Donor Tips vs. Transaction Fees

Read time: 3 min

👋🏾 Hey! I’m Sid and this is The Philanthropy Futurist, a weekly advice column preparing you for the future of the nonprofit sector. Each Friday, I tackle reader questions about measuring impact, driving growth, and managing your nonprofit.

This Week’s Newsletter at a glance:

• Donor Tips vs. Transaction Fees

• Philanthropy News From This Week

• Sid’s Book Recommendation

Donor Tips vs. Transaction Fees

Almost every charitable giving platform runs on the same fuel: “Trust” (note, the air quotes)

Yet behind every ‘Donate’ button sits a quiet tension… who funds the payments infrastructure of generosity?

Some giving platforms ask donors to ‘tip’ to cover costs. Others take a small transaction fee from each donation. And some do both. Within each of these models is a natural aim to sustain the giving platform itself… but at the same time, each tells a very different story about value and transparency.

From an economic standpoint, Transaction Fees offer predictability for the operators of the giving platforms. They ensure the giving platform can reinvest in technology, security, and innovation— but they at times indirectly (or directly) cut into the funds that Nonprofits receive.

On the other hand, Optional Tips shift that burden to donors, relying on goodwill and clarity to keep contributions flowing. When done right, it empowers donors to feel like partners. But when done poorly, it just feels like a hidden tax.

Then there’s the ‘psychology of giving.’ Donors often expect their money to reach the cause, not the middleman. A confusing checkout page or an unexpected fee can erase trust in seconds. That’s why transparency… not just efficiency, becomes the real currency of generosity.

For Nonprofits, these choices matter. The difference between a 2.2% fee and a 0% fee with donor tips can add up to thousands in gained or lost impact. But what’s really at stake isn’t just dollars… it’s donor trust.

In my opinion, the future of charitable giving platforms will favor Shared-Cost Transparency… models where Donors, Nonprofits, and Giving Platforms all have a stake in sustaining the philanthropy ecosystem. Giving works best when everyone can see where their dollar goes.

Until next week y’all! ✌🏾

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Philanthropy News From This Week

• CrunchLabs launches foundation with $7.2 million grant

• Backlash Grows as Charities Say GoFundMe’s Donation Pages Create Chaos

• How Promote Giving, a new investment model, will raise millions for charities

• A $35,000 Gift Via Text! How to Tap Americans’ Love Affair With Phones

Sid’s Book Recommendation

Each week, I recommend a book or film that has impacted my life in a positive way. My recommendation this week is:

The Partnership Economy by David A. Yovanno

This book is an actionable guide to understanding and leveraging the modern landscape of business partnerships to grow a company's revenue significantly. The author explains how the nature and growth potential of partnerships have transformed in recent years, highlighting how leading brands like Fabletics, Target, Ticketmaster, and Walmart effectively use partnerships for business growth. Learn more.

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