How Fintech Is Changing Nonprofit Philanthropy

We all know the world of nonprofit funding is evolving rapidly, with new players and technologies emerging almost daily. One of the most promising trends impacting nonprofits today is the use of fintech in an organization's operations. As a result, we're seeing a different type of funder emerge — specifically, small-dollar donors using fintech to accelerate their philanthropic efforts.

To remain competitive and thrive in this changing environment, your nonprofit should keep up with the latest trends. Let’s discover how fintech is shaping the future of nonprofits from small-dollar donors and what steps you can take to adopt these practices at your organization.

What Is Fintech?

Fintech, short for financial technology, is the use of technology in the financial sector, including banking, investment, payment processing, financial management and insurance. Fintech is a growing industry defined by innovation and disruption in business models and technology. While financial services have been around for a long time, how we use them (and how they're delivered) continues to evolve thanks to new technologies.

Fintech is becoming increasingly important in the nonprofit sector as more donors use disruptive technology (e.g., crypto) to manage their philanthropic efforts. As a result, nonprofits have to invest in digital tools to support those efforts. For example, donors increasingly make charitable contributions (or want to) through these digital platforms. Knowing this, your organization should explore and be up-to-date on new tech.

Why Is Fintech Important for Nonprofits?

The mainstreaming of innovative funding models underpinned with tech, such as new fintech platforms, is redefining the nonprofit sector. This has created an opportunity for nonprofits but has shifted the traditional donor base. Specifically, the chances are that the average donor wanting to give you crypto or using fintech is younger.

They're more technology-savvy, so your organization needs to adapt to keep up with these trends. Fintech is helping to accelerate these shifts by allowing donors to make contributions more frequently and in smaller amounts. So, donors can now contribute to nonprofits from investment platforms, such as Betterment, to the online payment platform PayPal.

Small-Dollar Donors Are Shaping the Future of Fundraising

As we've noted, the profile of the average donor is shifting in some respects. To some extent, the traditional path to fundraising success isn't as straightforward as it once was. However, it also presents an opportunity for nonprofits to look for new ways to engage with new donors. Small-dollar donors are a great example of how new donors are shaping the future of fundraising.

These donors tend to make several charitable contributions annually through fintech platforms. In return, they want to see your organization's high level of engagement through regular updates, recognition and rewards. Because small-dollar donors typically make smaller contributions, you must engage them frequently and sustain that engagement over the long term.

3 Steps to Adopt FinTech Practices in Your Organization

Now that you have an overview of how fintech is shaping the future of nonprofits, it's time to start thinking about how to incorporate these practices into your organization. Here are five key steps to help you jumpstart your fundraising efforts.

1. Invest in digital transformation. As an organization, make a strategic decision to invest in digital transformation and act accordingly. So, implement digital solutions throughout your nonprofit to make it easier for donors to interact with you. This will help enormously since some platforms are targeted toward donors and nonprofits.

2. Stay informed. Commit to staying informed about fintech and other technologies. The reality is that many of these technologies are placing distance between you and the donor (e.g., you might never know who donated). You need to know this so you can adjust accordingly.

3. Choose the right digital tools. After your organization invests in digital transformation, choose the right digital tools to help you engage donors more effectively. Investing in fundraising tech is vital as fintech, and other platforms might keep you from donors. So now more than ever, you need tech to boost your fundraising.

4. Regularly engage small-dollar donors. Once your nonprofit implements the right digital tools, inform yourself about engaging your small-dollar donors regularly. For instance, send regular updates, thank and reward them, and develop a concerted plan for them. The reality is that now more than ever, you need to create meaningful relationships with all donors — not just the major donors.

5. Evaluate subscription philanthropy. Many nonprofits are looking to a model like Spotify, where the goal is to have hundreds or even thousands of donors making small, regular gifts on a subscription-based platform. With the shrinking of major gift donors and the explosion of tech information and ease of access to people, seeking smaller gifts from a large population is a great revenue stream to add to your strategic development plan.

To some extent, the traditional path to fundraising success isn't as effective as it once was. However, as I mentioned, it also presents new opportunities for nonprofits. Small-dollar donors are a great example of how donors continue to shape the future. If you know me, then you know I always say donors underwrite what they help write. Sure, major donors are essential, but in the digital era and with fintech, it's even more vital to pay attention to your small-dollar donors.