$1 Billion Lost in Nonprofit Payments Each Year
tessera Perspetive
Charitable giving in the United States reached $557.1 billion in 2023 (Giving USA). Within that total, roughly $65 to $70 billion flowed through credit cards, debit cards, ACH, and digital wallets — the part of giving that runs across merchant-style payment rails.
Online giving now represents 12 percent of all fundraising revenue, up from 8 percent a decade ago (Blackbaud Institute, 2023). This stream is increasingly critical. It is also where inefficiency quietly drains donor value.
Across the sector, between 1.5 and 2 percent of processed donations are lost each year to preventable failures and excess costs. On today’s volumes, that equates to more than $1 billion annually.
Recurring Donations: Fragile but Growing
Recurring giving has become central. In 2023, 28 percent of online donation revenue came from monthly gifts(Blackbaud Institute). The average monthly donation is $25, and retention rates for recurring donors can reach 90 percent.
But recurring payments rely on cards — and cards fail.
10–15% of recurring card transactions decline every month due to expired cards, insufficient funds, or closed accounts.
Nonprofits typically operate 3–5 percentage points below commercial authorization benchmarks (Visa & Mastercard data).
The result: millions of dollars in recurring revenue lost unnecessarily each year.
One-Time Donations Face Preventable Declines
Even single donations encounter avoidable friction.
Networks recommend passing full AVS, CVV, and ZIP data to maximize approval. Yet many nonprofits fail to do so.
The consequence:
Authorization rates run 3–5 points lower than commercial merchants.
Each lost point on billions of dollars in volume means tens of millions in donor intent rejected annually.
Misclassification and Hidden Costs
Visa and Mastercard offer preferential charity rates. These programs reduce interchange by 25–100 basis points compared to retail classifications.
But many nonprofits are misclassified. Acquirers often default to retail codes or fail to update records.
For a nonprofit processing $10M annually, that error can mean $25,000 to $100,000 in excess costs every year.
Beyond classification, acquirer markups compound the issue. Statement audits routinely find 10–30 basis points in surcharges above published schedules. These fees, often labeled “non-qualified,” divert donor value into processor margin.
Cross-Border and FX Erosion
International donors add another layer of cost.
Standard cross-border assessments: 40–100 basis points.
Actual nonprofit charges after spreads and add-ons: 100–250 basis points (network fee schedules, acquirer pricing).
For global organizations, inflated FX rates alone can erase hundreds of thousands of dollars annually.
Donor Preferences Are Shifting
Generational change makes this issue more urgent.
63% of donors now prefer online credit/debit giving.
Only 16% prefer checks and 4% prefer cash (Nonprofit Tech for Good, 2023).
Donor-advised funds are surging, with $59.4B contributed and $54.8B granted in 2023 (National Philanthropic Trust).
The sector is moving inexorably toward digital channels — exactly where inefficiency is most costly.
The Sector-Level Impact
Individually, a failed $25 recurring gift or an extra 30 basis points in fees may seem small. In aggregate:
Processed donation base: $65–70B annually.
Preventable leakage: 1.5–2% of volume.
Net loss: $1B+ each year.
Every additional percentage point of approvals captured or every misclassified merchant ID corrected translates into millions preserved.
The Opportunity
Donors are giving. The generosity is already there. The question is how much arrives intact.
Payments inefficiency is not fundraising strategy or campaign design. It is the mechanics of money movement. Yet it carries strategic weight.
Recognizing payments as a core lever of nonprofit financial health means shifting attention from raising more to losing less.
Sources
Giving USA 2024: Annual Report on Philanthropy
Blackbaud Institute: Charitable Giving Report 2023
Nonprofit Tech for Good: Global Trends in Giving Survey 2023
National Philanthropic Trust: 2024 DAF Report