The desire to make an impact is one that transcends methodology, time, or even financial capacity.
Grassroots donors and wealthy benefactors alike are motivated by contributing to the greater good, seeking to do so in a secure, ethical manner that lends itself to bettering society.
As part of this endeavor, organizations and businesses have increased their focus on Corporate Social Responsibility (CSR) through company contributions to charities and causes that align with their core values. In doing so, corporations frequently leverage fintech solutions to offer employees easy ways to make donations through payroll deductions and incentives for volunteer hours served.
However, charity fraud, most notably in the past year, has increasingly undermined this longstanding connection between donations and their intended recipients. In the wake of COVID-19, the FBI warned of an exorbitant increase in charitable scams that used the recognizable branding of honest charities to deceive donors. The rise of unverifiable online giving platforms, a plethora of causes to contribute toward, and ever-growing cybersecurity concerns have combined to create a notable hurdle in the philanthropic world.
As the world has begun to financially recover from the pandemic, hackers have increasingly targeted banks, with fintech fraud spiking 129% in the first quarter of 2021. Deserving charities are caught in the crossfire, either due to an unwillingness to wade in the complication of sophisticated digital giving methods, or the lack of resources to vet such methods sufficiently.
The rise of unverifiable online giving platforms, a plethora of causes to contribute toward, and ever-growing cybersecurity concerns have combined to create a notable hurdle in the philanthropic world.
The answer to this conundrum lies in the problem itself, by fully understanding the power of digital transformation and how it can be leveraged for secure charitable giving rather than as a tool against it.
Philanthropic tech, or “philanthrotech” has organically grown over the last five years, with the social upheaval brought on by racial tensions in the United States and an overall reliance on social media greatly accelerating its popularity. Donating to online charitable funds via Venmo, GoFundMe, and other platforms became an easy way to exert a measure of political power, with the BLM movement and AAPI advocacy relying on financial support garnered from social media. Vetting the money trail, however, and ensuring federal tax compliance, can create murky legal waters for donors seeking a tax write-off on these contributions. Furthermore, ensuring the money is given to the intended recipient is nearly impossible when donating to an essentially anonymous fund. With a vast number of charitable opportunities cropping up online, how can digitization be leveraged for maximum protection and impact?
Fintech provides the most efficient, yet traceable methodologies for organizations looking to attract online donors, both large and small. Donor Advised Funds (DAFs) have traditionally been created and administered by private wealth banks and financial services firms with the goal of contributing larger sums of money to charitable organizations. Although DAFs are technically accessible to anyone, most individuals are unaware of their existence.
Millennials, for example, tend to rely on direct giving services like GoFundMe to donate charitably, rather than seek out a financial advisor that would assist in establishing a DAF associated with their preferred nonprofit. Why is this the case? DAFs typically require a minimum amount of money to be established, creating a barrier between grassroots givers and this secure giving option.
For corporations looking to foster a more cooperative workplace culture, utilizing the power of fintech could be an easily integrated, yet secure answer. Rather than typically choosing a single nonprofit that most employees would automatically donate to, companies can institute a DAF, or multiple DAFs, in order to efficiently expand the number of organizations employees can collectively support. Each DAF could be associated with a specific need, theme, or cause, creating more than just an avenue of giving, but a corporate culture surrounding giving. No longer are these creative giving options limited to the upper echelons of an organization or solely associated with a corporation at large. Instead, by giving via a DAF or other charitable fund, employees can feel a greater sense of camaraderie and impact in association with their colleagues, creating a bond that goes far beyond a large, one-time, faceless sum donated on behalf of their employer.
Changing the dynamic between donors and giving options typically employed by wealthier individuals can revolutionize online giving for charities struggling to get noticed. Rather than requiring a minimum of thousands of dollars, fintech platforms can take on the task of ensuring tax and legal compliance, creating a viable online giving option for donors of all economic backgrounds.
Philanthrotech indeed offers the traceability, cyber protections, and recognition that charities and donors long for in a sea of unending online scams.
Today, DAFs can be easily established within minutes, providing an additional stream of capital directly to charities without concerns surrounding the contribution’s origin. Rather than avoiding the digital revolution, charities and donors alike can embrace the opportunity it offers by making more complex funding options accessible to a wider array of potential donors. By relying on a third-party platform built for compliant giving, the complication of tracing digital donations can be essentially eliminated.
Philanthrotech indeed offers the traceability, cyber protections, and recognition that charities and donors long for in a sea of unending online scams. Making DAFs accessible is an important step that could potentially revolutionize funding for nonprofits struggling in the wake of COVID-19. Increased spending will automatically translate to increased fraudulent activity, requiring a more comprehensive, proactive approach to charitable giving. As the economy recovers, more opportunities to give generously will arise, requiring the fintech industry to creatively address the demand for seamless online donations.