Whiteboard: Online Giving—It’s Not Magic!

January 28th 2015

In this whiteboard session, Rodney explains the behind-the-scenes process of online giving.

Video Transcription:

Hi and welcome to an Elexio Whiteboard. I was watching television the other day, and I saw a magician and he did a magic trick, and what he did was he took a card and he called somebody up out of the audience and he had that person write their signature on the card and then through a series of interactions he did a couple of tricks and somehow the card ended up in the guy’s back pocket. It was amazing. I mean I watched closely; there was no way this guy had any interaction. There was no way he could’ve slipped it in this guy’s back pocket. It was really cool.

You know, when people see magic tricks they tend to react in one of two ways, they either watch it and they think, “I know how he did it. I can figure that out.” And they spend time. The wheels are clicking in their head trying to figure out exactly how the magician did it. And other people are just entertained and love the end result. Clap and applaud and move on.

Well, today in our whiteboard we are talking about online donations, so your church members or attenders giving money to the church online. Some people treat that like a magic trick and you may think of it and just be glad with the end result, because the end result is your church does receive money. Other people, and I’m going to suggest this might be the way to approach it, which is to really think through what’s happening out there? It’s not magic. So today in our whiteboard we’re going to break through and look at what exactly is happening when somebody gives money to the church in an online fashion. We’ll look at three big questions. Who is involved? What are the costs? And finally do I have a choice? Or, am I handcuffed in and have to do it one particular way?

Well, first of all let’s take a look at who is involved. You’ll be surprised to know that there’s actually four different organizations involved with that money that goes from here to there. First off, it’s called a credit card association. That’s Visa, MasterCard, Discover, all the things you’re used to. It starts with a credit card organization. Up next is what is called an acquiring bank.

Now, you don’t deal with acquiring bank. They deal with the big credit card companies. Up next is an organization called an ISO, which stands for Independent Sales Organization. You don’t deal with the ISO either. You deal directly with a merchant account provider. Merchant account providers are the people that collect the fees for everybody else in the chain. So let’s talk about fees. We now know who is involved, four different big organizations. What are the costs? Well, you’re going to see yearly costs. Yearly costs are things like, you’ll see it on your bill and it might say “IRS Compliance Fee” or “PCI Compliance Fee”. That comes again on a yearly basis. You may also see monthly fees. These are much more straightforward. It’s almost like a membership fee to be connected to the merchant account. Then common to all merchant accounts are transaction fees. So again, as a quick review, you’re going to have a yearly or monthly or both, and you’re most certainly going to have transaction fees.

Transaction fees are either percent-based or flat and really most all merchant account providers do both. So, does everybody pay the same amount? We said we would talk about the cost, but really is everybody paying the same thing? Is it some kind of a law? Is there a mandate that says these are the accepted amounts that the government will allow that to be collected? And the answer is absolutely not.

All kinds of different fees. All kinds of different yearly fees, monthly fees, percent fees and flat fees. It varies widely. So, as we think back to our magic trick concept, this is why I’m suggesting don’t treat this like a magic trick. Take a look at your bill and maybe find out, “What fees are we paying?” And are the rates reasonable? Because the final question, and you may have already been inferring the answer which is, yes, absolutely there is a choice in how you take money online.

So, if you figure it out and you know that maybe your church is paying too much, are you going to change? Well, I’m going to guess that you may feel a little bit like some churches I’ve talked to which is they feel a little bit like their whole online donation thing, because it does have this good end result, they like the feeling of getting the contributions. But this whole thing is kind of like a house built of cards. And, the old metaphor if a house is built of cards the slightest bump is going to make it all fall apart. Because if you do decide you want to change and save some money, if you feel you can, you might be afraid of changing because that’s going to mean that this person has to log in to their computer or their smart phone and change their account up. So the fear is, well, they’re just not going to do that.

Well, I’m going to end our whiteboard with a couple of things. One’s going to be a story which is how I’ll truly end. But I want to suggest a challenge. I think people will follow through and make the change with you if you communicate to them, “Hey, body of the church, we figured out we can save the church some money. And we need you to help us.” They’re going to still want the benefits of the convenience of online donations, and I think they will absolutely follow you to a new merchant account provider if indeed that’s what you believe is best for your church. So it becomes a faith move for you. I said I’d end with a story. One church who didn’t see it as something built on a house of cards, because what they saw is that they could save some pretty serious amount of money. This church, when they did their analysis, they figured out that they could probably be saving anywhere from $500 to $700 per month in fees. Now, I don’t care what size church you are, that’s noticeable money. So, the challenge is, take a look, figure it out. It’s not a magic trick. It’s a simple business transaction and you could be costing your church more money than is necessary.

If you need some help, we here at Elexio can help you analyze it. There are other companies as well.

Hey, thanks for watching on Elexio Whiteboard.

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