Fewer direct debit cancellations than ever, report reveals

Figures based on more than 9.5 million transactions find that the cancellation rate was 2.6 per cent in 2016, the lowest since Rapidata began compiling figures in 2003

The report
The report

Fewer people cancelled their direct debits to charity in 2016 than in any year since monitoring began, according to figures from the payments processor Rapidata.

The company says anecdotal evidence indicates the fall could be down to "dramatically less communication with supporters" by charities in the wake of the negative media attention on charity fundraising in 2015.

Rapidata’s Charity Direct Debit Tracking Report 2017, published today, is based on data from more than 9.5 million direct debit transactions to charity. It says that in 2016 the cancellation rate was 2.6 per cent, the lowest since Rapidata began compiling the data in 2003.

The figure is 10 per cent lower than the 2015 average of 2.9 per cent, although the report says the £9.7bn donated in 2016 was "on a par" with 2015.

The cancellation rate of 2 per cent recorded in April 2016 was the lowest monthly rate the company has recorded.

The report suggests the low cancellation rate in 2016 could be connected to charities’ reluctance to contact donors after the fundraising scandals of 2015.

In the report, Scott Gray, chief executive of Rapidata, says: "From anecdotal evidence, we believe that charities responded to the negative media onslaught and to the uncertainties resulting from a government review and significant regulatory change by stopping or postponing their fundraising campaigns, especially those involving telephone or direct mail communications.

"Dramatically less communication with supporters seems largely to account for these unusual results. There simply wasn’t the usual volume of activity – such as upgrade campaigns – taking place across the year, which in turn has resulted in less cancellations being recorded.

"This may go some way to explaining why the data for 2016 presents such an anomalous year in our records."

The report also recommends the introduction of an industry standard for direct debit cancellations, called the "cancellation average benchmark", which would be given to charities that kept their annual cancellations below 3 per cent.

"We believe that any charity whose cancellation rate rises above 3 per cent for any given month, aside from exceptional reasons from within the charity sector or outside events that may impact the rate, should review their supporter care programmes and strategic operations, with the aim of reducing and improving this rate," the report says.

"By identifying reasons for a rise and by carefully planning activities, charities can help prevent a repeat occurrence during similar months, campaigns or occasions in the future."

The idea has been welcomed by the Institute of Fundraising.

In a statement accompanying the report, Peter Lewis, chief executive of the IoF, said: "The health of direct debits and knowing what is happening in this part of our sector is vital.

"In broad terms, I welcome the idea of the sector-wide cancellation benchmark proposed in this report that charities should aim to stay below. I look forward to the discussions around this and encourage others to join these on how this might be taken forward."

The figures for first quarter of 2017 showed a slight rise in the cancellation rate to 2.86 per cent, compared with 2.65 per cent in same period last year, but Gray argues in the report that this return to normal was an indication that the sector was starting to feel more "confident and stable" and that fundraising activity had been reenergised.

Gray says: "While it may be concerning to see an increase in cancellation rates for 2017, any figures which indicate a return to a sense of normality can only be welcomed as a good thing as it shows that charities’ confidence in their activity with both new and existing donors is returning."

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