cVRPs: The donations that keep on giving will reshape charitable fundraising

Charities love all donations, of course, but I’d argue they love Direct Debit donations the most.

The numbers are striking: the average lifetime of a repeat donation on Direct Debit is around 38 months. On a card, it drops to 14 months. Cards expire or run out, bank accounts don’t. Here at JustGiving we’ve actually had some Direct Debits running for 21 years!

So, Direct Debit isn’t just convenient. It’s strategically vital to the sector. Which makes the next iteration in its evolution, commercial Variable Recurring Payments (cVRPs, which GoCardless offers as Recurring Pay by Bank), vital too.

Direct Debit might be loved, but it’s getting old

We’re excited by cVRPs because they offer the benefits of Direct Debits, but without some of the drawbacks. And there are drawbacks.

The underlying BACS technology dates back to the 70s, and it shows. The system depends on a series of files flying back and forth between merchants and banks, which creates lags of three to five days between requesting a payment and the funds arriving.

That creates real friction for charities. If someone sets up a monthly donation on, say, the 12th for collection on the 15th, the charity won’t get the first donation till next month because it's too late to process the payment files in time for this month.

cVRPs will close this gap and get more money to where it matters, faster. They run on open banking technology so they settle the same day while still offering the reliability and repeatability of Direct Debit.

But faster funding is really only the start. 

The big idea

cVRPs are a lot more than just a faster Direct Debit. They’re based on open banking technology, which makes them more flexible, which is why I agree with this research from GoCardless: cVRPs will be a catalyst for entirely new business models.

They allow charities to collect a donor's money — with their consent — for variable amounts, on different dates and even on one-off occasions. Donors can provide pre-authorisation to temporarily increase their giving in response to a crisis, like an earthquake or a pandemic, while retaining the control to pause or adjust at any time.

But zoom out further and with cVRPs you can re-think the concept of a repeat gift entirely. A cat lover can set up a mandate with JustGiving and tell us that they want their donations to support causes related to cat welfare. We can collect that monthly donation and share it around topical or deserving cat charities. If a virus is discovered that only impacts cats, we have their permission to temporarily increase their donation for the next three months, to address that crisis.

This is the difference between a platform like ours merely processing transactions and becoming the backbone of charitable giving. It creates a sticky relationship between donors, our platform and good causes, while giving charities a more responsive revenue stream.

As always with payments, it’ll be a patient revolution

Exciting as this is, we’ll need to be patient. New payment types are slow to bed in. Contactless has been around since 2007, but it didn't really take off until at least ten years later.

I think it will be the same story with cVRPs.

Not because the idea isn’t a good one, or because the appetite isn’t there. GoCardless research finds that 38% of consumers are open to using cVRPs, rising to 60% among Gen Z.

But because when money is involved a high-degree of consumer trust needs to be built up before something new becomes widely adopted. Direct Debit has decades of consumer familiarity behind it. Open banking still feels unfamiliar. Most people don’t really understand what it is, and we’re asking them to go from ‘oh, Direct Debit, I’ve done this a million times’ to ‘hang on, why am I being redirected to my bank? This is different’.

I believe two things need to happen to accelerate adoption. First, the experience needs to be more consistent across banks — a long-standing open banking issue. Second, consumer protection needs a clearer story: the Direct Debit Guarantee is extremely clear; the open banking equivalent is woolly. That’s an education job for the industry.

There’s also some practical implications to address. cVRPs have only just launched, with c. 80% coverage of all consumer UK bank accounts. There will still be some donors who can’t give in this way, so it’s important to use cVRPs in complement with Direct Debit. That way donor coverage is 100%, every time.

We want to lead the way

JustGiving has often functioned as the trusted R&D department for charities, launching and testing new payment innovations before sharing them with the wider industry.

And we’re happy to play this role again with cVRPs, which we know are being watched very closely by our charity partners. 

As I’ve described, cVRPs will enable us to turn giving into a dynamic relationship between donors and charities, powered by and personalised to the causes individuals care most about. I’ve always been a believer in the power of payments to do good, and this is an exciting new chapter in that story.

This is a guest article from one of our customers, JustGiving. Read 'Revolutionising recurring revenue' for more insights into the strategic opportunity of Recurring Pay by Bank.