other words, they need a payment processing system, which simply refers to the digital behind-the-scenes steps that transfer a donor’s funds to a nonprofit’s account.

Payment processing is essential to helping your organization develop new fundraising opportunities ranging from mobile giving solutions and merchandise sales to online event registration and ticket sales.

To help you get a firm grasp on all that nonprofit payment processing entails, this article covers the following key questions on the subject:

1. How payment processing works.
2. Accepted types of payments.
3. How to implement payment processing.
4. How to choose a payment processor.
5. How to ensure security in payment processing.

Let’s start with the basics: how payment processing works.

How Payment Processing Works

The term “payment processing” may seem dry and daunting at first, but with a bit of research, you’ll be well-versed on the topic in no time.

Let’s look at it step-by-step:

1. A donor makes a contribution via an online donation tool (think donation pages, crowdfunding sites etc.).
2. The payment processor verifies the donor’s credit card information.
3. The payment processor transfers the donor’s funds into a holding place called a merchant account.
4. The donation stays in the merchant account until the transaction into the nonprofit’s account is complete.

Altogether, a reliable payment processor will help your nonprofit secure online donations in a quick and easy fashion.

Accepted Types of Payments

Payment processors will accept two forms of online payments: credit cards and direct debit or e-checks.

Many financial supporters are in favor of credit cards simply because of their everyday use and easy access to funds. This means that payment processors will almost always accommodate credit card usage with the top four brands — Visa, Mastercard, Discover, and American Express — in highest demand.

Despite their quick processing though, credit cards can sometimes come with a unique set of challenges that drive away donors, such as the processor’s need to verify the card first as well as flat and chargeback fees, which can quickly turn a simple process into a confusing one.

If these potential risks concern you, then chances are your nonprofit might benefit from processing e-checks taken from a donor’s Automated Clearing House (ACH) account.

A lesser known alternative to credit cards, this form of direct debit works by withdraw an online donation directly from a donor’s bank account using the routing and account numbers at the bottom of their print check.

This efficient and more reliable way to transfer funds will often reduce the number of bounced checks at your nonprofit as well as allow a donor to set up recurring donations.

At the end of the day though, your nonprofit is best left investing in a payment processor that accepts both credit card and direct debit donations. This choice will not only save you plenty of hassle, but will also increase your total number of offerings.

How to Implement Payment Processing

Most nonprofits will also rely on one of two basic ways to secure payment processing: donations via the payment processor or fundraising software integrations.

If you find yourself scratching your head at each of these terms right now, don’t worry; everything will be set straight in the following breakdown.

1. Payment Processor Donation Forms

This first choice involves your payment processor generating an online form on your website for donors to access. If your nonprofit is still new to fundraising, then this approach is ideal for you because it’s simple to create as well as easy to offer.

On the down side, these forms don’t typically “talk” to the rest of your nonprofit’s software systems and will often instead lead your donors to a separate webpage to access them. This lack of communication across platforms tends to mean data entry and transfer will fall to your staff to handle, which can lead to human error or a slow process.

In addition, these forms tend to not be customizable which hinders usability.

2. Fundraising Software Integrations

The second way nonprofits can go is to incorporate fundraising software integrations which ensure fluidity across all your donation platforms.

This option is generally more geared towards established nonprofits and saves you from having to manually transfer data, which not only saves times but accounts for less error and more accurate financial reports.

Another perk of fundraising software integrations is that they’re typically more compatible with a nonprofit’s existing fundraising software including:

• Matching gift
• Auction
• Accounting
• Text-to-give
• Peer-to-peer
• CRM (customer relationship management)

Overall, a separate online donation form may be ideal for nonprofit startups, but fundraising software integrations will definitely improve a veteran nonprofit’s online donation outreach.

How to Choose a Payment Processor

When selecting a payment processor, it goes without saying that nonprofits will benefit more from one with expertise on nonprofit payment processing.

Luckily, there are several forms of this software that are tailormade for nonprofit clients and can be broken down into two categories:

1. Aggregators
2. Dedicated payment processors.

In the simplest terms, aggregators are large payment processing companies like PayPal or Stripe that may be popular and free but often spell trouble for nonprofit fundraising.

The trouble usually comes back to how aggregators pool all their funds for all their clients — both for-profit and nonprofit — into one shared merchant account.

This means that it not only takes longer for nonprofits to receive their donations (usually within 5-7 business days) but also that the account is more susceptible to fraud. One attack against an aggregator client puts the whole account at risk.

In contrast, a dedicated payment processor provides one customizable merchant account for each nonprofit to ensure individual care and attention.

This type of processor guarantees more control over a nonprofit’s funds and allows immediate access to them within 1-2 business days. Furthermore, a dedicated payment processor is usually more knowledgeable about nonprofit fundraising struggles and will integrate easily with top fundraising software services according to this iATS resource.

How to Ensure Security with Payment Processing

Unfortunately, it’s not enough to just secure a payment processor; your nonprofit must also be prepared to protect your new online donations from fraud.

This precaution is all too crucial because if a nonprofit fails to take active measures against fraud, it can face some serious damage that’s often impossible to bounce back from, including:

• Ruined reputation
• Chargeback fees to credit card companies
• Refunded stolen donations to rightful owners

Thankfully, there are a number of ways for a nonprofit to avoid these dangerous pitfalls, namely by setting up these go-to ACH and credit card fraud prevention policies:

1. Work with a PCI-compliant processor.
2. Make use of AVS.
3. Be wary of large donations.
4. Be wary of minimal donations, too.
5. Stay vigilant during holiday fundraising.

Let’s jump in!

1. Work with a PCI-compliant Processor

The beauty of a PCI-compliant processor (PCI stands for Payment Card Industry) is that they are already informed about nonprofit donation systems, which means they are also armed with several fraud prevention tools.

This software certification is essentially your first line of defense because it manages all of your nonprofit’s data, which means that it can also detect and handle any breach in conduct. Afterwards, the system can then retaliate against the thief by subjecting them to fees or revoking their online payment processing altogether.

Furthermore, a PCI-compliant processor can also keep your nonprofit’s donation page up to date with the latest security regulations from the payment card industry. Overall, this incredible software certification will grant your nonprofit peace of mind in tricky security situations.

2. Make Use of AVS

Another way to check for credit card fraud is to use an address verification system (or AVS) issued by your payment processor.

This tool makes sure that the address a donor lists on a donation form matches with the address they have on file with their bank or credit card company.

If the two addresses do not match, then the payment processor will notify the nonprofit immediately of potential fraud. An AVS can also ask for the security code on the back of a credit card to ensure extra security.

3. Be Wary of Large Donations

Most people don’t know that one of the main reasons why nonprofits are targeted by thieves is because they provide an easy testing ground for stolen credit cards and e-checks.

Basically, a thief will check if a stolen credit card or ACH account works by making large donations to nonprofits through them. This makes it easy for the thief to then contact the nonprofit, insist it was a mistake, and demand a refund either on a different card or check that they can walk away with.

This scam has since issued so many problems in recent years that nonprofits are now advised to double check large donation amounts in order to confirm if they’re legitimate or not.

4. Be Wary of Minimal Donations, Too

Likewise, a scammer can also test a stolen credit card or ACH account by donating miniscule amounts to nonprofits.

However, this problem can be easily solved if the nonprofit sets a minimum donation standard to avoid suspiciously small offerings. (Even a minimum donation level of $15 can help stop fraud.)

Another more technical approach to detecting these scams involves velocity checking. This technique requires the nonprofit to thoroughly examine the number of transactions from one credit card, bank account, or donor in general. If you notice a pattern of small donations in a short timeframe, they may be coming from a fraudulent source.

5. Stay Vigilant During Holiday Fundraising

The holiday season from November to December is typically the busiest time of year for nonprofit donations.

Unfortunately, this also means that it’s the busiest time for credit card thieves to unleash new scams. While this doesn’t mean that a nonprofit should let paranoia ruin the celebratory season, it’s still important that in the midst of all the fundraising success, a nonprofit remains aware of any fraudulent threats.

Above all, there’s no telling how or when fraud will strike your nonprofit. What it comes down to instead are the security measures you’ve put in place and, in times of crisis, how well you maintain grace under pressure.

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This all just goes to show that investing in a payment processor can do so much more for your nonprofit than help with online donations.

This multi-purposeful tool can also protect you from fraud, secure your funds in one personalized account, and sync with other fundraising software to form one master donation system that fuels all aspects of your organization.

In short, having a brilliant payment processor can make all the difference in helping your nonprofit thrive and survive in the digital age.