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London Tech Week

Why payment providers must drop charges to support charities in their funding 

Banked
Image credits: Banked

Just as things seemed to be settling from the aftermath of the COVID-19 pandemic, another crisis has hit the nation. As the cost of living crunch looms on the horizon for many households, it is set to disproportionately hit those from low-income backgrounds. Inflation is at record highs, the pound is losing value, and households everywhere are being forced to tighten their belts as the cost of living in the UK is rising faster than it has for several decades. 

The dangers are clear. Independent think tank The Resolution Foundation reported that without support, the scale and depth of the cost of living squeeze, alongside a lack of support for low-income families, could plunge a further 1.3 million people into absolute poverty next year. This figure includes 500,000 children, the first time Britain has seen such a rise outside of recessions. To support those struggling, charities are playing a more critical role than ever. 

Charities fighting UK poverty

Charities – the organisations that were relied upon so heavily during the pandemic – have become increasingly needed as pockets of the nation fall further into despair. Demands for charity services, whether physical needs like housing or emotional needs like support, are skyrocketing. These services help so many people in so many ways every single day.

Simply a few examples of how the myriad of noble organisations are currently serving the country: Hackney Foodbank (where a third of those who visit are children) is distributing emergency food packages, the Royal National Lifeboat Institution is saving lives at sea, and St. Mungo’s is offering beds and support to thousands of homeless people.  

However, no matter how much the help of organisations like these is desperately needed, charities continue to struggle. Like other organisations, UK charities were hammered by the pandemic, especially at the start of the lockdown in 2020. In fact, 40 per cent of charities had to dip into reserves at the height of the crisis and lost a staggering £6.4bn of anticipated income

These are not insignificant figures that can be easily recouped in a short period of time – instead, the road to recovery is set to be long and arduous. More than half (58 per cent of charity leaders) reported that financial stability and income generation represented some of their most pressing challenges. 

After all, the October 2021 budget did not reveal any new investment in the sector, even though there is an increasing demand for charities to provide much-needed services. Instead, the pandemic has left a £6.6bn spending hole, which broadly indicates much less funding for charities reliant on government support.

Alongside this, donors have been more reticent as well. Energy bills for the average household have risen by approximately £700 per year. Besides inflation, there have been increases in income tax, council tax, National Insurance, and the National Insurance threshold. Due to these rising costs across the board, 1.6million fewer people made charitable donations last year compared to the one before. 

In these demanding times, as charities and the people they serve to continue to struggle, there is an ethical role that payment providers must play to support charities in their funding activities. As the ones who enable the infrastructure of daily money flows, how they deal with charities can make a considerable difference when these transactions are compounded over time. 

Lower or no fee for charities

Specifically, payment providers can help charities recover by waiving transaction fees and mandating zero fees on donation transactions. New payment methods mean that the entire donation that someone gives should reach its destination and not be subject to payment fees, ideally having a zero-fee policy for any direct charity donation.

As charitable operations are being squeezed more than ever, there has never been a better time to try out new innovative methods, including shifting away from traditional payment methods, like mailers with manual card entry fields and collecting cash. Instead, QR code scanning on television should be enabled to take donations during live events. 

Another example would be using QR codes on mailers for direct instant and secure payment and the ability for street charity fundraisers to collect simple one-off donations without the need for a card reader. These seamless, secure payment methods would encourage donations and reach charities more efficiently, streamlining their operations and removing unnecessary friction.

These technological measures would make an enormous difference to the sector over time – ultimately helping them to be much more efficient in their operations and helping each donation to stretch that little bit further. As these efforts build up over time, a colossal difference would be made to those who need it the most. 

Brad Goodall is the Co-Founder + CEO of Banked, a fast-growing fintech that powers real-time payments for consumers, businesses and banks, improving customer experience, payment security, business efficiency and cost-effectiveness. Its core product – Pay by Bank: Checkout – offers a payment method that gives customers a fast and secure way to pay directly using their bank.

This article is part of a partnership with social impact media firm Ecology Media, which is running a special editorial series called A Better View to explore the ethical and diversity challenges that exist in the world of innovation – and the ways they can be fixed.

For partnering opportunities, contact [email protected].

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