July 28, 2017
For the past 40 years, the U.S. charitable giving sector has shown an interesting – and to be honest, frustrating – trend: while the total dollar amounts given to charity each year have risen almost every year (only declining in three years between 1976 and 2016), the amount we give as a percentage of GDP has remained stubbornly stuck around 2%. Two percent of GDP is still a jaw-dropping amount of money – In 2016, foundations, corporations, bequests, and individuals combined to donate a record-breaking $390.3 billion* to charity. But the question of how to grow the percentage of American dollars flowing to support charitable causes has remained a thorny one.
A few key trends suggest it may be time for that number to change. Americans are a generous bunch, and new technologies are expanding both how we give and how we connect to the causes and people we care about. Over the past two decades, technology and the internet have simplified the donation process. We can now give online, connect to and interact with causes with unprecedented ease, and see more clearly how our donations are spent. Entire new industries of digital donation payment processors and crowdfunding have emerged; we routinely donate directly to people impacted by the causes we care about instead of relying on charities as intermediaries. Online platforms are disrupting more established giving channels like donor advised funds (DAFs) and new tools transform traditional workplace giving campaigns by allowing employees to choose which nonprofits they want to support.
The internet will continue to change existing giving channels and create new avenues for donors to more deeply connect with the causes they care about. This is especially true of Millennials, who represent the largest living generation and spend significant numbers of their waking hours online. Here are a few big ideas that are changing the face of American giving and creating new ways for us to channel our generosity:
- No-minimum and low-minimum DAFs: DAFs are already the fastest growing channel in charitable giving, with a total asset value of $78.6 billion, and total giving from DAF accounts exceeding $14 billion in 2015. New players like Razoo and Global Impact’s Growfund offer no account minimums or fees, and low minimum donation amounts. Now donors with smaller amounts to give have access to the tax-advantaged charitable giving accounts that traditionally were only accessible to higher-income donors.
- More choice in workplace giving: The United Way is a major player in the workplace giving market, accounting for 90% of total funds raised through workplace campaigns through the early 2000s. While workplace giving programs annually generate more than $4 billion in employee donations, only 13% of U.S. companies had employee participation rates at or above 61%. Companies have worked to increase employee engagement in their giving campaigns by adding year-round volunteering to their campaigns and offering paid-time off for volunteering opportunities. Many organizations are also adopting online technology platforms, which make it easier for employees to give directly to their favorite nonprofits and influence their company’s philanthropic investments.
- Small dollars from large numbers of people, instead of a few big checks: Crowdfunding sites like GoFundMe, Generosity, Kiva, and DonorsChoose.org have exploded in popularity in recent years. In 2015, the global crowdfunding industry raised an estimated $34.4 billion. Charitable donation-based crowdfunding (as opposed to contributions to companies and individuals) represented the second largest category with more than $2.85 billion in crowdfunding volume. That number is expected to reach $30 billion per year within the next decade. Even players like YouTube and Facebook are entering the game, launching YouTube Donation Cards and Facebook Fundraisers in the last two years.
Americans are driven to give back, and the tools to do so are getting better. We believe that crowdfunding is only going to grow, and with it, the conversation about whether giving to individuals counts as a charitable donation (right now, except in a few cases, it doesn’t). Gifts by individuals will become a bigger share of the pie as online tools make gifts of all sizes even easier. Infrastructure and capacity building within the philanthropic sector will become increasingly important — changes in technology and donor behavior will cause a transformation in the way charities operate and interact with their donors.
We can learn from innovations in finance, behavioral science, and marketing to anticipate some of the ways in which the sector will change. We believe that now is the time to build the infrastructure to support these important changes in order to stay ahead of transformations in the charitable landscape.
Here at iF, we spend a lot of time thinking about the tools and systems that will make it easier for Americans to give back, both today and twenty years down the line. Curious? Drop us a line at email@example.com. We’d love to share our ideas and hear yours.