Note: A bright light in direct fundraising, Don Kuhn died in November, 2005 at the age of 83. Don wrote this article in the early 1990's and Larry May of Direct Media graciously allowed us to post this. It's brilliant even in 2006, and would have probably been right over my head in the early 1990's when I couldn't spell "www." It's long. Read it anyway.

-Rick Christ

Many charitable organizations today are receiving internet transactions and don't realize it.  You may not realize it either.  These internet donors are NOT accessing you through your website, if you have one.  They are accessing you through their bank on the internet, or through a payment system on the internet linked with their bank.  Some time in the future, you may be receiving gifts through electronic transfers directly into your organization's bank.

You are probably accepting internet gifts already as white mail, because such gifts do not arrive in the return envelopes that you regularly send donors and prospects.  You may likely be annoyed that they are not using your system like most other loyal donors.  You, or your lock box service, may not even be noticing the account numbers included on the check stubs, or reading the memos they may include on the stubs in their efforts to help you know which appeal they responded to (using numbers off your reply slips).

In actuality, they are a new and different kind of donor, and I suggest that you had better start getting to know them better, and servicing them better, because their numbers are not only growing, but accelerating as internet banking catches on.  They will someday become the majority of your donors,

They are different because

They all have computers and pay most of their obligations through the internet. Their gifts are easily recognized as coming through a bank payment system. They have E-mail addresses (you should seek ways to get them). Practically all of them have credit cards. They maintain you as a payee in their system, just as you have them in your system. Because you're a payee, they are apt to give to you, whether or not you solicit them. When they give, they know instantly when they last gave to you and how much. They may give to you today, but authorize payment weeks or months away. They make recurring, automatic payments to some payees (so why not to you?). Their gifts may not reach you if their payee address is wrong (you have to help).

Recently I attended a fund raising convention in which one of the sessions attempted to forecast changes in the next 30 years.  Mostly they discussed websites, the few successes, and the many disappointments.  None made mention of the fact that many organizations are already receiving internet-originated gifts through internet banking and payment systems.  But that's where much of the future lies.

The revolution in giving started in the first half of the 20th century when Americans began acquiring checking accounts and paying bills and making gifts through checks.  In door to door campaigns, and direct mail, most small gifts were given in cash, large gifts by check.  Gradually, even small gifts where given by check.  Credit cards gave Americans an additional way to pay; but Americans were and still are reluctant to make gifts with them.  Nevertheless, credit card gifts, with the help of the internet and 800 telephone numbers, are slowly increasing.

At the end of the millennium in the 1990s, the revolution in ways to give accelerated.  ATMs and the internet had arrived.  Organizations were scurrying to produce websites.  Non-profits were seeking gifts, over the air, through the mail, through websites, and through affinity arrangements and other means.  To varying degrees, people were using cash, personal checks, credit cards, and electronic banking and payment systems to pay and to give.  People with computers, with and without internet access, used accounting systems such as Quicken or Microsoft Money to set up budgets, print their checks, and then mail them the old fashioned way through the USPS.  If they had modems, some computer users also used these programs to download their banking and credit card activities into their pre-categorized budgets.

At the present time, this payment/giving revolution is in a chaotic state, but its overall direction is unmistakable.  We indeed are trending toward an electronic society.  At the same time, virtually every industry, every company, including the dot.coms, every organization, including the non-profits,  --  they are all still thinking paper.  And the most important way that organizations can begin edging ahead of the pack is to identify those in our population that are using the changes that are so rapidly occurring - those persons who are deserting handwritten, personal checks in favor of internet payment systems.

Organizations can do this, first by identifying every new gift entering its donorbase by its How Paid: cash, personal handwritten check, credit card, computer check, or internet check.  Second, they should look for ways to help make it easier for their internet donors to maintain their organization as a payee, and to continue giving to them on the internet.  If you do not incorporate How Paid into your system, at the very least, you should identify and cultivate your internet donors.  (For the purposes of this article, I refer to an internet donors as individuals whose gifts/payments are made thorough an internet bill payment system.)

A little history on How Paid:  The identifying of gifts by their How Paid (or Tender) is not new.  The American Lung Association, since the 1920's and probably before, recorded How Paid on their reply devices for all incoming gifts - a $ for cash, a ¿ for check, an MO for money order..  But the How Paids were never recorded in the maintenance systems.  In the early 1960s, the Michigan constituent of the National Tuberculosis and Respiratory Disease Association, now the American Lung Association began recording How Paid for gifts entering its Speedaumat donor maintenance system.  In 1968, ALA/Michigan extended these ideas more elaborately in its developing computer system.  In 1970, the Michigan system became the core program for the ALA national EDP system for fund raising.

Each gift recorded in the computer system was identified by A, for cash, B for bills (paper cash), C for checks, D for credit cards, and E for electronic gifts.  They then were used in donor profile codes.  Of course, at the time, there were neither D nor E gifts to record.  D and E were incorporated in the donor profile codes for possible use in the future.

In the 1950's, 1960's and 1970's (my years with Lung) all Lung associations had huge donor bases consisting of many small donors, but also enviable numbers of $15 and up donors, most of whom had worked their way up from $1-$5 over the years.  The nationwide Lung association donorbase totaled 10 percent of the population.  In Hawaii, the donorbase totaled 24 percent, and in Minnesota, 19 percent.  In 1959 in Minnesota, 40 percent of its donors were $1 givers.

Previous research revealed that there was a comforting upward expansion of gift giving at all levels.  Coin donors became paper cash donors.  Cash donors became check donors.  And within each pure level of donation, whether $1, $3 or $10, each level increased its average gift to some degree the following year.

In Michigan, when we examined the upgrading qualities of our numerous $1 donors.  We discovered that 75 percent of them sent cash, mostly paper cash, but also some coin; and that 25 percent gave by personal check.  However, of the $1 donors who increased their gifts above the $1 level, 75 percent of the raises came from the 25 percent that gave by check.  This was not a great surprise, but it was a major confirmation of what we suspected.  It triggered the idea of incorporating the How Paid into contributions entering our maintenance system, and using them in our donor profile codes.

How did we use this How Paid information?  Chiefly, it enabled us to pursue raised gifts more aggressively, and effectively, from check donors of small gifts.

In 1985, while living in Chappaqua, New York, I bought my first home computer and modem and began using Citibank's electronic bill payment system.  It was DOS based, and linked with a laborious, now defunct budget system called Dollars and Sense.  Interestingly Citibank had two competing bill payment systems, one called Citi-gold for their best customers; the other called Direct Access, was for all other customers.  I disliked Gold, so I switched to Direct Access.  Since neither system was linked, I had to recreate my payee list manually, which by the early 1990's had grown to more than 100 payees  By then, I had moved to the Denver area, but I continue to do my computer banking, now over the internet, with Citibank in New York.  In more than 10 years, I have never lost a mailed deposit, thanks to the efficiencies of the United States Postal Service.

But there are problems that I will now share with you, along with observations:

1.  Non-profits and businesses alike, with and without their websites, still "think" paper.  It's hard to find any who have made an effort to really understand, much less exploit, the metamorphosis toward global/internet banking and global/internet marketing.  Not one organization has given me a hint that they are aware that I pay my checking obligations through internet banking.  I have never received a thank you via E-mail from a non-profit organization, even though I have provided my E address when asked.

2.       In 1999, probably more people joined internet banking than in all previous 14 years combined.  ATM's and the internet have sped things up, which means that the problems now will become more magnified.

3.       I have set up numerous recurring payments, mostly automatic monthly payments with no ending date.  Businesses continually keep me in their regular paper flow, usually with computer-generated notes thanking me for my prompt payments.  With one non-profit, my recurring monthly gift to them generates an elaborate, monthly thank you for my "generous gift of $5," a thank you which I have fruitlessly tried to halt over a two year period.

Subscription renewals have been an iffy, iffy nightmare, but they are getting better.  I am amazed at how donor-friendly many non-profit computer systems are compared to their profit-making counterparts with millions to invest in their costly systems.  For instance, one bill payment to Readers Digest resulted in my entire account being transferred to my daughter in Fairfax, VA.  To correct it, RD had to start me over as a new subscriber/buyer, even though I protested that I continued wanting to be recognized in their system as a 50-year subscriber/buyer.

4.       A larger, growing problem, relates to the fact that neither Citibank, nor any of my payees have recognized that they each have at least somewhat of an obligation to try to make it easier for me keep the addresses of my payees current.

For example;  I automatically paid Service X $29 a month.  The Service ignored the fact that my payments did not come in the envelope it provided me (needlessly) every month.  I discard its envelope every month.  Suddenly Citibank informed me that the USPS returned the last two payments to the Service as undeliverable.  Almost simultaneously, the Service began pressing me for two past non-payments.  I discovered that some time earlier, the Service changed its collection address.  The Citibank payments mailed first class continued to be delivered until the USPS change order expired.  Now, I have to look at every monthly return envelope from the Service and compare it to my payee address to discover if the company has changed its collection address again.  Citibank doesn't make it easy, because their system requires me to go to a separate screen to look up a payee address.  The process defeats the purpose of setting up "convenient automatic payments."  Service X, by the way, changed its collection address again just last month.  I caught the change on its return envelope only because I had memorized the previous address

However, there is light on the horizon.  Larry May, President of May Development Services, a division of Direct Media, who uses internet banking, recently received a note from a business payee who supplied him information to update his payee list.  "So there is one who notes how I'm paying," Larry reports.

5.       Businesses are not alone.  In a charitable mood about a month ago, I browsed through my payee list and authorized my bank to send gifts to 20 different payees.  A few weeks later I received computer messages from the bank regarding three payees:  "The U.S. Post Office returned the bill payment check, payable to XXXX, Ref# XXXX, date, $XX as undeliverable and we have credited your checking account number XXXX.  Please verify the correct mailing address and update your records accordingly."

That was a 15 percent undeliverable rate.  My options were 1, to delete them, 2, to remember them and leave them inactive until possibly I hear from them again, at which time I can correct them and send them a donation, or 3, to look them up and correct them on my own.  To date, I have done nothing.  There has just been no time.

Additionally, one payee, a museum of which I have been a member for a number of years, welcomed me as a new member with my surname misspelled.  After I wrote them, it was promptly corrected.

6.       Hopefully, one of these days, Citibank may include payee addresses in their payment screen.  And hopefully, payees will find a way to notify me routinely when they change a collection address or account number..

Following are a few ideas to help you communicate more effectively with your growing internet donors, those with payee lists.

1.       Let your donors know that you know that they use an internet payment system, and that you have them identified in your system as in internet donor.  Complement them on their use of the internet and their payment system.  Point out the advantages, and seek their ideas for improvements.  Try to understand internet giving from the donors' point of view.  Join an internet payment system yourself.

2.       Make sure that donors know the account number they have with your organization, so that you can credit their gifts accurately.  Make sure the account numbers on your reply devices are easily identifiable.  You'll have a special problem with new donors picked up through your donor acquisition efforts, for usually they have no account numbers to enter into their payee system for you - just list codes.  Your first Thank You to them should prominently include the account number that you would like them to use.

3.       Ask them for their E-address so that you can help them keep your payee collection address current.  In your internet address book, create an E-group of internet donors, for communicating to the group easily.

4.       After donors have made several gifts, show them how easy it is for them to become a monthly, quarterly, semi-annual, or even annual donor, using the recurring payment options in their system.  These options may include fulfilling a pledge for a specified amount over a specified time, for a special project of interest to them.  Show them how easy it is for them to set up recurring payments and to control them.

5.       When they make a gift, thank them immediately on the internet, and later by regular mail.  Invite them to visit your website.  Invite them to participate in donor surveys that may lead to improvements in your operation.

6.       Use your newsletter to report on the increasing internet users who send you gifts through their internet payment systems.  Share their testimonials.

7.       Tailor your laser-produced mail solicitations to ask internet donors to "send your internet bank payment check today, or use the convenient reply envelope now."

8.       When internet gift traffic becomes large enough to warrant such, explore the possibility of electronic transfer of gifts directly into your account.  Recipients of electronic transfers supply special addresses to their customer/donors for maintaining them as a payee.  Thus, donors don't have to worry about address accuracy for payees that accept electronic transfers.  A shortcoming of an electronic transfer is that memos are not included in the transfer.  Account numbers, of course,  are included.

That's it.  So start by looking through your white mail today.  Search out your internet donors.  Explore ways to identify these donors by discussing the problem with your collection department/center and your computer maintenance people.  And after you do, treat these donors as "special", and be sure to track them with special statistical reports and benchmarks.  Good hunting.

March 2006