The U.S. philanthropy market is sizeable, stable, and growing. There are approximately 1.6 million non-profits in the U.S. collectively contributing over $2 trillion in revenue and expenses annually. However, as payments in most other markets in the U.S. have quickly moved online, charitable giving has lagged. Today, online giving still comprises less than 10% of total fundraising. Enter FrontStream.
What is FrontStream and How Do They Create and Capture Value through Digitization?
Starting its life as a traditional online payment gateway for a wide range of merchants, FrontStream today is deeply embedded within the charitable giving market, providing a broad range of solutions across the ecosystem. These solutions range from a Customer Relationship Management (“CRM”) software specifically tailored to non-profits’ needs to online peer-to-peer fundraising platforms. But why is this online shift important? Online channels are more efficient for non-profits: they lower the cost per fundraising effort and offer a higher hit rate with lower cost of access to donors. Online channels also result in rich and clean data sets that could be used to drive future giving. For example, a non-profit may ask for donors to input their salary and age range. From this data, a non-profit may be able to identify that individuals between the ages of 27 – 30 within a $75,000 – $100,000 income bracket care about a specific cause more than other groups, and they can target this market more aggressively in the future when fundraising for that cause. Finally – and especially as demographics shift – there is an opportunity for non-profits to increase donation revenue through leveraging social media and peer-to-peer fundraising. The 2014 ALS Ice Bucket Challenge is an excellent example. In an eight-week period in 2014, the ALS Association raised $115 million through an initiative where an individual would take a video of themselves pouring a bucket of ice water over their head, posting the video to social media, and nominating a few friends to either partake in the challenge or donate to ALS (with most people opting to do both). As a partner of ALS Canada, FrontStream processed approximately 10% of these donations through their online giving platform.
Although larger non-profits, such as the Red Cross, may be well-served with an expensive Enterprise Resource Planning solution, many small- to medium-sized non-profits find themselves underserved. These smaller non-profits may be using multiple single-point solutions, such as Paypal for payment processing, BidPal for auctions, and Excel spreadsheets in place of a CRM. A significant amount of an individual’s time at this non-profit would then be spent manually inputting donation data into a master Excel spreadsheet. As a result, a strong market appetite grew for one provider to eliminate the multiple vendor challenge and increase operating efficiencies, including the need for one unified data warehouse to manage donations across multiple channels. From FrontStream’s point-of-view, providing multiple solutions to one customer strengthened their customer relationships through more engagement and an increased value proposition. Figure 1 below outlines FrontStream’s services provided to non-profits and corporations to support both individual and institutional giving.
What are the Next Steps?
As FrontStream effectively acts as the digital intermediary between donors (both individuals and institutions) and non-profits, the company has the opportunity to add significantly more value to the entire chain. Through speaking with some of FrontStream’s large corporate customers who use FrontStream’s TRUiST software for employee giving campaigns, it became evident that employee donors would like to better understand where their donations are going and what they are being used for. FrontStream is in the unique position to create an online two-way marketplace where non-profits who have received donations can post pictures or stories of what they have accomplished with donations from a specific campaign. This is likely to influence future giving and is also helpful information for companies to include in their Corporate Social Responsibility reports. FrontStream’s tools are effectively connecting supply with demand, providing better employee engagement and offering valuable data to measure community impact. Furthermore, there is a great opportunity for FrontStream to expand their data and analytics offering to non-profits. As FrontStream is at the center of significant donor data for both collection and use of data to enable fundraising, there could also be an opportunity to proactively consult non-profits on their fundraising strategies to further increase donations and allow these entities to do more good. Better.
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 The Urban Institute National Center for Charitable Statistics
 Blackbaud 2015 Charitable Giving Report