Combining nonprofit payment processing with modern donation forms: Security measures and best practices

Dana Guterman

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August 28, 2024

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7 minutes

Nonprofit Trends

The Giving Experience

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Long ago, most nonprofits received donations by check, and often, donors made payments in person. Then, debit and credit card donations took center stage, and donors spent hours on the phone repeating their card codes. Now, it's all about online payments, but... what is a payment processor? Today's the day that we learn together.

As a modern charitable organization, you need certain tools to handle online transactions smoothly and securely—but it's a big, wide, and confusing digital world out there. That's why we've got (totally jargon-free) guidance to help you navigate this rocky terrain. Just keep in mind that none of this is one-size-fits-all, so ask all the questions and take it slow.

What is payment processing? Our processing payment meaning:

Payment processing for nonprofits is when the nonprofit gets the money! It has little to nothing to do with the donor; it's all done on the back end by a company like Stripe or PayPal. The truly transformative part, though, is when the eligible nonprofit takes the donations to make impact.

Before we get into all the gritty details of payment platforms and online payment processors for nonprofits, there's some fancy-schmancy lingo you should know. And this is just the beginning. We could go on and on about merchant accounts and ACH and blah, blah, blah until your eyes glazed over. Instead, think of this as a jumping-off point; it's Payment Processing Tools 101. Learn the ropes, then get ready to be the most popular guest at your next dinner party.

And what are payment processors? Our payment processor definition

Online payment processors are the middle-person between your donors' bank account and your organization's account. Once you've paid for something with your digital funds, a nonprofit payment processor handles the actual transfer of funds, making sure the money gets where it needs to go, quickly and securely.

From movies and grocery shopping to museum tours and shark tracking, more and more of our lives have moved online in recent years. As a result, our wallets have, too. Today, more than four in five Americans use digital payments, and that number's only rising (McKinsey). While it might seem scary—and while we're still stubbornly paying cash at our local coffee shop—our finances are going digital, and that means we all need to up our e-payment know-how.

Is a merchant processor the same as a payment processor?

A merchant processor is the same thing as a payment processor, which is the same thing as merchant payment processors and third-party processors. In the for profit world, once the financial transaction is made on the customer's credit or debit card (if the business accepts card payments), the customer's bank sends funds to the merchant's bank and within a few business days, the money is in the business bank account.

What is a credit card processor? Is there a difference?

A credit card processor is the same thing as the merchant processor or the payment processor. The public generally uses these terms interchangeably, which is just as well since there's really no difference between the three. For our purposes, you can lump them together in the thesaurus of your mind.

What is a payment processing center & how does it fit into the process?

A payment processing center is... the payment processor. They receive donations and transactions from donors, process funds, and deliver money to the non-profit organization's financial institution. It's the word "center" that's getting you—if you must think of it as a place, think of it as a magical place that attracts money. A payment depot, if you will.

What is a credit card acquirer?

A credit card acquirer is the one that catches the money, so to speak. Once the payment is made, the credit card acquirer is the one left holding the cash. They are bound to deposit the money into the nonprofit's bank account, minus any fees.

What is a payment gateway?

If a payment processor is a company that handles the behind-the-scenes work, a payment gateway is the entry point for online transactions, facilitating a smooth experience. It collects all the necessary customer data, ensures everything's kosher, and then transfers donor and card information to the payment processor.

So, if you want to take advantage of the funds in your donors' digital wallets, you'll need a payment gateway to collect and encrypt their payment information and route it to the nonprofit payment processing tool. The payment processor informs the bank that it's ok to hand over the cash. It's all a beautiful symphony, really.

What is the difference between a payment gateway and a payment processor?

If you thought they were the same thing, you're not alone. A lot of these terms are often used synonymously. In summary, the main difference between payment gateways and secure payment processors is their role in the transaction process: the payment gateway authorizes and forwards payment information, while the payment processor finalizes and settles the transactions.

Always with obfuscation, finance world! But with good reason—it's not unusual for a provider like Stripe to act as both the gateway and processor, for example. So now that you know the differences, you'll know what to look for, and you won't be as confused when we're accidentally inconsistent with our terms. And one more thing… getting a Funraise account is the easiest way to have all of this and more. No need for the neon question mark above your head anymore!

Also, when you're looking at articles outside the nonprofit world, you can think of the qualified nonprofit as the merchant, their Stripe or PayPal account as a merchant account, and their payment processor is a vendor. The donor is the customer, and the logistics of accepting their credit and debit card transactions is similar to the way third-party payment processors accept credit and debit card payments for their goods and services. Yes, there are many differences between the nonprofit and for profit worlds, but the logistics of accepting credit or debit card payments (depending on the payment provider) is remarkably similar.

Integrating multiple payment gateways

This sounds like it's for the more advanced among us, but really, it's for anyone and everyone.

As much as your payment gateway can do, there are others that will increase the number of donors and the ease with with donors can make a gift. A good digital fundraising software like Funraise will allow you to connect multiple gateways because they want you to be able to collect donations from as many donors as possible. Think PayPal, for example. PayPal is a gateway, processor, and digital wallet.

What's a digital wallet?

A digital wallet, also known as an electronic wallet or e-wallet, is an online service or application that lets you pay for things online. Since it stores all your banking info, there's no need to reach for your physical wallet. Nonprofit donors digital wallet payments to make donations, join membership programs, or buy tickets to an event. Examples of digital wallets include Apple Pay, Google Pay, or PayPal.

And here's a fun fact: In 2021, more than 50% of global e-commerce payments were made using digital wallets (Statista). Payment processing services are leaning more digital, more mobile, and the transaction process and types of payment processing options are growing like whoa.

Social payments

Is this a trend or the future of payments (and giving)? Venmo and other modern payment methods combine social platforms and payments and make donating easy—key to converting donors at record-breaking rates.

Funraise CEO and Co-founder Justin Wheeler notes, “As social interactions have gone digital, donations have moved into the digital realm as well, making it imperative that nonprofits evolve their ability to accept those digital donations."

Funraise CEO and Co-founder Justin Wheeler notes, “As social interactions have gone digital, donations have moved into the digital realm as well, making it imperative that nonprofits evolve their ability to accept those digital donations."

How do payment processors work? 8 Steps to payment success

While you can tour the US Mint to see exactly how your cash gets made, the same isn't true for digital payment tools. If you're feeling mighty suspicious of all this newfangled technology—and we get it, we relate to Abe Simpson, too—here's a quick play-by-play: "How do payment processors work?"

Step 1. A donor makes a payment on your website.

It can be a small gift or a large gift, a one-time donation or a recurring subscription, event tickets, or online merch. The point is: they're sending you money.

Step 2. The donor's financial information enters the payment gateway.

Whee! Honestly, we thought this tour would be boring.

Step 3. The payment gateway collects, verifies, and encrypts the information.

Just double-checking that your donor's info hasn't been stolen by robots. Once everything's safe and secure, it can get processed.

Step 4. The accepted donation moves on to the payment processor.

Acceptance is so sweet. Time to spend some quality time with the payment processor!

Step 5. The payment processor starts the official transfer process.

It securely sends the card data from the check-out page to the donor's card network (be it Visa, Mastercard, or something else).

Step 6. The network says yay or nay.

The card network either authorizes or declines the payment depending on whether funds are available. Assuming the payment is authorized …

Step 7. The bank sends you the funds.

Thank you!

Step 8. You get the donation in your account.

Watch out for incoming donation funds! Now, to make big ol' impact with those gifts.

Example of a payment processor for nonprofits: the Funraise solution

Funraise Payments is the most excellent example of a payment service provider that we can think of; it's built to have all the features of the big payment processors, but customized for nonprofit payment processing, so you get the best of what Stripe offers on your donation form, embedded right on your website. There's top-notch security and transparent pricing, and Funraise Payments supports all the popular payment methods. Plus (and this is a big bonus), donors have the option to cover the platform fee. About 90% of them do, which means an effective platform transaction fee of 0% for you.

Get all the details on Funraise Payments and see how to set up a clear, conscious donation flow with Funraise donation forms.

Choosing an online payment solution for your nonprofit

Now that you know everything you could ever want to know (and maybe some things you didn't) about nonprofit credit card processors, the time has come to choose which one's right for you. Keep in mind that features, rules, and nonprofit rates can vary—plus, you'll need to get your board's full buy-in before making any moves. With those caveats out of the way, let's dig into choosing the best online payment solution option for nonprofits.

But first, we want to emphasize this… you don't need to choose a payment processor. By setting up your Funraise account, you automatically get access to Funraise Payments by Stripe—the gold standard for nonprofit payment processing tools.

What features should my online payment processor have? Questions to ask when choosing a payment processor

As you survey the vast credit and debit payment processor landscape, here are some things to ask yourself and any vendors that offer online payment systems for nonprofits. (And yes, you can ask us at Funraise all of these and more.)

Is there a start-up fee?
Is there an annual fee on top of the debit or major credit card transaction fees?
Do they support international payments?
What security precautions do they take?
Do they have readily available, live customer support?
What's the onboarding process like?
How long does it take for donations to get deposited in your account?
Are there additional features for qualified nonprofits?
Is there a cancellation fee?
What payment details do they collect?
What payment options do they offer?

Benefits of connecting your donation form and your payment processor

Seems obvious, but we'll say it: Your payment processor is only useful if it's connected to your online donation form. You need the donation form to collect the donor data not just for your CRM, but for your payment gateway so that your payment processor can deliver the donation. The benefit of having these connected is that you get every donation that a supporter is gifting.

In addition, there are a few specific benefits to connecting your donation forms for nonprofits and payment processor that we'll dive into:

Setting up recurring donations

Recurring donations are some of the most important gifts that your donors can give. Allowing these loyal supporters to set up a monthly donation once is crucial—your donation form allows this to be a set-it-and-forget-it maneuver.

Handling cryptocurrency and stock donations

Sometimes major donors want to give something besides cold, hard cash. In those cases, you need a donation form that can accept crypto, stock, DAF donations, that can facilitate corporate matching gifts, and more. While these donations may not go through your main payment gateway and processor, they still benefit from having a clear, concise giving experience set up on your donation form.

Ensuring donation payment form security measures

We've discussed donation form security several times already, but it's worth digging into. Donation form security measures don't just affect this one-time donation, they let your supporters know that your nonprofit can be trusted, which is the cornerstone of a rich, long-lasting donor-nonprofit relationship.

Taking it mobile

So many of your online donors make donations through mobile devices that if for no other reason, this right here is why you should connect your donation form to your mobile payment processing platform: Funraise. Your donation form will function as a sort of mobile card reader, putting through mobile processing payments, mobile-ly. Of course, some mobile payment processing solutions offer a physical mobile card reader, but that will be connected to your donation form, too. So... might as well do it.

4 different dedicated payment processors

With all of the above in mind, what's the right processor for you? Here are a few top nonprofit credit card processors along with our expert opinions.

Our top choice: Funraise Payments (powered by Stripe)

Obvious. The power of Stripe, the innovation of Funraise, the passion of a nonprofiteer. A payment processor dream-come-true.

Even more is the mobile checkout process, giving you the ability to use Funraise's app as a card reader for payments on the go.

Stripe

‍We love Stripe (and that’s why we chose it for Funraise Payments!). It sets the standard for dedicated payment processors, is secure, allows you to accept payments in a ton of currencies, integrates with pretty much everything, and has live customer support 24/7. The best part is that it's used with Funraise Payments, so you get all this and you can begin collecting donations day one. It’s that easy.

PayPal (and also Venmo)

‍If you want to go with what you—and everyone—knows, PayPal is the original payment processor. It’s popular for a reason: its merchant services are easy to use and works in nearly every country. But it tends to be more expensive than the alternatives and you can only reach customer support on the phone during limited hours. There’s also very little in the way of customization.

Block (formerly Square)

‍Block, which you probably still know as Square, is popular with brick-and-mortar businesses. Upside: it’s a snap to set up an account with a payment processor and get going. Downside: add-on services can really add up, and as you grow, you’ll might want more options (which Funraise Payments has in spades!)

What nonprofit credit card processing fees should I know about?

As you can see, credit and debit payment processing requires the involvement of many parties and systems, and like most things in life, it don't come free. There are staff members to pay, networks to maintain, and bugs to troubleshoot. As a result, there are fees, and they fall into three categories. Note well, however, that these fees vary widely, so do your research.

Transaction fees (AKA payment processing fees)

These are the fees associated with each individual payment. They're usually a percentage of the amount plus a small flat fee. Per transaction fees are typically your largest credit and debit payment processing expense, and they're nonnegotiable, so pay close attention.

Flat fees (AKA scheduled fees)

These are set monthly or annual fees associated with a payment processor. They're all over the map; some nonprofit credit card processors change no flat fees (woohoo!) while some are pretty steep (boo!).

Incidental fees

If something goes awry, you may find yourself with incidental fees. Maybe it's a chargeback fee or a fee associated with not having sufficient funds in your account. Either way, if you get them, you should prepare to haggle with all your might.

All about online payment security

No matter how affordable a payment processor may be, if it doesn't keep your donors' data safe and snug as a bug in a rug, it's a no-go. But what should you look for when you're considering processor security—and which security features give you the biggest bang for your buck? Never fear; Funraise is here [to demystify payment processing security features].

Tokenization

Worried about hackers, cyberattacks, and fraud–oh my(!)? Fear not, friend. Enter tokenization, a process by which card details, like names, numbers, and CVV codes, are replaced with randomly generated IDs known as “tokens.” Now, all your data is as safe as can be.

Encryption

Data encryption is a process that uses algorithms to make text unreadable. It's similar to tokenization, but the method is different. So, you might wonder, which is better? The answer is a resounding “both!” A payment processor that uses both tokenizationandencryption offers optimal protection.

PCI compliance

Payment card industry (PCI) data security standards are a set of guidelines that outline how companies can best keep customer data secure. You want your payment processor to be PCI-compliant and then some.

When it comes to payment processing, it's a jungle out there. Thanks for letting us be your guide today!

Get the best payment processor in the galaxy, Funraise Payments!

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Nonprofit payment processing key takeaways

Funraise Payments is powered by Stripe and is purpose-built for nonprofit donation processing. It offers the best of Stripe and Funraise's security, innovation, and ease of use. All Funraise accounts have access to this super-powered payment processor. So, what are you waiting for?
With more than four in five Americans using digital payments, qualified nonprofits need to work with payment processing companies to accept and process online payments securely and seamlessly. Payment processors also make accepting credit card payments safe and secure.
There are three main fee types associated with payment processors: transaction fees, flat fees, and incidental fees.
When you select payment processors, security is paramount. Look for a processor that is PCI-compliant and uses tokenization and encryption to protect donor information.
The right payment processor depends on your qualified nonprofit's size, technical knowledge, and needs.

Donation Form Payment Processing FAQ

Do nonprofits have to pay credit card processing fees?

Short answer: Yes. The longer answer is generally yes, but there are nuances involved that can affect how these fees for credit card processing for nonprofits impact the organization. For example, models like Funraise's Donors Cover Fees ensure that while nonprofits are still charged at their standard nonprofit rate, the donation will cover much of these fees.

What's the difference between an online donation tool and a payment processor?

Online fundraising software and digital donation tools are the housing for the payment gateway and the payment processor. Rather than asking how they're different, it's more useful to look at them as two parts of a machine or process. They fulfill different roles and come into play at different times during the donation process.

What type of security should I look for?

When it comes to payment processing solutions, ensuring the security of your donation forms is paramount. Donors need to feel confident that their personal and financial information will be protected throughout the transaction process. Look at Funraise's donation form security to set a benchmark for the type of data security your nonprofit needs.

Which payment method is best when donating to a charity?

Charities want you to be able to make a gift in the way that makes the most sense and is the most efficient for you, dear donor. If you want to ensure that you're doing your best each month for nonprofits, opt in to cover the costs of processing for nonprofits or platform fees.

Which payment gateway is best for nonprofits?

Funraise Payments, powered by Stripe, is the best payment gateway for nonprofits. Funraise Payments combines the power and innovation of Stripe with Funraise's incredible product and nonprofit industry knowledge. Funraise Payments is built for non-profit organizations just like yours, employs bank-level security measures, and is baked in to the best fundraising software in the galaxy.

What is the safest way to donate money?

The safest way to donate money is to use a trusted payment gateway on a donation form that clearly advertises the payment processor that powers it. To only give money to trusted nonprofit organizations, to trust your instinct, and to never give more than you can afford.