5 Things Nonprofits Must Know About Payment Processing

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Payment processing can be a complex topic, but it’s vital for accepting online donations. In this article, we’ll cover the basics of payment processing by answering frequently asked questions that nonprofits have.

Specifically, we’ll discuss these questions:

  1. What is payment processing?
  2. Why is payment processing important?
  3. What kind of payments should my nonprofit accept?
  4. How are donors’ payments secured?
  5. How do payment processing and PayPal differ?

Your organization should know the answers to all of these questions to ensure that you’re using (or purchasing) the best payment processor possible.

Let’s get started with the first.

 

What is payment processing?

1. What is payment processing?

Payment processing, generally speaking, is a process that occurs once a donor makes an online transaction.

A payment processor (usually a third-party company — like Qgiv!) handles your donors’ personal financial information so that their donations can be properly deposited into your nonprofit’s bank account.

It doesn’t matter what kind of donation the donor makes; they can purchase a product, register for a fundraising event, or pay their membership fees. Either way, the payment processor will handle the transaction across online channels.

To really break down how payment processing works, take a look at these steps:

  1. The donor makes an online contribution. As mentioned above, this contribution can take various forms!
  2. The donor’s financial information enters the payment gateway. The payment gateway verifies that a donor’s information (such as their credit card number) is correct.
  3. The donation is sent to the merchant account. The merchant account holds credit card donations. The account is either owned by the nonprofit or the payment processor.
  4. The donation is deposited into your nonprofit’s account. If your nonprofit owns the merchant account, then the donation will automatically be transferred within a few business days. If the payment processor owns the merchant account, the funds will be deposited at the discretion of the processor (usually once or twice a month).

Now that we’ve covered the basics of what payment processing is, let’s talk about why it’s important for your organization.

 

Why is payment processing important?

2. Why is payment processing important?

Payment processing is important because it allows your organization to accept online donations.

In this day and age, donors are spending more and more time online and on mobile devices. Your organization needs to reach donors where they already are if you want to retain and engage them.

Plus, accepting online donations allows your nonprofit to offer all kinds of options to your donors.

For example, donors can:

  • Make a one-time online donation or set up recurring gifts.
  • Pay membership fees.
  • Purchase fundraising products and merchandise.
  • Register for fundraising events.

If donors can do all of these things from the convenience of their laptops or phones, they’ll be more likely to follow through with their donations.

That’s why it’s important that you take payment processing into consideration when purchasing online fundraising software.

Online fundraising platforms may have a built-in payment processor that allows you to accept online donations, or they may have partnerships with payment processors that can integrate with the platform. 

When purchasing a platform, it’s important to consider the option that can most accommodate your needs and growth.

Specifically, you’ll want to choose a platform that accepts diverse payment options, which we’ll discuss in the next point.

 

What type of payments should your nonprofit accept? Learn more with our payment processing guide!

3. What kind of payments should my nonprofit accept?

First, it’s important to understand the different kinds of donations that a payment processor can accept.

Let’s break it down.

A. Credit card payments

Credit card payments are what most people think of when it comes to making an online donation.

Donors type their credit or debit card numbers into a data field on an online donation form, as well as personal information like names and billing addresses. Then, the donation is processed just as it would be if the donor swiped their card in a grocery store (with the added convenience of giving online).

Most payment processors accept major credit cards: Visa, MasterCard, American Express, and Discover.

It’s important that your payment processor does, too; after all, credit card holders have a tendency to spend 2.5x more on impulse than other donors!

Payment processors usually charge a flat fee and a percentage per donation for credit card payments. Qgiv, for instance, charges a flat rate for the payment processing costs ($0.30 per transaction) and a small percentage that covers the costs for the merchant processor (for Qgiv, it’s 3.95% for most cards and 4.95% for American Express).

B. ACH debit payments

ACH (automated clearing house) payments are essentially e-checks, allowing donors to give directly from their bank accounts.

Donors type their bank account and routing numbers into an online donation form. The donations do not have to go through a merchant account, and your nonprofit receives a direct deposit!

Because the transfer of funds is direct, ACH debit payments are very useful for donors who wish to set up recurring donations.

ACH debit payments also allow nonprofits to avoid credit card processing fees. Most payment processors will only charge a flat fee for these payments.


It’s important that your nonprofit chooses a payment processor that allows your organization to accept both types of payments.

After all, you could accidentally prevent a donor from giving if you don’t accept their credit card! Providing options naturally allows more donors to give to your organization because it makes donating more accessible.

Plus, meeting your donors’ payment preferences can encourage them to follow through with the process.

No matter how donors choose to give, they’ll want to know that their donations are safe and secure. Let’s discuss security in the next point.

 

How does payment processing secure donors' payments?

4. How are donors’ payments secured?

One of the most important considerations for choosing a payment processor is ensuring that your donors’ sensitive financial information is secure.

First, payment processors should be PCI-compliant. This is especially important to Qgiv — there are various levels of PCI compliance, and we make sure we maintain the highest level possible. The Payment Card Industry (PCI) Security Standards Council has determined data security standards to protect merchants and contributors. PCI-compliant organizations adhere to these standards.

PCI compliance is vital for nonprofits; failure to adhere to these standards can result in penalties and fines!

PCI compliance can also reassure donors that their gifts are secure. You don’t want to deter donors from donating because they feel that they can’t trust your online giving channels. And, of course, you don’t want to put their information at risk of a security breach.

In addition to PCI compliance, there are several payment processing security features that your organization should know:

  • Tokenization. Tokenization is mandated in PCI standards and should be integrated into any payment processor. Tokenization involves replacing information like credit card numbers with a string of different letters and numbers, which builds a barrier between a donor’s information and potential hackers.
  • Encryption. Encryption converts donors’ information as it was entered into “cyphertext.” Think of cyphertext like a code that can only be understood if it’s opened with the right key. Algorithms control the encryption process and protect information as it moves through the stages of the payment process.
  • Fraud Protection. There are several fraud protection services that payment processors may offer. Essentially, these services help verify a donor’s information and block access from malicious hosts. Ask your payment processor what kind of fraud protection services they provide.

Securing your donors’ information is absolutely necessary when accepting online donations. You wouldn’t trust a website that doesn’t secure your own payment information, and your donors wouldn’t either!

Now let’s talk about how nonprofit payment processing is different from (and more beneficial than!) PayPal!

 

How do payment processing and PayPal differ?

5. How do payment processing and PayPal differ?

While PayPal and nonprofit payment processors may accomplish the same task (that is, accepting online donations), they differ significantly in their approach and benefits.

PayPal is an aggregator. An aggregator is a large company that processes donations and transactions for many businesses and nonprofits. PayPal requires that nonprofits use the merchant account that PayPal has already set up.

Unlike PayPal, nonprofit payment processing is designed and specialized for nonprofits and donors.

Here are just some of the benefits that payment processing offers (that PayPal doesn’t!):

A. Branded donation pages

PayPal creates a standard donation form for all organizations, regardless of who they are.

Payment processors may provide custom donation form tools, or they may offer their services to online fundraising software. Either way, your nonprofit can build donation pages that showcase your mission and reassure donors that they are, in fact, giving to your organization.

Nonprofits who brand their donation pages earn 38% more than those who use PayPal. Plus, donors are 70% more likely to give again if a donation page is branded.

B. Easy donation process

With PayPal, donors have to create an account (or log into an existing account) before they can make a gift. This tedious process can deter donors from giving.

After all, online giving is about convenience and efficiency; who wants to spend time creating an account that you may not even use?

Additionally, many payment processors integrate with nonprofit CRMs so that donor data is easily transferred into a database. This process saves the time and effort that it would take to manually transfer data. Accessing donor data is important for retaining and stewarding your online donors.

For instance, if you need to engage with a donor, you can access that individual’s profile in your CRM to learn about that supporter’s:

  • Giving habits.
  • Interests.
  • Preferred donation channel.
  • And so much more!

Plus, when all of your donor data is located in one place, you can easily track your communications with donors, including information you’ve already provided them.

After all, you want to give donors a unique and personal experience every time you interact with them.

C. Nonprofit expertise

Because PayPal handles all kinds of businesses and clients, their service is much less personal. Your nonprofit — and your donors — may suffer as a result.

If you encounter a problem with your donation forms, you may struggle to find someone who can fix your problem quickly. You’ll inevitably lose out on donations as a result.

Plus, your nonprofit has less flexibility with accepting online donations because you must use PayPal’s merchant account. This extra step delays donations, which can be a huge barricade for urgent campaigns.

After all, the sooner you can put your donors’ gifts to good use, the sooner you can update them on how they’ve furthered your cause!

Though PayPal may work for small or new nonprofits, it works best as a temporary solution rather than a long-term fundraising strategy.

A nonprofit-tailored approach to online giving can create a better experience for your donors so that they keep coming back to your page.


Understanding nonprofit payment processing is the first step in ensuring that you choose the best provider possible. Whether you’re purchasing online fundraising software or are using the services of a payment processor directly, all of these considerations should be taken into account.

Are you ready to see payment processing in action? Check out Qgiv’s online fundraising platform for free!

Request a demo to see how Qgiv can provide the right payment processing for you!

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