July/Aug 2005

Ask the Expert: My organization wants to start taking donations online. What are our options for taking payments electronically?

Answer by David Crooke, Founder and Chief Technology Officer, Convio

Offering online donation processing can help organizations in many ways. Donors often prefer the convenience of making a donation online using their credit card. And, providing donors with the option to give online allows organizations to receive the funds immediately and automatically, versus waiting for a check in the mail that must be manually processed.

Following is a brief overview of some of the choices and considerations for nonprofits that wish to take payments electronically over the Internet.

Credit Card Merchant Accounts

The traditional way to take payments online is by opening a merchant account that is Internet enabled. A merchant account is an account opened through a bank that is a member of the Visa, MasterCard or other credit card network that allows merchants to accept credit cards from purchasers. The funds are then transferred electronically to the merchant's bank account. This is still the most streamlined and cost effective form of electronic payment for larger organizations.

Organizations should be sure their online software provider allows for easy merchant account setup. Convio, for example, has arrangements with some merchant account providers to offer its clients attractive group rates. Convio also provides Internet gateway and anti-fraud services from leading providers like eFunds ClearCommerce included with its transactional applications.

Factored Accounts: IATS

For smaller organizations, or those that want to quickly set up separate accounts for special campaigns, IATS provides another credit card processing option. Organizations should check with their online software providers to ensure they support IATS.

IATS's service works exactly like a merchant account, but with a simpler and faster application. IATS does not charge a setup or monthly fee, and unlike a merchant account, does not require additional application forms to enable organizations to accept additional card types such as American Express and Discover.

To PayPal, or not to PayPal?

With the growing success of the eBay community, organizations often ask if they should "take PayPal" on their Web sites. There are two very different ways to use payment services offered by PayPal:

Using PayPal's processing services as an alternative to a merchant account or IATS account. This is similar to an organization using a merchant account or IATS service, and is similarly priced.
Accepting donations of "PayPal Dollars" in addition to regular forms of payment. Initially, this may seem like an attractive option. However, the vast majority of people with PayPal logins use PayPal only as a vehicle to pay for items on eBay listed by private sellers and have never actually had a balance in their PayPal accounts. So, it offers little value to nonprofits.

PayPal seems to be attempting to grow out of its eBay roots to become more of a force in the online payment industry, and the vendor may be worth a second look in the future. A few Convio clients, for example, plan to test donations of PayPal currency. Watch for an update on this topic in a future issue of Convio Connection.

Security Considerations

With online fraud and identity theft at record levels, the credit card industry is taking security seriously and is beginning to require organizations accepting online payments to adhere to their published security standards. Organizations should be sure that any vendor they use is — like Convio and its payment processing partners — accredited to the latest Payment Card Industry Data Security Standard (PCIDSS) requirements.

Summary

When it comes to online payments, credit cards are still the method of choice, and the range and prices of online donation processing options open to nonprofits have never been better.

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