The changing face of payments What this means for charities and regular givingJuly 2018

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Foreword

When we look at the advancements in payment technology, it’s quite astounding. Who’d have predicted a decade ago that we would be using contactless cards and mobile phone apps to pay bills, carry out banking and donate to our favourite causes?

Rapidata is front and centre of the payments industry for not for profi t organisations, uniquely positioning us to consider this changing landscape and the impact it is having within our sector. By sharing our thoughts and research, we can offer an insight into how technology and attitudes are driving change, and how not for profi t organisations can respond and adapt.

This is part of our commitment to sharing and being an active contributor within the third sector community. I hope you will fi nd this report useful in encouraging discussions and focus.

Scott Gray | CEO

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Two-thirds of people say they make more payments digitally now than they did fi ve years ago.

The number of transactions made every month have grown by nearly twenty times in the three years to June 2017.

Growth of new payment technology and platforms

It goes without saying that rapidly advancing technology goes

hand in hand with the shift in payment trends. The public, who

are increasingly time-poor, have embraced the ability to set up or

make payments quickly, easily and securely – often while on the

move – and this offers huge potential for businesses and charities

alike. Two-thirds of people say they make more payments

digitally now than they did fi ve years ago.2

Among a new wave of electronic and digital payments,

contactless is perhaps the most notable area of growth, with

the number of transactions made every month having grown by

nearly twenty times in the three years to June 2017.

The popularity of social media, crowdfunding and online retail

has also resulted in a new raft of payment options. Social media

giants Facebook and Google have both brought payment

platforms to market and others like Venmo, hugely popular in the

US, now enable payments to be made within mobile apps while

also allowing users to follow each other’s accounts and pay their

share of a bill. Shopping platforms like Amazon are adding a

new philanthropic edge to online retailing and Amazon Pay

has now launched voice-activated payments, via Alexa, in the

UK. Meanwhile, more and more people are using banking apps

to access their accounts and are making or changing payments

from there.

The decline of cash

While cash remains important, it is no longer king. People are

rapidly moving away from cash payments as other options

become more familiar. In 2017, cash payments were for the fi rst

time overtaken by debit card payments, mirroring the rise of

contactless technology.

By 2015, cash represented only 15 per cent of the total value of

consumer spending in the UK, according to Government’s recent

cash and digital payments consultation, while the volume of cash

payments reportedly fell from 62% to 40% between 2006 and

2016. This is expected to continue declining in the coming years,

to an estimated 21% by 2026.1

By 2015, cash represented only 15% of the total value of consumer spending in the UK.

How the payments industryis changing and why

1 UK Cash & Cash Machines 2017 Summary and UK Payment Markets 2018 – UK Finance2 Cash and digital payments in the new economy 2018 - HM Treasury4

In 2017, cash payments were for the fi rst time overtaken by debit card payments, mirroring the rise of contactless technology.

Research shows that 85% of the UK population now use a smartphone, surpassing laptops (78%) and tablets (68%).

73% of bills are paid via Direct Debit.

Nine in ten people who hold a bank account in Great Britain have at least one Direct Debit mandate set up.

The growth of smartphones has undoubtedly played a

crucial role in making digital payments more accessible

through a huge range of apps. Research shows that 85%

of the UK population now use a smartphone, surpassing

laptops (78%) and tablets (68%) and almost a third of

consumers now use their phone to make payments. In fact,

in 20174 Brits used their smartphones to spend nearly

a billion pounds in stores via contactless Digital Wallet

systems alone, and services like Apple Pay and Google Pay

continue to grow.

And, let’s not forget that while SMS texting may have

lost favour to messaging platforms like WhatsApp and

Facebook Messenger, it offers quick and easy payments on

the move, routinely used for carparking, public transport,

and of course charity appeals. That said, SMS itself is fast

being overshadowed by in-app payment functionality – a

testament to the speed of the payment revolution.

Meanwhile, blockchain and cryptocurrencies like Bitcoin

and Ethereum are gaining interest as ways of transacting

and investing in a digital sphere. But, we have some way to

go before cryptocurrencies gain public trust and become

more viable considerations for every day payments.

Continued growth in regular payments

Even though consumers have more payment choices than

ever before, recurring or regular payments continue to be

an essential requirement. Research from Bacs shows that

Direct Debit is the most popular way for Brits to pay their

household bills, with 73% of bills being paid using this

method.5

Bacs research also shows that nine in ten people who

hold a bank account in Great Britain have at least one

Direct Debit mandate set up, and the popularity of Direct

Debit continues to grow with over 4.2 billion Direct Debits

processed in 2017, up from 4 billion in 2016.6

Strengthening security and innovation in the payments industry

Given the explosion of digital technologies and changing

consumer attitudes and behaviours, it’s no surprise then

that Government has responded with the launch of the

New Payment System Operator (NPSO), a new umbrella

organisation for the core industry payment bodies – Bacs,

Faster Payments, Cheque & Credit Clearing and UK

Payments Administration. The NPSO has a remit to work in

the public interest to develop the capability and capacity

of the UK’s retail payment systems. Every year, the UK

moves more than £6.4 trillion through Direct Debit, Faster

Payments and other remote banking methods.7 The NPSO’s

responsibility for maintaining and developing payment

systems and standards will bring a continued focus on

security, as well as proactively encouraging innovation.

3 Global Mobile Consumer Survey 2017 - Deloitte4 Tipping point for ‘Tap and Go’ as mobile payments top £975m 2018 - Worldpay

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5, 6 , 7 Half a century of Bacs payments 2018 - Bacs

As retail and banking customers increasingly expect slicker,

faster and more convenient payment experiences, the same

expectations apply for those who donate to charity. People carry

less cash with them and some 70% of charities say they have

seen a decrease in the percentage of donations given in cash

over the last three years, according to survey figures from the

Institute of Fundraising. Most respondents (86%) also predicted

that cash donations would decrease further over the next

five years.

Inevitably, this means that charities must ensure they are not

relying too heavily on cash, but exploring other payment

options for their supporters.

Making more payment options available to supporters

Contrary to common conceptions that older demographics give

most, recent research from Barclays shows that it was people

aged 35 to 54 that gave the highest average donations last

year, followed by the under-35s.8 The research suggests that

younger people are more likely to donate than they used to be,

making it increasingly important for charities to offer a range of

trusted payment options to supporters. This means appealing

to all potential supporters and enabling them to give in a way

that suits their payment preferences, offers them greater control

over their giving journey and ultimately, improves their giving

experience.

This might range from building more sophisticated payment

options into a charity’s website, to social platforms such as

Facebook Donate that allow users to give to causes directly from

the app page they are viewing.

Communicating the importance of regular giving

Let’s not forget that regular giving is critical for so many charities.

While there will inevitably be many new ways to give, the default

option is often to make one-off and sporadic payments, and

charities will want to drive a more committed and reliable income

stream for stability and long-term planning.

Direct Debit was the fourth most popular way that

people gave to charity in 2017, with almost one-third (32%)

of people saying they donated in this way and another

18 per cent paying a charitable membership or subscription,

compared to donations by debit card (11%), SMS text (10%)

and cheque (7%).9

Consideration must be given to how Direct Debit is

communicated and promoted to supporters and, ideally,

integrated so that a regular donation becomes even more

accessible.

The impact on charities and regular giving

86% of charities predicted that cash donations would decrease further over the next five years.

70% of charities have seen a decrease in the percentage of donations given in cash over the last three years.

People aged 35 to 54 gave the highest average donations last year, followed by the under-35s.

8 The future of giving 2018 - Barclays 9 UK Giving 2018 - CAF

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Recognising that regular donors want greater control

With all these developments, the public has far greater access to,

and control over, their payments and banking than they used to.

The same technology that allows them to set up payments at the

touch of a button also means they can cancel them just as easily

- both a blessing and a curse. But how would supporters react

if we gave them even more control and more options for their

donations?

When Rapidata surveyed 2,000 people that make Direct Debit

payments10, the majority (74%) thought they should be able

to fully control their payments each month. Regular donors said

they’d welcome the option to adjust the level of donation (43%),

skip a payment (44%) or take a payment ‘holiday’ (32%).

Our research also highlighted that more than four in ten

respondents (44%) had previously taken the decision to cancel a

Direct Debit payment in order to reduce their monthly outgoings.

From a fundraising perspective, a skipped payment or payment

holiday would be infinitely preferable to a cancelled Direct Debit.

Giving supporters greater control poses a clear opportunity

to both retain and build those vital supporter relationships.

Conversely, it also makes it even easier for supporters to increase

donations in response to an emergency appeal.

74% of survey respondents thought they should be able to fully control their Direct Debit payments each month.

Direct Debit was the fourth most popular way that people gave to charity in 2017, with 32% of people saying they donated in this way.

Four in ten respondents had previously taken the decision to cancel a Direct Debit payment in order to reduce their monthly outgoing.

Looking to the future

The payments industry is evolving at a rapid rate. While it’s

difficult to predict what the future will hold, it’s safe to say

that cheques will – at some stage – disappear, and cash

payments will further decline, while digital and electronic

payments continue to become increasingly important and

more widely used.

Indeed, seven in ten charities see online fundraising as ‘the

way forward’, and half of all charities are actively exploring

investment in new ways for their supporters to donate.11

As cost and barriers to entry diminish in the near future for

contactless payments, all charities will be able to gain access

to this payment channel.

With the NPSO proactively opening up access and

encouraging innovation in this space we should expect

an accelerated development period. In addition, Artificial

Intelligence (AI) has for some time been influencing consumer

spend, payment behaviour, and delivery preferences and

there is no doubt this will translate into the charity world and

fundraising technologies.

Cryptocurrencies may well gain ground, but recent

instability in the marketplace has shaken the public’s trust

and there is some scepticism about how quickly or secure

such systems are. We should remember though that

complex or pioneering payment channels can come at a

cost and may be out of reach for some charities and may

not suit all target supporter groups. As always, it’s about

offering the right payment options for your supporter base.

10 OnePoll survey 2018 - Rapidata 11 The future of giving 2018 - Barclays

As cost and barriers to entry diminish in the near future for contactless payments, all charities will be able gain access to this payment channel.

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The good news for charities is that Direct Debit is set to

continue growing as the trusted and secure mainstay of the

regular payments industry, remaining a critical facility for

organisations that rely on monthly, weekly or other regular

payment cycles.

With the first anniversary of the NPSO, a more joined up

payment landscape will start to emerge with new innovations

and connectivity between banks and payment providers.

We would hope to see a review and change to the current

three-day Bacs settlement period to same-day, to bring it more

in line with other payment methods. With greater innovation we

can expect to see faster and easier sign-up processes for online

Direct Debits utilising the technological advancements within

the banking, payment service and fintech communities.

Giving regular supporters the reins

The public is becoming more active in relation to their finances.

By offering supporters choice, like an alternative to a straight

cancellation of their Direct Debit, a charity could prevent

unnecessary attrition, hold on to them for longer and gain more

opportunities for further dialogue. The same webpages that

would allow a supporter to manage their Direct Debit could also

share updates about the charity’s work, promote a campaign or

an emergency appeal, weave in additional messaging around

the impact of donations, and the difference a top-up gift, or

even a legacy pledge, could make.

What this means for regular giving

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Offering greater fl exibility

Payments should be fl exible, both in terms of the amount

given and timings. Direct Debit offers the ability to meet the

needs of the supporter in terms of how or when they choose

to give. Similarly, for charities running lottery or raffl e

programmes, there is the ability for supporters’ payments

to be actioned weekly (coinciding with the lottery itself)

rather than monthly. This may better suit some supporters,

spreading what would otherwise be a larger monthly

payment into smaller amounts over the course of the month.

By being more adaptable as a sector, we’ll also be better

positioned to engage with harder-to-reach demographics,

such as participants of the growing ‘gig economy.’ There

are an estimated fi ve million people currently working in

the gig economy in the UK, comprising around 15.6% of

the total full and part-time workforce12. With their freelance

and independent contractor status, these workers often

have unpredictable incomes, making a regular Direct Debit

payment on a set day each month less convenient than a

fl exible alternative. Embracing new payment technologies

and adapting a more open attitude to the regularity of

donations could help to ensure that charitable giving is an

attractive and tangible option for new supporters.

The growing gig economy accounts for 15.6% of the total UK workforce

12 Independent work: choice, necessity, and the Gig economy 2016 - McKinsey

By offering supporters choice, like an alternative to a straight cancellation of their Direct Debit, a charity could prevent unnecessary attrition

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The future of the payments industry is an exciting one, and

charities and fundraisers should feel rightly optimistic about

the opportunities that digital payment advances and changing

consumer attitudes offer.

Ultimately, today’s supporter is in control: over the way charities

communicate with them, over their data, and also over their

donation payments. Charities must recognise this and ensure

they are making the most of all engagement opportunities,

including those touch points presented at payment. This will

help to optimise the donor experience and safeguard the

reputation of a forward-thinking and innovative charity sector.

Achieving this is about listening to supporter preferences and

offering greater flexibility and choice right across the payment

journey, presenting them with multiple ways of paying as well as

options for managing their giving. The fast-changing payments

environment also demands that we keep up with advances in

technology, meaning that charities must regularly review their

infrastructures and processes.

The world is changing, and with it consumer behaviour and

expectations. Offering supporters more control over their

payments ultimately benefits both sides, and with growing

consumer and regulatory pressure to do just this, it is also

increasingly necessary. It is imperative then that charities

embrace these changes and give supporters the flexibility

they require.

Closing thoughts

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At Rapidata, we champion innovation and best practice, which

both lie at the heart of the work we do and the new initiatives

we are continually developing. We are continually monitoring

the changing face of the payments industry and responding with

new solutions to help our clients adapt.

Guided also by our recent Direct Debit poll, we have introduced

an innovative new product, Control my Payment.

Control my Payment has been designed to give supporters

greater flexibility over their regular giving Direct Debits.

In a nutshell, it allows supporters to control their Direct Debit

amount, collection date and frequency, as well as offering

additional options, such as skipping a payment or a

payment holiday.

By giving supporters more control over their regular giving, we

believe we are enabling charities to meet requirements of the

changing payment and consumer landscape, while responding

to the calls within our sector to improve the donor experience.

Control my Payment also offers a platform for charities to further

engage with their supporters, highlighting the impact of their

donations and suggesting ways in which they could help further.

For more information about Rapidata’s expertise and services,

please visit rapidata.com

Rapidata’s response

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t: +44 (0)1293 601111 | e: info@rapidata.co.uk | w: rapidata.com