Sunday, February 18, 2007

Open Letter to Venture Philanthropists

I am writing to you today on behalf of the global community of fundraisers. We need your help -- but we do not need you make another donation.

We need you to help us change the way that donations are made.

The future of philanthropy may not be entirely paperless, but the trend away from traditional forms of fundraising cannot be denied. Within the past five years, the amount of donations processed online has risen from the millions to the billions. Although overall giving has grown during this time, the majority of this increase is a result of changing behaviors among donors who would have previously donated offline.

This trend is merely the latest manifestation of a larger move away from writing checks in favor of utilizing credit cards to process donations.

I have two chief concerns within this reality:

First, the vast majority of fundraisers do not see this as a concern at all. In fact, many welcome the shift with open arms, praising the increase in overall giving as a result of providing donors with a quick, efficient way to make a gift.

While I am certainly grateful that the credit system has further opened the wallets of the world's donors, I am troubled by the fact that few question the effectiveness of this new tactic. Specifically, I am baffled as to why more of my peers do not share my next concern:

Such transactions require processing fees that result in a loss of millions of dollars that donors intended to go directly to charitable organizations.

In 2005, it's estimated that over $4.5 billion was donated online. Even at a rate of 4% (far lower than what many charities pay per transaction), that is over $180 million in processing fees.

Surely, there must be a better way to provide donors with a quick and efficient way of making a gift.

Admittedly, the challenge of changing something as entrenched and as powerful as the credit system is daunting. Much of the world's wealth is, quite literally, set against such a challenge.

But could it be done?

Could a network of foundations pool their capital to fund the creation of a social enterprise capable of processing over $4.5 billion at little or no cost to non-profit organizations?

Could a visionary leader -- a Bill Gates, a Richard Branson, a Pierre Omidyar -- leverage the resources necessary to change the way that the credit card companies do business?

What systems would need to be in place? What barriers would need to be overcome -- not just financial, but also political?

Is there another way?

I believe there is. And I believe that you, the venture philanthropists of the world, are the ones with the resources, knowledge and connections to make it a viable reality.

Imagine the impact of:

  • Matching every $0.96 donation with an additional $0.04,
  • Decreasing the entire sector's fundraising costs by 2-4%, and
  • Removing the barriers that prevent smaller non-profits from accepting online donations.

The trend towards credit-based philanthropy will not stop. This year, non-profit organizations will surely receive more than $5 billion online. And yet there still will be too few resources to meet the needs, and every penny spent on processing a credit card is a penny that could have been spent on feeding the hungry, healing the sick, housing the homeless and more.

There must be another way. We need your help.

Yours, in the service of our community,

Jeremy Gregg
Editor, The Raiser's Razor