Digital transformation is heading to a new place: Nonprofits

Nonprofits are still raising donations the same way they’ve been doing for decades. While many other industries made the transition to today’s digital world, nonprofits have so far resisted making this leap, effectively missing out on a whole new generation of donors. 

450 billion dollars were donated in the US in 2019. Out of that, $292 billion was donated by individuals, despite the fact that the US alone has 1.56M nonprofits listed. Even more surprising, is the fact that less than 10% of all donations are happening online. In today’s digital day and age where everyone is handling almost everything online and via their phones, the nonprofit sector is still running things in a way that is not effective and limiting their success. It makes you think of the potential impact that digital transformation can have on this market.

There is no shortage of examples of other industries that made the digital transformation leap. The insurance market, for one, saw the rise of companies like Lemonade and Hippo who simplified the world of homeowners insurance. Lemonade claims that 70% of their customers are under the age of 35 as insurance is purchased online. The same goes for markets such as travel, consumer goods, medical or financial services. Yet, there are still markets that have been left behind and are considered outdated.

A recent report shows that the number of donations made is decreasing. Here are a couple of notable reasons for it:  

The pandemic effect

Like many other industries, nonprofit organizations were greatly affected by covid-19. Giving to charitable organizations was down by 6% in the first quarter of 2020 compared to the same time last year, according to the Fundraising Effectiveness Project’s 2020 First Quarter Report. If the 6% loss in the first quarter continues for the entire year, more than $25 billion that would have been donated to nonprofits will be lost because of the pandemic, based on numbers from the most recent Giving USA figures. In addition, the number of overall donors dropped by 5.3%, and the donor retention rate—the percentage of donors who gave last year and have already given in 2020 — dropped 3 points to 16.4%. It is still unclear if this trend is a temporary one, or if we are facing a bigger, more permanent issue. 

A generational change in donor profile  

With around 80 million Millennials in the United States, this generation is the future of many markets, as well as the nonprofit one. The Millennial generation already accounts for $200 billion in direct purchasing power and they are set to be the beneficiaries of a $41 trillion transfer of wealth from older generations. Millennials are just as likely to donate as their parents and grandparents, only with a number of new “terms & conditions”. For example, transparency over the donation process. Furthermore, this digital-first generation aims to maximize every donation made and wants to see an immediate impact on their giving. Personal connections to causes and people also play an important factor in how, when, and to whom millennials donate. Looking at most nonprofits in the US, it’s safe to say that they have yet to answer these demands.  

The nonprofit market is ripe for a change.

We see the first signs of change with new tech companies and revolutionary donating platforms emerging over the past few years. Companies like Pinkaloo, Kindest & Flipcause have only set the stage in trying to lead the industry on a long-overdue change. Today many companies try to offer different innovative ways to help advance the market. Israeli startup OneDeeds for one, offers a unique marketplace for product-based donations that helps not only to raise donations but also to increase donation transparency. 

Only time will tell if we’ll see the “Lemonade” of the donation market created, but the reality is that it’s time for the nonprofit market to change and adapt. No industry today can afford to have only 10% of its activity done online. The question is only how and when this industry will go through the inevitable process of digital transformation. 

About the Author
Asaf Rozengarten is the CEO of OneDeeds
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