Online payment processors can help cut down on the confusion and ensure your nonprofit is following state and federal regulations when processing nonprofit donations. Read on to learn more about nonprofit donation processing and what you need to look for.
![Nonprofit Donation Processing: The Ultimate Guide [Updated 2025]](https://donorbox.org/nonprofit-blog/wp-content/uploads/2021/03/2022-JanFebMar-blog-images-1.png.webp)
The number of donors who give online continues to grow every year. In fact, 64% of donors prefer to give online – a clear indication of how important it is for nonprofits to incorporate online fundraising and donation processing into their fundraising strategies.
In this article, we’ll explain what nonprofit donation processing is and how it works, elaborate on important nonprofit payment processing terms, and provide more information on payment processors. We’ll also answer some frequently asked questions.
Let’s get started!
In simple terms, nonprofit donation processing refers to when a donor makes a donation to your cause using a secure online payment method. It involves a series of steps, from the initial intent to donate to the point where funds are reflected in your bank account.
Collecting one-time and recurring donations, crowdfunding, peer-to-peer fundraising, membership fees, event tickets, and selling products can all improve your organization’s bottom line.
These fundraising types have their own tax rules and impacts on a nonprofit, but they can all be accepted with donation processing systems.
It’s natural to be cautious when purchasing new fundraising tools and to look for systems that are easy on the wallet. Understanding how a payment processing system works will help you decide which one will work best for you.
Let’s explore a few terms that explain how these systems work and how they can impact your organization.
A merchant account is a nonprofit bank account set up to receive online donations. Check with your bank to understand the process and fees included.
A card association is a powerful group of banks – like Visa, Mastercard, American Express, and Discover – that sets the terms of all credit card transactions.
ACH stands for Automated Clearing House payments. Unlike credit card payments, these donations go directly from bank to bank. These payments are known as e-checks and can be completed in 72 hours. They are also an excellent option for recurring donors or larger donors.
Third-party processors are software used by nonprofits to send payment requests. Some of the best-known processors are PayPal, Stripe, and Square.
A payment gateway is fraud prevention used by payment processors for online donations. Some donation processing services have unique payment gateway systems. Others use a third-party one. Payment gateways encrypt credit card information and help reassure donors that their donations remain safe.
Aggregators are large payment processors that support smaller businesses and nonprofits. PayPal is well-known and well-used by many small nonprofits.
A payment-enabled software can send requests for donations through its own payment processor to the card association.
Virtual Private Networks use data encryption to secure information and stop fraudulent payments.
The Payment Card Industry (PCI) Security Council set up some security standards in 2007 to protect both the customer and the merchant involved in a payment transaction. Nonprofits should remain compliant with these standards to avoid being suspended and facing penalties. Choosing a PCI-compliant payment processor is essential.
Tokenization is a mandatory requirement by PCI compliance standards. It takes sensitive information, such as a donor’s card details, and replaces it with a string of alphanumeric symbols as a part of its security measure. Payment processors create and issue these tokens themselves and therefore, it is upon them to keep the information safe.
Encryption is another important security measure for payment processors to help convert sensitive information from plaintext to cyphertext. The cyphertext, in turn, can be read with a key that is unique. It is used to keep donor data private and secure.
Donation processing can happen quickly. This swiftness can surprise many people since there are quite a few steps to the online donation process. These include the following:
Credit and debit card transactions will include a flat rate and a small percentage to cover processing fees. ACH payments are simpler, since the process doesn’t include the large card association. But these days, what works the best with your Millennial and other newer generations of donors is the digital wallet payment option.
Donorbox offers a no-contract, low-cost donation processing option for all nonprofits. We use Stripe as our main payment processing system and offer a plethora of payment methods.
Our full list of available payment methods is listed below:
All Donorbox campaigns come enabled with Donorbox UltraSwift™ Pay, which helps you use the power of digital wallets, including Apple Pay, Google Pay, and Venmo. This makes the donation process 4x times faster for your donors.
A payment processor is necessary to accept online donations. Plus, there are many ways it can help you increase funds and boost donor outreach.
Smaller nonprofits may opt to skip a payment processor because of cost, but there are payment processors that are easy on the pocket.
A payment processor that also doubles as an online giving tool will help you maximize donations with features like crowdfunding, text-to-give, peer-to-peer fundraising campaigns, and store your donor information in its donor database.
Many small nonprofit organizations rely on membership fees to continue their work, and convenience is key. If you have an online payment processor, you can collect recurring fees with a few extra steps.
Donorbox lets you create simple membership campaigns, add unlimited membership tiers, manage your members and membership payment data on the backend, and highly benefit from a loyal supporters base through monthly and annual memberships.
You can unlock all these benefits while easily processing membership fees with ease, maximum security, and high-end fraud-protection measures. Check this example. below.
Selling products online is a great way for you to raise more funds! You can reach larger audiences and bring in a larger amount to your budget. Payment processors will help you sell your products and accept payments in the most secure way possible.
One of the most frustrating parts of having events is selling enough tickets. Selling online tickets can lighten the load. Payment processors can make this process easy and secure for you and your donors!
Donorbox lets nonprofits create a simple-to-use event page, add unlimited ticket levels, input fair-market value and tax rate to determine the tax-deductibility of these tickets, manage ticket sales and purchasers’ information at the backend, and accept donations from the event page.
As usual, while also ensuring the utmost security of payment processing. Learn more about Donorbox Events here. Check out this example of a Donorbox ticketing form here.
There are a few different ways your donors will give online. You’ll need a processing system that can accept each of these payment types.
Donating by credit or debit card is easy and convenient. Most payment processors will accept credit and debit card payments from Mastercard, Visa, American Express, and Discover.
There are two separate fees for this type of payment. Any credit or debit card payment will include a flat processing fee. There is also a percentage fee for credit card processing.
Automated Clearing House payments, or ACH, are payments that move from one bank to another. This type of donation only includes the flat processing fee.
Your donors generally type their bank account and routing numbers into an online form, and that donation will be moved automatically. With Donorbox ACH Payments, donors don’t have to type in their account numbers. All they have to do is select their bank and use the username and password they have with their bank.
With direct debit payments (e.g. U.K. Direct Debit and Canadian PADs), your donors will authorize your nonprofit to debit money directly from their bank account, either on a one-time or recurring basis. This is done through a “mandate email” process.
With Donorbox, most of the steps are automated and you only click a few checkboxes/buttons to enable direct debit payments.
Digital wallet payments are the third most popular method among donors, after credit/debit cards and cash.
If your nonprofit is not providing options such as Apple Pay, Google Pay, and Venmo, you’re missing out on a large chunk of donations. Use Donorbox UltraSwift™Pay to leverage the power of digital payment methods as a user-friendly and fast donation platform.
“Payment aggregator” is a term used to describe a few large processing systems that help small businesses and nonprofits collect online payments.
PayPal is the largest of these aggregators. PayPal does not use individuals’ bank accounts. Instead, it uses its own merchant account to accept and send payments.
There is a percentage and flat fee for all payments processed. They do have a lower percentage fee for nonprofit organizations. The difference between PayPal and other payment processors is that a nonprofit cannot brand its donation pages if using PayPal. This can be important because the average completed transactions on online donation pages increased by 50% since last year.
If your customization and branding options are limited and you’re only focusing on using a tool to process payments, you have fewer chances of increasing donations. Your payment processor should adapt itself to emerging trends and let you optimize your donors’ experience for more effectiveness.
Bonus Resource: Check out this video to explore the best donation payment options nonprofits need to have to maximize donations and why!
If you are ready to accept online donations and is looking for the right payment processor, there are plenty of options on the market! However, it’s important to know which features to look out for. Below are a few different features you should research when making this decision.
Payment processors created for nonprofits give organizations options that others cannot. Features like recurring donations, company donation matching, donor management, text-to-give, membership campaigns, event ticketing, crowdfunding, robust donation forms, and goal meters can increase your income and encourage donor retention.
Not every online donor wants to give in the same way. Thanks to advances in technology, there are several ways to make a payment. This is especially helpful if your organization has donors from different countries.
A payment processor that offers flexible payment options will streamline the donation process. Look for a processor that accepts credit cards, bank transfers, direct debits, digital wallet payments, and PayPal or payments from other aggregators.
A new payment processing system can be frustrating if it is not easy to set up. You probably have limited time to spend learning new programs and minimal technical support on hand. The best payment processing systems are easy to set up and work with your existing website.
Like time, money is limited for most nonprofits. Cost is the first thing boards look at when approving budget increases.
Many payment-processing programs will include a sign-up fee, along with contract and processing fees – including flat rates and percentage fees. When researching payment processing systems, find one that costs less but covers all your needs.
Some payment processing programs also offer the chance for donors to pay processing fees when donating. This is a great way to decrease the cost of your payment processor and ensure most of the funds from donations go straight to your cause!
Hacking threats are real and prevalent in our society. Donors are aware of this and look for signs that their donation is safe. Ensure that your payment processor is PCI-compliant and follows these 12 requirements:
Yes, each time a donor uses a credit or debit card to give online, there is a flat-rate processing fee and a percentage fee for credit cards. You must pay this fee, unless your payment processor offers donors the opportunity to pay these fees themselves.
Organizations must have a payment processing system or an aggregator like PayPal to accept credit card donations.
Nonprofits can accept credit card payments, ACH payments, direct debits, and digital wallet payments from donors’ banks through their payment processors.
A payment gateway is a secure pathway from your online donation form to the credit card processing company. Online donation systems require a payment gateway to protect donors’ credit card information. Many nonprofits work through their merchant account provider to set up a payment gateway. Others use third-party providers like Authorize.net.
Payment processors for nonprofit organizations should be affordable, secure, and easy to set up. Look for one that is created for nonprofits and includes features that amplify donations to your cause.
Donorbox offers safe and affordable payment processing – no contracts or startup fees included! Our platform fee starts at just 2.95% for the Standard plan. The platform fee can be reduced to 1.75% for most features, and 2% for Events, Memberships, and Peer-to-Peer when you upgrade to our Pro or Premium plans – with additional add-ons available! Payment processing fees are also lower with Donorbox through PayPal, Stripe, and ACH payments. Plus, you can ask donors to cover these fees.
Learn about Donorbox plans and pricing here.
Our system includes branding options, customizable donation pages, and features like goal meters, recurring donations, tribute donations, advanced fundraising options, and seamless website integration.
Check out our Nonprofit Blog for insightful tips and tricks to help you fundraise smarter. Don’t forget to sign up for our newsletter to receive exclusive fundraising ideas and insights sent to your inbox every month.
Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits. As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.
Subscribe to our e-newsletter to receive the latest blogs, news, and more in your inbox.
Kristine Ensor