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£1 DDs to Charities
Comments
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Which is why I asked for evidence, of which none has been presented. You also equated my single example to being the "lowest cost service provider" - who said they were?
No I didn't. I just said you were assuming "the charity is able or willing to use the lowest cost service provider". Nobody other than each charity will know who their lowest cost service provider will be. And that is also why you are unlikely to find the evidence you are looking for....whereas you'd expect other services doing tens of thousands of payments with consistent details to cost significantly less and be highly automated.
Possibly, but scaling up an activity can also introduce other costs which could make this assumption invalid. You may have noticed the provider you refer to quotes prices for small volume users, but anything to do with large volumes requires further discussion with the provider.It would also appear to be sensible to assume that any ongoing other administration costs are minimal for ongoing DD's.
Again, you cannot make that assumption.
The bottom line is charities have to operate in a businesslike manner. If it costs more to collect and manage £1 payments from 1000 donors than it does to collect £2 payments from 500 donors then the accountants will look at what percentage of the £1 donors will increase their donations and what percentage will stop donating. If less than half the donors quit then the charity is still better off financially. They know the numbers and will make the strategic decisions. All we can do is to guess."In the future, everyone will be rich for 15 minutes"0 -
You brought up the notion of the "lowest cost service provider", which insinuates that the cost would be such that they would need to choose solely on that basis, which may not be true. I simply gave an example clearly demonstrating the inherent costs aren't that high, before even looking at higher volume discounts.No I didn't. I just said you were assuming "the charity is able or willing to use the lowest cost service provider". Nobody other than each charity will know who their lowest cost service provider will be. And that is also why you are unlikely to find the evidence you are looking for.
You are seriously suggesting it is likely that higher volumes would cost more per transaction than lower volumes would? A provider not listing volume prices on a website is pretty standard practice.Possibly, but scaling up an activity can also introduce other costs which could make this assumption invalid. You may have noticed the provider you refer to quotes prices for small volume users, but anything to do with large volumes requires further discussion with the provider.
Would saying it's 'very likely' be better?Again, you cannot make that assumption.
Yes, I agree - true for the overall strategy of a charity.The bottom line is charities have to operate in a businesslike manner. If it costs more to collect and manage £1 payments from 1000 donors than it does to collect £2 payments from 500 donors then the accountants will look at what percentage of the £1 donors will increase their donations and what percentage will stop donating. If less than half the donors quit then the charity is still better off financially. They know the numbers and will make the strategic decisions. All we can do is to guess.
What I'm saying is that the available evidence on costs suggests that a charity does not lose money (and very probably takes in a reasonable percentage) whenever somebody sets up a £1 DD to them.0 -
I haven't 'insinuated' anything either.You are seriously suggesting it is likely that higher volumes would cost more per transaction than lower volumes would? A provider not listing volume prices on a website is pretty standard practice.
Yes, it is possible if you look at the real-world average cost to the charity per transaction rather than the amount paid to a notional external service provider per transaction. Costs rarely have a linear relationship with volume and assuming that a higher volume will always reduce costs is a mistake. Anyone who has watched an episode of "Dragon's Den" will appreciate that scalability is always a concern and is not a simple multiplication process.
I have been directly involved in a project where the average cost per transaction for a service increased dramatically as the volume of transactions increased. It got to the point where the average cost exceeded the charge being made. The options were: Increase the charge (unacceptable), Reduce the demand (impossible), Provide the service for free at point of use (chosen option).
I am not saying there is anything wrong or sinister with a service provider not listing volume prices - rather that it is a reflection of the complexity involved when you start dealing with large volumes.What I'm saying is that the available evidence on costs suggests that a charity does not lose money (and very probably takes in a reasonable percentage) whenever somebody sets up a £1 DD to them.
What 'available evidence'? Do you mean the 20p per transaction cost? If so then yes, a charity might be able to set up direct debit system collecting very small numbers of £1 DD's and still make a modest net profit. But that isn't what we are talking about - we are discussing volumes in the 10's perhaps 100's of thousands (we don't even know that figure) which is an entirely different thing.
As mt99 points out - it is very hard to get information about what it really costs (and there's probably a reason for that) and anything else is a guess. My guess is that many charities may make a strategic decision to stop accepting £1 DD donations if the volumes significantly rise due to the current account merry go round."In the future, everyone will be rich for 15 minutes"0 -
You brought up using the "lowest cost service provider" by yourself. Your first reply said I was "assuming" the charity is "able or willing to use the lowest cost service provider", yet I never said that they needed to. It could be that they have a range of possible providers, all at competitive rates.I haven't 'insinuated' anything either.
I'm not really sure you can look at Dragon's Den as a great comparison, where people often have to invest large amounts on fixed costs to scale up, compared to something that is largely done electronically and in massive amounts on a daily basis...Yes, it is possible if you look at the real-world average cost to the charity per transaction rather than the amount paid to a notional external service provider per transaction. Costs rarely have a linear relationship with volume and assuming that a higher volume will always reduce costs is a mistake. Anyone who has watched an episode of "Dragon's Den" will appreciate that scalability is always a concern and is not a simple multiplication process.
Was this a highly automated service done electronically?I have been directly involved in a project where the average cost per transaction for a service increased dramatically as the volume of transactions increased. It got to the point where the average cost exceeded the charge being made. The options were: Increase the charge (unacceptable), Reduce the demand (impossible), Provide the service for free at point of use (chosen option).
...if the banks are using a system that makes volumes in the 10's or 100's of thousands more costly per transaction, there are serious issues....What 'available evidence'? Do you mean the 20p per transaction cost? If so then yes, a charity might be able to set up direct debit system collecting very small numbers of £1 DD's and still make a modest net profit. But that isn't what we are talking about - we are discussing volumes in the 10's perhaps 100's of thousands (we don't even know that figure) which is an entirely different thing.0 -
...if the banks are using a system that makes volumes in the 10's or 100's of thousands more costly per transaction, there are serious issues....
I thought we were talking about the charities, not the banks. You need to look at the bigger picture, not focus on a small part of the whole process.
I have absolutely no problem with you believing what you want to believe based on your 'research' that DD's can cost as little as 20p each. If you think the charity ends up with 80p to spend on good causes then great. I heard a rumour that the banks actually pay the charities to process the DD's for them.
As I said, my guess is that many charities may make a strategic decision to stop accepting £1 DD donations if the volumes significantly rise due to the current account merry go round. For me that is the beginning and end of it."In the future, everyone will be rich for 15 minutes"0 -
Seems to me we're talking about the costs involved, which banks will charge for as appropriate. And you're telling me to "look at the bigger picture", yet you then immediately say the banking system is only a "small part of the whole process" of DD's?!I thought we were talking about the charities, not the banks. You need to look at the bigger picture, not focus on a small part of the whole process.
I like how you put 'research' like that, insinuating to anyone reading that a factually true statement (the charge made to any individual creating a DD on GoCardless) is unreliable. Yet you've offered absolutely nothing except saying that hypothetically it could get more expensive when scaling up, despite that being extremely abnormal for highly automated electronic processes.I have absolutely no problem with you believing what you want to believe based on your 'research' that DD's can cost as little as 20p each. If you think the charity ends up with 80p to spend on good causes then great. I heard a rumour that the banks actually pay the charities to process the DD's for them.
Maybe, but that will come down to an analysis of numbers of £2 DD's created rather than £1 DD's, not due to a £1 DD costing them.As I said, my guess is that many charities may make a strategic decision to stop accepting £1 DD donations if the volumes significantly rise due to the current account merry go round. For me that is the beginning and end of it.0 -
"look at the bigger picture" = "the banking system is only a small part of the whole process of DD's"
I'm actually insinuating that one piece of factual information, possibly not relevant to the discussion, is not evidence that charities gain a net financial benefit from £1 DD donations. If you really want to research the subject you will need to do a lot more than googling "how much do direct debits cost". I'm obviously not saying the factually true statement is unreliable, that would be silly.
Your best bet to start your research is to find out whether the charities actually operate "highly automated electronic processes".Maybe, but that will come down to an analysis of numbers of £2 DD's created rather than £1 DD's, not due to a £1 DD costing them.
Prove it then. And claiming that DD's can cost as little as 20p doesn't count."In the future, everyone will be rich for 15 minutes"0 -
Nah, I think I'll leave it up to you to evidence an ongoing monthly cost to a charity of 80p over and above what GoCardless charge.Prove it then. And claiming that DD's can cost as little as 20p doesn't count.
No point in further debate, neither of us can 'evidence' it - I simply have no rational reason to believe that there would be significantly higher costs for a charity than an individual, even when adding on some admin costs.0 -
I simply have no rational reason to believe that there would be significantly higher costs for a charity than an individual, even when adding on some admin costs.
And there is your 'rational reason'. How much are the admin costs - none of us know for sure but having worked in an environment where admin costs were closely monitored and accounted for my guess would be that the admin costs involved in setting up, managing and closing down a £1 DD would account for a significant part of the annual £12 income, on top of banking costs the charity has to pay.
The only thing that matters is there are good alternatives to doing £1 charity donations. Rather than wasting the time and effort of a charity for a minimal or negative return it is far better to make use of the alternatives. Or else not being mean and actually make a donation of a reasonable amount.
As teddysmum said about the banks many posts ago "I wouldn't be surprised if the next move was to put a minimum spend on direct debits, to stop these meaningless trivial payments being used to satisfy the current rules." What better reason for the banks to justify changing the rules than to stop this activity having a negative effect on the charity sector?
Anybody using guesses and assumptions to justify paying a charity just £1 by DD because 'they still make a profit' simply needs to do the decent thing and pay a bit more, or use any of the freely available alternatives."In the future, everyone will be rich for 15 minutes"0 -
Each Penny, with respect, you are forgetting something!
It is up to the charity itself to set the minimum it will accept as a DD. For example, I looked at one and it will not accept DDs for less than £3 a month.
If £1 causes them difficulties or leaves them with nothing, then it's within their power to increase their minimum!0
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