What can we learn from SwipeGood?
To my surprise, I recently heard that SwipeGood will be shutting its doors in December. Why the surprise? I thought it was a feasible and timely business idea, they have 50,000+ users, and they received 500k in angel funds nine months ago. (http://techcrunch.com/2011/02/10/swipegood-raises-500k-from-michael-birch-and-others-to-allow-you-to-donate-with-each-purchase/)
SwipeGood lets participants round up each credit or debit card purchase to the dollar and donate the added amount to a nonprofit of your choice. If one swipes his or her card for $39.25 at the grocery store, the total is rounded up to $40.00 with the extra $0.75 going to the preset charity. 
In 2008, Bank of America invested in the idea that this “spare change” could add up by launching their “Keep the Change” program. Dean Karlan, professor of economics at Yale, compared the two programs here (http://www.freakonomics.com/2011/02/23/does-swipegood-lead-to-more-charitable-giving/). The average annual savings of participants in the Keep the Change initiative was $125. If we assume that SwipeGood had similar results, we can do the math to come up with an estimate of what they raised for their charities. But the folks at SwipeGood only got to keep 5%.
At the end of economist’s article, he calls for a field test to determine the effectiveness of SwipeGood. I wish that I could find THAT case study! Alas, we are left to speculate as to why their doors are closing. After perusing the comments on articles and a forum about SwipeGood and speaking with my business partner about the subject I have three ideas:
1. People don’t trust themselves with charges here and there all day, every day. Maybe they wanted a one-time donation that is easy to budget and plan into expenses.
2. SwipeGood didn’t emphasize the nonprofit brand so people felt more like they were giving to a third-party, for-profit entity instead of to the charity.
3. Potential donors were wary of 5% of their donations going to SwipeGood, a for-profit entity.
Number three is particularly interesting to me because it is counter-intuitive to many people at first glance. Why let a third-party have a cut of my charitable donation? The truth is nonprofit marketing and donation solicitation costs a lot of money. Direct mail campaigns, charity races, cookies and candy bars! They all present costs to the nonprofit that are often higher than 5%.
What about donation web pages for non-profits? While credit card fees for a nonprofit donation page are around 4%, the nonprofit has to expend a lot of effort and expense maintaining that donation page themselves, and they may not have time to test it to raise their own conversion rate. So a “cheap” 4% can end up costing them a lot of money.
HelpAttack! emphasizes the nonprofit branding, uses HTTPS, and has a secure partner (http://www.firstgiving.com/) to handle credit card transactions. What else can we do to make you, the critical donors, feel more confident in choosing HelpAttack!? Please leave a reply below.
Tags: donation, donations, fundraising, fundraising on Facebook, fundraising on Twitter, Help Attack, HelpAttack, HelpAttack!, microdonations, non-profit, nonprofit, nonprofit marketing, not for profit, pledge, pledges, pledging, social media fundraising, SwipeGood
November 17th, 2011 at 12:30 pm
I think you’ve touched on the answer: transparency. Show us how the 5% that goes to a for-profit would compare to the administrative costs of the nonprofit doing the fundraising themselves. Show us in charts/tables/graphs/case studies why it’s a sound investment for NPOs to partner with Help Attack! and make it prominent on your website.
November 18th, 2011 at 2:48 pm
Noah, thanks for your response. This is exactly what I was hoping for! Now off to find some concrete facts and figures on administrative costs of fundraising. Anyone with suggestions on where to find trustworthy information on the topic? That could turn into a post in and of itself!
November 18th, 2011 at 11:46 pm
I completely agree with Noah. I might also recommend a short educational page that explains how we as donors can learn how to research how much our favorite NPO spends on fund raising. Most people are familiar with income statements, balance sheets, et cetera, but would have little clue what a “Statement of Activity” is. Or that NPOs are required to report their fund-raising costs. A little education could go a long way also in helping us become smarter donors. Some might be shocked to learn that their favorite NPO has an operating overhead of 35%. While a similar NPO helps the same people with an overhead of only 10%. This directly effects the value of a donation, and sometimes in a big way.
November 21st, 2011 at 6:48 pm
Great thought on having a page on how to choose – figuring out which cause to support is where many people get stuck if they arrive at HA! without one in mind. We should add that…
As for overhead, sadly it gets far more complicated. Imagine two oral surgery organizations (like SmileTrain), Org A has 5% overhead and Org B has 10% overhead, but B performs 50% more surgeries per dollar by employing local doctors rather than flying over US surgeons. Org B does a third more “good” per dollar despite having double the overhead.