Global Matters

The role of payments in optimising the impact of giving

By David Michael, CEO, Streeva Ltd

The UK is one of the most advanced countries when it comes to payment innovation, as Brits embrace contactless and the ability to pay in under a second with a tap of a card or phone. So much so that more than half of all commercial transactions are now paid for contactlessly.

This is great for consumers and merchants – but what about the other payments that may be left behind?

The success of contactless has resulted in people carrying less cash – which means that many charities aren’t benefiting from donations of loose change.

Charities who are already competing with each other for awareness are now being challenged to change their methods of fundraising to meet changing consumer behaviour.

While many charities have been understandably slow to modernise, those who have pioneered and have refined their collection model are seeing big returns. The Natural History Museum (NHM) predicts to raise £500,000 in this year in contactless alone. Karl Roberts of the NHM informed us, “The Natural History Museum has 60% international visitors and 40% domestic. We have seen 90% of the contactless donations we receive have been from British bank accounts”.

Had these donors also added Gift Aid, this could have resulted in more than £100,000 extra going to the NHM without costing donors a penny more.

Through a combination of technology and recent changes in Gift Aid legislation, we at Streeva realised the possibility to use payment data to automatically create charitable declarations on behalf of a donor. We set about building a collaboration with key stakeholders to pilot this technology, including Visa, the NHM and GoodBox.

Market adoption
In order to collect the Gift Aid, donor adoption is critical. There’s a total of 31 million taxpayers in the UK and so having a trusted and simple onboarding process is important. We see banks and credit card companies being best placed to invite donors to participate. Imagine a prompt from your bank to enable Gift Aid on your bank account once you’ve made an eligible donation? It would be especially attractive for the 4.7 million higher rate and additional rate taxpayers, as any Gift Aid donations will reduce their tax bill, a bit like 25-33% cash back on donations.

Based on HMRC and Office of National Statistics research, we predict a donor adoption rate of 80% would be an attainable target. This could be driven upwards through increased donor education and closer integration with HMRC. Creating a Gift Aid declaration only if the required tax has been paid, would remove the reliance on knowledge of tax law. This would reduce the £180 million tax gap where donors gave Gift Aid where they hadn’t paid enough tax.

Beyond contactless, there are many other convenient ways to give that suffer from the same challenges when it comes to Gift Aid. Swiftaid has been built to help work across all digital fundraising channels. In turn, creating a tax utility service to add Gift Aid to donations effortlessly and really start to reduce the £560 million of missed Gift Aid each year.

Payment driven tax
Streeva’s overarching goal is to reduce the pain points of tax handling for everyone and believe that using payment data to drive automatic tax processing will remove the burden from individuals and organisations. With this in mind, we’ve been working closely with the University of Surrey to help embed tax law within Blockchain smart contracts and validate methods of linking full receipt data to payments without needing to change the underlying payments networks. The validation of our Gift Aid solution will be a great first example of how we can achieve this.

By David Michael


Tag: Financial Inclusion