Fundraising websites - playing the online percentages

The death of Stephen Sutton focused attention on the fees charged by the online donation site JustGiving. Susannah Birkwood reports on the business models of the company and its competitors

Online giving sites
Online giving sites

When 19 year old Stephen Sutton died last month, social media channels echoed with calls for the donations website JustGiving to donate its fees to the Teenage Cancer Trust. How could a profit-making company, people asked, be taking a cut of the millions raised by a young man who had died of bowel cancer?

The furore was no surprise. A similar outcry - led by national newspapers - was heard when Robert Berry died while running the London Marathon for the National Osteoporosis Society in April and when Claire Squires died during the same event while running for the Samaritans two years ago.

What made the Stephen Sutton case different was that, this time, the online donations site refused to bow to public pressure and declared it would not be donating its fee to charity.

"We're not writing a rule book around any of this," says Anne-Marie Huby, co-founder and managing director of JustGiving. "When Claire and Rob died, it was completely unexpectedly, in the middle of their fundraising efforts," she says. "We thought the right thing to do at the time was to waive our fees in their honour. With Stephen, it felt like a very different story."

Huby says the site has been unfairly demonised in the press for charging 5 per cent - its standard fee - on donations made to the TCT, when in fact it is likely to charge a fee reduced to 3.5 per cent because of the size of the sum that will have been donated to the cancer charity this year. JustGiving will also make a £50,000 goodwill donation to the cause. Nevertheless, a conservative estimate of what the site will earn from Sutton's campaign comes to £147,000 - and that's if the £4.2m raised so far does not rise any further. The company declines to specify how much it has raised in fees so far.

Huby (left) feels this is justifiable. "I am certain that no other platform could have handled the volume of donations we did at the peak of Stephen's campaign," she says. "We were handling 19 donations a second; given our knowledge of the other e-commerce sites, that puts us into the premier league in terms of sheer robustness."

JustGiving has been in that top league ever since it pioneered online giving in 2000, but many cheaper, often not-for-profit alternatives have entered the marketplace in the past few years. JustGiving's two main competitors are Virgin Money Giving and BT MyDonate. The former, which charges fees of 2 per cent, was launched in 2009 as the not-for-profit arm of Virgin Money; two years after that, BT introduced its MyDonate platform, pledging that all donations would go to charity except for payment card fees.

Whereas the biggest charities appear to register with all three sites and with some of their smaller rivals - including the likes of Charity Choice, Everyclick and Givey - smaller charities have to pay more heed to the fees the various sites charge.

"We don't use JustGiving because of the scale of the costs involved, which are quite significant," says Andrew Sinclair, development director at the international development charity RED International, which uses VMG for sponsored events and MyDonate for one-off gifts. "I am also put off by the monthly subscription. JustGiving has a system to run, obviously - there's the personnel and the fantastic platform it's got: it all costs money. But if other organisations are able to do what they do, for much less, why can't they?"

Joe Saxton (left), founder of the sector consultancy nfpSynergy, believes the answer might have something to do with JustGiving's venture capital backer, Vesta Capital Partners. He says he was surprised when Mark Astarita, director of fundraising at the British Red Cross, tweeted a link to his thousands of followers last month asking for funds through JustGiving. "I would expect someone from an organisation of that size to be asking for money through VMG or MyDonate because he knows he's going to save money," Saxton says.

Despite widespread acknowledgement that JustGiving is the most expensive option available, a lot of charities do seem to buy into Huby's claim that they're likely to raise more overall, even though the charities have to sacrifice a larger slice of each donation. Ashley Fulwood, chief executive of OCD-UK, says his fundraisers always choose JustGiving over the competition because of its brand name and what he sees as its "better tools". Sarah Tuckwell, regional fundraising manager at the cancer charity the Candlelighters Trust, says JustGiving gives people what they want - a "user-friendly, quick and easy way to give". Felicity Patterson, who works in fundraising and marketing at Tools for Self Reliance, says the firm is "trusted by supporters" and "worth the money".

Trust among supporters, and charities themselves, became an important differentiator between the big players and new entrants to the market in July 2013 because of the case of CharityGiving. The collapse of this donations website, run by the charity the Dove Trust, left many, often smaller organisations feeling unsure about which sites were reliable. "It showed how you have to think about who your provider is," says Jo Barnett, executive director of VMG. "I've always challenged the idea that anyone can set up a fundraising website. There's no way for charities to assess their reputations, who has invested in their systems or their governance."

Such was VMG's concern that the company, alongside JustGiving, wrote to the Institute of Fundraising asking it to come up with some guidance for charities on the risks involved in using improperly managed platforms. Last August, the IoF and the Charity Finance Group announced that they would provide guidance jointly so that charities could better understand the donation process and ensure the security of their money. Almost a year on, however, the guidance is still in the pipeline and is unlikely to be published before October.

Daniel Fluskey (left), head of policy and research at the IoF, says charities should be aware that any profit-making platform set up to solicit donations should have a written agreement with a charity in place before its starts raising money for it, as the IoF code of practice says. Alistair McLean, chief executive of the Fundraising Standards Board, points out that many online giving sites have signed up voluntarily to be regulated by the FRSB. This does not mean that a site is vetted by the board, but complaints from charities or members of the public will be addressed. Some sites are corporate members of the IoF and are therefore committed to following its code of practice.

VMG's Barnett says that charities should make sure the online giving site they use holds donations in a trust account, abides by strict security controls and invests in high-quality anti-money laundering systems. "There are quite a few controls that can be put in place that don't amount to regulation but can help educate the sector to recognise what a good or bad partner looks like," she says.

The IoF's Fluskey concludes: "It's up to each charity to look at the brand name awareness and technology that each of the sites can provide, as well as the fees, to decide which one or which combination is the best to use."

 'It's made us all ask tougher questions'

The donations website CharityGiving was suspended by the Charity Commission in June 2013 because of concerns about the governance and financial management of the site, which was run by a charity, the Dove Trust.

In January 2011 the regulator had opened an inquiry into the trust, which allowed charities to set up pages on its site so they could receive one-off or regular donations, because the charity had not filed any accounts during the previous five years. When the site was suspended, the commission appointed an interim manager, Pesh Framjee (left) of the accountancy firm Crowe Clark Whitehill, because there appeared to be a shortfall between the funds due to charities to which people had donated through CharityGiving and the cash held by the Dove Trust. Framjee has estimated that the Dove Trust's potential liabilities are about £2.2m, most of which is owed to charities.

Last December, the commission asked the High Court to rule on the fairest method of distributing the funds available, because there were several options. It said about £500,000 was available for initial distribution to more than 1,800 charities and good causes that are owed money. After a directions hearing in March, the regulator invited charities that were owed money to give their views on how the initial funds should be distributed. The deadline for submissions was 23 April, and the evidence is due to be considered by the High Court at a full hearing on 3 July.

Anne-Marie Huby, co-founder and managing director of JustGiving, says the CharityGiving case was one of "appalling mismanagement". The biggest problem, she says, was that there was no separation between the money donated and the operational accounts of the business. "It's educated the market to ask tougher questions about how donation sites are run," she says.

The commission's inquiry into the Dove Trust continues.

Online donation sites: the numbers

JustGiving (launched 2001)

Amount of £10 debit card donation including Gift Aid given directly to charity: £11.71

Transaction fees/VAT: 79p

Registration: £15 a month

Charities signed up: 13,000, including 10 of the top 10 brands*

Business model: For-profit. Describes itself as a "social business"

Ease of use for charities: Charities must register through an online form, then fill in three further forms with their Gift Aid, bank and direct debit details, and they must send in a recent bank statement. Once received, the forms will be checked for fraud and the charity's page will in most cases be set up within 24 hours

Member of IoF/FRSB? Both

Helps charities in other ways? Three volunteering days a year for each employee; monthly emails and blog helping charities to use technology; employee match-giving and fundraising events

How quickly does it pay? Weekly or monthly, depending on volume

Average donation: £23

Charity Choice (launched 2005)

Amount of £10 debit card donation including Gift Aid given directly to charity: £12.25

Transaction fees/VAT: £0.25

Registration: Free

Charities signed up: 6,979, including 10 of the top 10 brands*

Business model: A 25p charge to process donations, but most donors choose to pay this separately, so the charity receives the full donation and Gift Aid. Free to charities - the site generates income through advertising and its optional premium service, £89+VAT to charities

Ease of use for charities: To register, a charity must fill in an online form. It will then receive an email with instructions to send a bank statement and a Gift Aid form by post. Once these documents are checked, the charity's donation facility can go live

Member of IoF/FRSB? IoF

Helps charities in other ways? Publishes a blog and fortnightly newsletter with advice on fundraising, and runs a directory of events, appeals, legacy information, requests for volunteers and goods

How quickly does it pay? Weekly for donations, monthly for Gift Aid

Average donation: £71

Everyclick (launched 2008)

Amount of £10 debit card donation including Gift Aid given directly to charity: £11.92

Transaction fees/VAT: 58p

Registration: Free

Charities signed up: 6,574, including nine of the top 10 brands*

Business model: Allows fundraisers to select a charity even if it isn't registered on the site by contacting it separately once funds have been raised. Everyclick's payment partner, the charity Charities Trust, takes a 4.8 per cent fee for disbursing funds to charities

Ease of use for charities: The site uses the charities list as from the Charity Commission, so fundraisers can find the charity they need. Once funds are raised, the charity is contacted; it then registers on the site to collect its funds by completing an online form and having its charity credentials verified, which can take up to a week

Member of IoF/FRSB? Both

Helps charities in other ways? Offers marketing toolkits and subsidised print costs

How quickly does it pay? Between one and five weeks

Average donation: £37

Virgin Money Giving (launched 2009)

Amount of £10 debit card donation including Gift Aid given directly to charity: £12.16

Transaction fees/VAT: £0.35

Registration: £100+VAT, one-off

Charities signed up: 9,000, including 10 of the top 10 brands*

Business model: Not-for-profit. Takes 2 per cent of donations to cover administration costs

Ease of use for charities: Takes at least five days. Charities must fill in bank, trustee and HMRC forms and pay a £100+VAT set-up fee. Once live, charities can add photos, links and events to their pages

Member of IoF/FRSB? Both

Helps charities in other ways? Free Gift Aid processing. Free regional training workshops. Use of Virgin Money lounges for supporter events. Marketing support such as flyers and posters

How quickly does it pay? Weekly for donations. Gift Aid is paid once it is received from HM Revenue & Customs

Average donation: £38.80

* According to the Charity Brand Index 2013, these are: Macmillan Cancer Support, Great Ormond St Hospital Children's Charity, Cancer Research UK, Help for Heroes, the Royal British Legion, the RNLI, the British Heart Foundation, the NSPCC, Comic Relief/Sport Relief and the Guide Dogs for the Blind Association

BT My Donate (launched 2011)

Amount of £10 debit card donation including Gift Aid given directly to charity: £12.35

Transaction fees/VAT: £0.15

Registration: Free

Charities signed up: 6,193, including eight of the top 10 brands*

Business model: Not-for-profit. Funded by 1 per cent of BT's profits, so it's free for charities, except for the 15p debit card/1.3 per cent credit card fee

Ease of use for charities: Charities can register free online and their accounts should be activated within 24 hours. After this, they can create and publish profiles with events, pictures and links to social media and websites

Member of IoF/FRSB? Neither

Helps charities in other ways? Free Gift Aid processing. Works with charities' corporate partners on CSR programmes

How quickly does it pay? Weekly

Average donation: £50

Givey (launched 2012)

Amount of £10 debit card donation including Gift Aid given directly to charity: £12.50

Transaction fees/VAT: £0

Registration: Free

Charities signed up: 8,000, including eight of the top 10 brands*

Business model: Says it is a "social donation platform". Charities sign up through Givey's vetting partner, the PayPal Giving Fund, which manages the donations and Gift Aid. It is financed the by company's business arm, so it's free for charities and fundraisers

Ease of use for charities: Free to register, but they must be members of the PayPal Giving Fund. Charities will be asked to provide a logo and a short biography of aims, and individuals are asked to provide proof they are authorised to register their charity

Member of IoF/FRSB? Neither

Helps charities in other ways? Uses technology to help charities with their fundraising - for example, Givey powered a 24-hour live-stream fundraiser for Unicef

How quickly does it pay? At the end of each month

Average donation £10

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