Donors want a simple, secure way to support your nonprofit, whether they’re buying event tickets or setting up recurring gifts. Since donor payment preferences vary, it's important to offer multiple payment options, including cards, checks, PayPal, and Apple Pay or Google Pay. While most supporters prefer cards, giving them choices can  increase total donations.

To provide the flexible, seamless,  and secure checkout that donors demand, you’ll need a payment processor: the partner that securely handles electronic donations.

This post explains how nonprofit payment processing works, the options available, and how to choose the right fit for your organization.

What Is Nonprofit Donation Processing?

Ever wondered how online donations get into your organization's bank account? That's nonprofit donation processing! Nonprofit donation processing is like a bridge that connects people’s donations to your organization. When someone donates online using a credit card or other method, the donation travels through a secure network to your bank account. This process involves different steps, like going through a special online payment gateway that keeps your funds safe.

How Does Nonprofit Donation Processing Work?

Think of donation processing as the bridge between a donor’s payment and your nonprofit’s bank account. When someone gives online, their payment information travels through a secure payment gateway, is verified, and then transferred into your account. This behind-the-scenes process ensures every donation is delivered safely and efficiently:

1. A donor makes a payment (online form, event terminal, or recurring gift).

2. The payment gateway encrypts and verifies the transaction.

3. The payment processor routes the funds to your account.

From there, you can choose between two main models:

Accept Payments Directly Through a Merchant Account 

A merchant account is a specialized bank account that allows your nonprofit to accept payments directly from donors via credit or debit cards and other electronic methods. This account serves as an intermediary between your organization and the payment processor, ensuring funds from transactions are securely transferred into your bank account.

Your nonprofit may choose to use a merchant account if you process a high volume of donations, want complete control over payment processing, and prefer the ability to customize your donation experience. 

A merchant account requires you to establish a direct relationship with a payment processor. This generally means you receive funds faster than if you used a Donor Advised Fund (DAF). A merchant account also provides more flexibility in managing transactions compared to a DAF. However, it means your organization will be responsible for more security and compliance checks (more on that later).

When you open a FrontStream merchant account, one Merchant ID is used across all your fundraisers, auctions, and events, simplifying payment reconciliation and data. 

Funnel Payments Through a Donor Advised Fund (DAF) 

A Donor Advised Fund (DAF) is a charitable giving program managed by a sponsoring organization, such as a nonprofit, financial institution, or community foundation. Your nonprofit may choose to use a DAF if you want a streamlined solution for collecting donations, without having  to establish a dedicated merchant account.

With a DAF, the sponsoring organization handles the receipt, processing, and security checks for donations. After compliance verification, funds are disbursed directly into your nonprofit’s bank account. DAFs are particularly beneficial for corporate sponsors raising funds on your behalf or for larger nonprofits seeking to centralize and manage contributions from multiple chapters or fundraising initiatives.

FrontStream handles aggregate donations through its 501(c) (3) certified DAF, the FrontStream Global Fund.

Understanding Payment Processing Terms 

Before we dive into the details of nonprofit payment processing, let's familiarize ourselves with these key terms.

Payment Gateway

A payment gateway is a secure online system that facilitates electronic payments by acting as a middleman between your donation forms and the payment processing network. When a supporter enters their payment information, the gateway verifies the details, encrypts the data to protect against fraud, and transmits it to the appropriate payment processor for approval.

Aggregator

A payment aggregator is a company that facilitates payment processing for multiple smaller organizations, acting as an intermediary between them and payment processors. Aggregators provide a single point of contact for managing transactions, which allows nonprofits and businesses to focus on their core goals without being burdened by administrative or technical challenges.

Payment aggregators handle various tasks, such as processing payments, encrypting sensitive data, and transferring funds securely to the merchant’s bank account. They also often offer additional services like fraud prevention, chargeback management, reporting tools, and customer support to further streamline operations.

FrontStream Payments is a user-friendly platform that integrates seamlessly with donation forms, ensuring secure transactions and providing donor analytics and compliance tools.

PCI Compliance

PCI Compliance refers to a set of global security standards, known as the Payment Card Industry Data Security Standard (PCI-DSS), designed to protect cardholder data. These standards apply to any organization that stores, processes, or transmits credit card information.

When choosing a payment processing partner, look for one with Level 1 PCI DSS compliance—the highest level of security in the industry. Level 1 compliance indicates that the provider has implemented the most rigorous security measures, giving you and your supporters peace of mind that all transactions are safeguarded against potential breaches.

Third-Party Payment Processor

A service that uses a DAF to handle payment processing on your nonprofit’s behalf without requiring you to set up a merchant account.

Dedicated Payment Processor

A payment processor that sets up an individual merchant account for each nonprofit it works with.

FrontStream offers both third-party and dedicated payment processors, giving your organization the flexibility to choose an option that best suits your needs.

Virtual Private Network (VPN)

A tool providing secure internet connections to protect data during transactions.

ACH (Automated Clearing House)

An electronic network for financial transactions, including direct deposits and bill payments.

Tokenization and Encryption

Security methods that protect donor information by replacing sensitive data with unique identifiers and converting data into secure code.

Why Do Nonprofits Need a Payment Processor?

Working with a payment processor can level up your nonprofit’s donation experience:

• Offer donors multiple ways to give

• Securely process online donations

• Reduce errors with automation

• Improve donor satisfaction with easy checkout

• Increase donation conversion rates

Provide Donors With Multiple Payment Options

Your supporters are used to using credit and debit cards to make purchases in their daily lives, and they expect the same flexibility from nonprofits, too. Accommodating various payment options beyond just checks and cash caters to donor preferences and streamlines the donation process.

Securely Handle Online Donations

By adhering to regulations such as PCI-DSS, payment processors ensure that donor information is handled securely. This helps protect your donors against fraud and data breaches.

Improve Donor Experience and Satisfaction

A seamless donation process encourages repeat donations and builds donor trust. Working with a payments processor helps you accomplish this by offering multiple payment options in a single user-friendly place.

Reduce Manual Processing Errors

Automating donation processing minimizes the risk of human errors, helping ensure your records are accurate. It also relieves the administrative burden on your staff, freeing up their time for more strategic work.

Increase Donation Conversion Rates

A secure and easy donation process can significantly boost the number of completed donations. Working with a payments processor is an important step to scaling up your fundraising efforts.

Top Features Nonprofits Need in a Payment Processor

Payment processors all serve a similar function. But when it comes to how they serve nonprofits, they’re not all created equal. Here are a few capabilities to look for in a payment processing partner:

PCI Compliance

PCI compliance is a must-have for payments processors. It ensures that your system adheres to the highest security standards, keeping your supporters’ sensitive financial information safe.

FrontStream’s payments processing platform is PCI Level 1 compliant, meeting the highest security and fraud prevention standards in the industry.

Support for Multiple Payment Methods

Donors want the flexibility to make payments to your organization in any format they choose. Look for a payment processor that supports ACH transfers, PayPal, Google or Apple Pay, as well as credit and debit cards.

Easy Integration With Existing Systems

Your payments processor should integrate seamlessly with your accounting software to streamline reconciliations and reporting, and with your CRM to simplify customer data management.

Customizable Donation Forms

Choosing a payment processor with built-in fundraising tools  keeps things simple. In particular, look for a processor that allows you to customize donation forms to match your nonprofit’s branding and specific needs. You’ll get better results from trustworthy forms.

FrontStream’s drag-and-drop tools let you build user-friendly branded donation pages in minutes.

Recurring Donation Capabilities

Your payment processor should enable donors to set up automatic, recurring donations. This reduces the administrative burden on supporters who want to provide ongoing support and helps sustain your organization with a steady flow of funds.

With FrontStream, your donors can easily set up monthly pledges that drive recurring revenue to support your cause.

User-Friendly Donor Interface

A straightforward and intuitive interface enhances the donation experience. Look for a payment processor whose payment tools are simple and easy for your supporters to use.

Transaction Reporting and Analytics

Access to detailed reports helps you track donations and financial health. Your payments processor should offer robust analytics tools that give you visibility into the performance of all your fundraising campaigns across platforms.

Transparent and Competitive Pricing

Understandable and fair pricing ensures your nonprofit retains more of each donation. Compare pricing across multiple payment processors to ensure you’re receiving a good deal.

Single Point of Contact for Customer Support

Many online donation tools rely on third-party payment processing integrations to process donations made through their platforms. However, it’s easiest to work with a vendor with an all-in-one solution that includes native payment processing capabilities. That way, you have a single point of contact for any questions that arise and can resolve issues faster.

With FrontStream, you work with a dedicated account manager who understands the importance of same-day answers and a seamless donor experience.

Multi-Currency Support for International Donations

Accommodating donations from international supporters expands your fundraising reach. Make sure your payments processor can accept payments in multiple currencies so you’re not limiting support to one location.

Ability to Make Online and In-Person Payments

Credit and debit card payments aren’t just for the web—you need to accept them at in-person events, too. Your payments processor should provide credit card payment terminals that enable you to collect donations and process purchases of merchandise, entry tickets, and more. Even better, accepting card payments in person means you can keep less cash on hand at events, reducing security risks.

FrontStream’s credit card payment terminals are fully integrated with our fundraising platform, streamlining acceptance of in-person payments at events.

Ability to Work With Corporate Partners

Having a corporate partner raise donations on your organization’s behalf is one of the most effective ways to fundraise. Look for a nonprofit payment processing partner that can also work with for-profit companies through a DAF. That way, you’ll have the flexibility to accept payments from any source in the same place, simplifying campaign setup and reporting.

Best Practices for Nonprofit Payment Processing

How can you get the most out of working with a payment processing partner? Take these steps to maximize your results.

Ensure  Data Security and Privacy

You and your payment processor should work together to implement robust security measures. This both protects private donor information and maintains compliance with regulations like PCI-DSS, GDPR, and CCPA.

Enhance  Donor Experience

Donors are more likely to give if you make the process simple and easy. When designing a payment experience, prioritize user-friendly interfaces and seamless transaction processes to keep your supporters coming back.

Monitor and Analyze  Transactions

Working with a payment processor is an opportunity to gain more visibility into how donations flow into your organization. Regularly review transaction data to identify trends, optimize processes, and improve your fundraising strategies.

FrontStream gives you access to detailed transaction data in a user-friendly interface, enabling you to easily track chargebacks, conduct financial reporting, and more.

Why FrontStream Is Your Ideal Partner for Nonprofit Payment Processing

Choosing the right payment processing solution is vital for the success and growth of your nonprofit. Whether your organization is large or small, FrontStream’s comprehensive payment processing solutions can take your fundraising efforts to the next level.

FrontStream ensures secure, efficient, and user-friendly donation processing for nonprofits of any size—and thanks to our DAF, we work with corporate partners, too! Backed by the highest level of PCI compliance, our platform offers an easy-to-use interface, transparent and competitive pricing, and robust reporting features.

We provide a single point of contact for customer support so your team can focus on your organization’s mission, not troubleshooting issues. And with support for in-person payments via credit card terminal, including Tap-to-Give capabilities, you’ll be able to take your enhanced donor experience on the road to events as well.

Want to learn more about how FrontStream can simplify payment processing for your nonprofit? Talk to us!