Giveabl Update #5: Figuring out Giveabl's Pricing Model
If you've been following Giveabl's progress, you will have noticed our pricing page has changed every couple of months as we experiment and gain feedback from potential donors and recipients before launch.
Building a successful platform that enables donations relies on reducing fees as much as possible for both donors and recipients. Getting the cost of giving as close to zero should be the goal.
Batching Payment Processing Fees
Some fees are almost immutable. Third-party payment processing fees, for example, are a given. Making a payment via credit card always incurs a fixed fee and a percentage fee.
One way to minimize the impact of the fixed fee (which can make smaller donations prohibitively expensive) is to batch donations.
For example, imagine making three $0.50 donations. Each donation would incur a $0.30 fixed fee, deducted from the amount donated. These fees mean that of the $1.50 donated, only $0.60 passes to the recipient (and that's not including the percentage-based fee).
If we batch these donations by paying them in one transaction, we can reduce the fee to $0.30, with $1.20 passed to the recipient.
As you can see, batching is an efficient way to decrease payment processing fees. It also enables other ways to donate, like micro-donations and round-ups that may only be a few cents at a time. As batching scales, the economics continue to improve, leading to more cost-effective donations.
Another challenge with payment processing fees is the variability. For example, paying via credit card is more expensive than bank transfer. Alternatively, paying via credit card within your own country is often cheaper than paying via credit card overseas. Similarly, settling in the same currency as your recipient will be more cost-effective than paying in a different currency and incurring additional currency conversion fees.
Accounting for the multitude of combinations and permutations that could arise is hard. These variations make it increasingly complex to build a variable pricing model that delivers the best possible pricing to a donor simply and understandably.
Because of this complexity, we have decided that payment processing will be deducted from the donation amount by default. We will offer the ability for donors to elect to cover this cost; however, it will be up to them to opt-in.
Detaching payment processing fees from our platform fee gives us greater comfort, knowing we can confidently change a consistently low fee to donors.
Setting a Platform Fee
Speaking of the platform fee, this was the other part of our pricing puzzle. The platform fee is what Giveabl receives for building, running and maintaining the platform (paying for servers, software and staff). We believe that, through automation, we can reduce costs to a point where 1% of donation volume is sufficient to generate a profit.
This fee is comparable to or better than other donation platforms, giving us a competitive edge. In addition, it's transparent and straightforward, with no fixed or monthly subscription fees. We also love that it scales with your giving; it's simple value-based pricing.
What is Giveabl's final Pricing?
While we're still a few months away from having our Foundation and Fund established to process donations, we believe this is the closest we have come to our finished pricing.
Donors will pay a 1% fee on their donation volume.
E.g. $100 Donation + $1 Fee = $101 Payment
Recipients receive the donation less any third-party payment processing fees. There are no additional fees for recipients and we never charge them to use the platform.
Pay 1% fee on their donation volume.
Receive the donation less any third-party payment processing fees.
Our initial vision was to have all costs (including payment processing fees) covered by donors on every transaction. This vision is still our ultimate aim, and we will prompt donors to consider covering costs when using the platform. Over time we will gather more donation data and begin to understand the desire and likelihood of donors to cover fees. This data will help to inform future decisions around pricing.
As part of our commitment to transparency, I hope that this blog provides a rationale for Giveabl's pricing.
Any questions or feedback? Please contact us!