PayPal is the quiet whale that powers most of online giving
With all the focus on Facebook fundraising, PayPal is quietly helping nonprofits raise tens of billions
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First read these couple of stats and then answer a question for me:
in 2020 Blackbaud studied nearly 5,000 organisations who raised $3.2 billion in online donations
in 2020 Facebook fundraising generated $2 billion in donations
Now answer this question (and don’t cheat by reading below!)
How much would you guess that PayPal generated in online donations in 2020?
Listening to this podcast episode the other day (it’s really great and worth a listen if you are in digital fundraising) I was shocked to find the answer is a mind-blowing $17 billion!
That’s more than 3 times Blackbaud’s figure and Facebook combined 🤯
So why, with this much online donation firepower do we not talk about PayPal more?
It seems PayPal is the quiet whale of online fundraising. It’s not sexy, but the numbers don’t lie.
I think it’s time nonprofits dusted off PayPal and made sure we understand how they are thinking and ensure we are aligned. This post is a deep dive into exactly that.
First let’s understand what PayPal is (the “Flywheel”)
I really liked the way Oktay Dogramaci (the VP of Giving at PayPal) described PayPal in the aforementioned podcast:
..those three types of customers that were focused on (nonprofits and causes and individuals and these other businesses), if you think about it, that's kind of like a microcosm of all of PayPal, PayPal is this two sided network of senders and receivers, and you have these other third parties coming in creating a network effect.
The best way to think about PayPal is a huge flywheel. As more individuals, business and nonprofits use it to pay each other the more people sign up, the more people use it and so on.
It’s might not be a social network in the traditional sense (like Facebook or Linked In) but it uses very powerful network effects.
This has been working well for payment and some estimates are that PayPal now handles 22% of ALL online transactions in the US.
How is PayPal structured around Giving?
I was interested in the way Oktay talks about charitable giving:
it's not a separate side thing that we do over here. It's built on top of the core, PayPal model.
So giving is build “on top” of the core PayPal model. But I think to understand this fundraising monster a little more we need to break it down.
PayPal have three components when it comes to donations and fundraising.
PayPal payments (really the main thing PayPal does)
3rd Party platforms (the PayPal Giving Fund)
PayPal itself (ie PayPal app)
To fully leverage PayPal we are going to need to look at each one in turn.
1. PayPal payments
If I donate on a nonprofit’s website and use PayPal as the payment option, I’m giving via PayPal as a payment provider.
Over the years I have experienced how adding PayPal to a donation journey has uplifted conversion. In one case it increased online conversion for one of my clients by 60%. If a nonprofit I’m working with doesn’t offer PayPal on their donation forms it’s one of the first things I recommend. It’s a no brainer! (hint: check your donation forms RIGHT now and try and make a donation via PayPal. If you can’t, put at the top of your list to get done)
But why does it make such a difference?
Here are just a few reasons that come to mind:
Millions of PayPal accounts make it easy for people
As you can see above, PayPal has 377m account (actually at the time of writing is it over 400 million. PayPal has over doubled accounts in the last 5 years.
Once someone has a PayPal account paying via PayPal becomes easier - no initial sign up, connecting bank accounts or cards etc . It’s just login and go. All you have to remember is a password. A password is still friction but when you use your PayPal account so much across the internet it’s a password you are more likely to remember.
It’s comfortable. It’s consistent. It’s safe.
So when your donors are making a donation and they see the PayPal logo, it speaks volumes to them (subconsciously) about how it’s easy to pay. It’s comfortable. It’s consistent. It’s safe. It’s trustworthy.
PayPal money is different to money in the bank
Let’s say I buy a new iPhone and sell my old one on eBay for $200. Now I have $200 in my PayPal account. And here lies some really interesting psychology. It’s possible people value their PayPal balance differently to their bank balance. It’s money with less strings attached that the money in my bank account and therefore I might be less burdened to give more of it away to nonprofits. The average PayPal user has $485 in their PayPal balance. That’s a huge opportunity for nonprofits.
2. 3rd Party platforms (the PayPal Giving Fund)
I loved what Oktay said in the podcast when it came to PayPal it was…
giving all over the internet
Giving all over the internet. Wherever you are on the internet there is PayPal, ready to accept donations.
We talk a lot at my company GivePanel about how nonprofits need to “meet their donors where they are”. This is the same thought.
PayPal’s 3rd party platform strategy is impressive. It has it’s own DAF (Donor Advised Fund) called the PayPal Giving Fund (PPGF) and through this it powers a lot of charitable giving on other platforms. Here are just some of the platforms it powers:
Ebay
Go Fund Me (when people give to a charity via Go Fund Me it’s ALL done through the PayPal Giving Fund)
Facebook fundraising (Facebook offer PayPal as part of Facebook Donate)
Giving via Uber
Even it’s own platforms (which we’ll come on to next)
And tons more. PayPal Giving Fund makes it super easy for platforms to offer giving. They’ve done a lot of the hard work and so PayPal has quietly become the standard when it comes to 3rd parties offer giving touch points.
It’s like PayPal has quietly over time become the underlying infrastructure of giving on the internet.
3. PayPal itself (ie the PayPal App)
Now we come to PayPal itself. Both the desktop version of PayPal but more importantly PayPal’s mobile apps.
PayPal are really doubling down on their mobile apps it seems. They just did a big redesign. And guess what has been really elevated in the user experience on mobile?
That’s right. Giving. Right off the homepage of the app.
People can choose their favourite nonprofits as the default nonprofit they want to support. When people do this it means that you will come up during giving touch points, like giving $1 at checkout in PayPal etc.
Incredibly PayPal’s research shows that if people’s favourite charity shows up in these moment they are 5 to 6 times more likely to give! 🤯
So getting the real estate for nonprofits is significant and I don’t think in fundraising we focus enough on strategies to do this.
It also means the building a charity brand that people know love and trust is becoming even more important. Looking after your donors and fundraisers will help build that brand so YOU are the one they choose in a list of other nonprofits.
PayPal also started the PayPal Generosity Network. From my point of view it’s not really a serious contender as a fundraising platform yet. It’s not open enough yet. It doesn’t have the features of some of the other consuming facing fundraising platforms like JustGiving. But it’s VERY interesting and I will be watching this space.
If you haven’t figured it out already donations that are processed via PayPal’s own apps are done through the PayPal Giving Fund. So PayPal is kind of its own customer for its 3rd party platform strategy via PPGF.
What’s the future?
As readers will find out over the coming weeks and months I’m a big fan of the metaverse and web 3.0 (most people who don’t believe in this future haven’t spent time with an Oculus Quest 2). PayPal is already one of the key payment platforms for the metaverse with their Oculus partnership and I have personally already used my PayPal account to buy VR experiences.
Digital currencies will also be an important part of web 3.0 and PayPal already accept bitcoin and have made crypto a big part of their new app experience.
So expect PayPal to continue to be the “plumbing” behind a lot of internet payments going forward.
Final Takeaways
To finish up here are a few simple takeaways for nonprofits and their online fundraising:
Review your donation process and make sure it includes PayPal
Download PayPal’s new mobile app and explore it as though you were one of your supporters. Check out the giving experience. Find ways to get people to select you as their favourite charity in PayPal.
Make sure you understand PayPal Giving data - where are donations coming from and how can you use that to inform your strategy.
Thanks so much for reading. If you got value out of this post please subscribe if you are not already and share it with someone who would benefit.
Also, just wanted to let you know we have an event coming up next year (23/24 March) called the Social Fundraising Summit in Dublin. We’re lining up a bunch of amazing speakers and interactive workshops. Early bird tickets go on sale soon so register your interest.