Facebook is charging back into the payments space but this time charging hard — taking 5% on every donation it processes through its recently launched non-profit features, announced to page administrators Tuesday. Facebook introduced a Donate button for 19 select non-profits in 2013, but didn’t charge a fee, instead sending 100 percent of donations to the charity. The social media giant says of each donation made through Donate buttons that keep donors on a non-profit’s page:
“We’re committed to building products that make it as easy and safe as possible for people to contribute to the causes they care about. To make this possible, starting in August, 2% of contributions will be used to cover a portion of the costs of nonprofit vetting, security, and fraud protection, operational costs and payment support and 3% of contributions will go to payment processing. The remaining 95% will go straight to the nonprofit. Facebook’s goal is to create a platform for good that’s sustainable over the long-term, and not to make a profit from these charitable giving tools.”
If a donor is donating for the first time, he must enter his payment card information in a window; future donations are done with one click if the user does not remove his card information from Facebook in his payment settings.
“It’s sounds like a very exciting offering for non-profits,” says Deana Rich, president of Rich Consulting. “Facebook is a juggernaut, and this looks like a seamless way to donate. The only concern is that Facebook makes sure to follow all the Visa and MasterCard rules for Payment Facilitators. They need to register as a Payment Facilitator, and follow very specific criteria for how they run transactions. I’m sure they are planning to do just that.
Rich went on to say, “It isn’t often that 40% of the fee charged to a merchant or submerchant is earmarked for compliance. Hopefully that will ensure they are following the rules, and then some.”
In 2015, Facebook added a donation button to non-partner non-profits but this one involved a couple more steps and redirected to the charity’s website to finish the process. Now, any non profit that goes through the Facebook application process can have either re-direct or in-page donation ability.
Rick Oglesby, principal at AZ Payments Group and a partner at Double Diamond Group, says Facebook is set to be a formidable competitor in the non-profit space, and beyond.
“Facebook being a payment facilitator is very compatible,” he says. “Facebook is in a very good place to aggregate a whole variety of payments for the simple reason being they’re a huge advertiser. Any time you see advertising in the digital space you want consumers to be able to buy right away. And you can because you have a two way communications channel.
“Everybody that’s in the digital advertising space is trying to figure out how to make it happen and happen really quickly and easily, and being a payment facilitator is a great way to accomplish that. I could see Facebook becoming a very large payment facilitator over the next few years as they continue to build out that capability. There’s very few players that have that kind of consumer attention.”
Facebook says donations go directly to participating non-profits, with Facebook Payments Inc. acting as processor. Payout reports are offered to admins and receipts are sent to donors. It says it does “not integrate with third-party platforms at this time.” Credit card statements will show “FACEBK [ORGANIZATION NAME] donate.fb.com.”
Facebook users in 39 countries can donate but can only donate to U.S. 501(c)(3)s for now. The Donate button is “an on-Facebook donation flow available to nonprofits that apply through our application (https://www.facebook.com/donate/signup),” and processes with two to three clicks in the page.
Interested non profits are advised what to do to set up donations.
“Before your organization can collect donations on Facebook, 3 steps need to be completed. The Page must be verified, follow our community standards and be linked to a donations account. To learn more about raising funds and awareness on Facebook, visit Facebook for Nonprofits.”
Oglesby says Facebook is well positioned to compete with existing payments companies.
“Whether you’re a merchant or a non-profit you’re still looking to garner consumer intention, you’re looking to collect funds and you’re looking to make it as easy as possible for them to send you money and the PF model is a great way to do that,” he says. “It enables aggregation on both the merchant and consumer side. An independent party like a Facebook can manage the risk associated with the transaction on their own and really stand in and underwrite both the merchant and the consumer to make sure the transaction happens.”