SwissBanking
The online magazine of the Swiss Bankers Association
June 30, 2016

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The social side of Fintech

The social side of Fintech

Fintech is more than just the banking of the future. Here is how digital fundraising is forging new paths using modern financial technologies, and how companies can use this to do good.

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Marco Zaugg, CEO and Co-Founder of RaiseNow
What does fundraising have to do with Fintech and why is insight dedicating an article to the topic? To get straight to the point: there are close ties between digital fundraising and the financial sector. Furthermore, digital fundraising offers new opportunities for companies that take an active role in their corporate social responsibility (CSR).
In Switzerland, the most important and only provider of digital fundraising solutions in this form is RaiseNow. The startup was entered into the commercial register in 2015. However, it was originally part of Getunik, an agency specialising in digital services, and therefore has longstanding experience in online fundraising. The company offers software for digital fundraising and primarily services big and medium-sized non-profit organisations (NPOs) such as Helvetas, Redcross.ch, Doctors Without Borders and Amnesty International. It has around 150 clients, which also include charitable organisations in Germany, the United Kingdom and the US.

Closing ties between digital fundraising and the financial sector

Around the globe, using all conceivable payment methods

Making donations remains a predominantly non-digital undertaking, and money is usually paid in by means of a payment slip. This no longer corresponds with the spirit of the times. Marco Zaugg, CEO and Co-Founder of RaiseNow explains: “Only 2.2 percent of donations are made through digital channels, which is much too low if you look at our society’s high level of digitalisation. Digital payment methods are undergoing a transformation. NPOs have also come to recognise this, which plays into the hands of online fundraising.” RaiseNow provides the technology, handles the overall processing of payments and provides the corresponding donation forms. One-off or recurring donations can thus be made directly to the charitable organisation with just a few clicks, either by credit card, Paypal, PostFinance or e-banking. Alternatively, the payment can be activated using Twint or Paymit. It is also possible to make an instant donation by SMS, which is charged to the donor on their mobile services bill. For Swiss-wide donation platforms such as Glückskette and other ZEWO-certified charitable organisations, the entire flow of online donations is handled by RaiseNow. “As a PCI DSS-certified provider, RaiseNow can process credit card data and manage the collection of regular donations for the charitable organisations fully automatically”, Zaugg adds. RaiseNow offers its solution worldwide. Using so-called Meta Payment Service Providing, payment orders can be made and received from anywhere. Further to this, RaiseNow technology processes the donations in real-time. In addition, donors receive a donation receipt by e-mail immediately after the transaction has been carried out.

Digital payment methods are undergoing a transformation.

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Donation form WWF
Investor protection, self-regulation and the Banking Act

For certain crowdfunding platforms such as wemakeit.com, RaiseNow also offers escrow agreements, or fiduciary holding of the assets. As is usually the case for crowdfunding, the money is collected, but only transferred to the recipient upon completion of the project. “Holding the money in this way is deemed by FINMA to be a deposit, and is therefore subject to depositor protection”, explains Marco Zaugg. RaiseNow has established a separate legal entity for assets held in a fiduciary capacity, which is a member of the Self-Regulatory Organization (SRO). RaiseNow is the only provider in Switzerland to offer such escrow agreements.
Generally, the following applies: as long as the recipient of the money is known from the outset, and as long as no interest is paid, Fintech companies, in particular crowdfunding platforms, are exempt from the Banking Act and therefore do not require a banking licence. The Swiss Federal Council announced this following a meeting on 20 April 2016.

Holding the money in this way is subject to depositor protection.

Do a good deed digitally

The use of RaiseNow’s technology is not limited to NPOs only. The solution is attractive for any company that wishes to improve its CSR: A big Swiss company with branches in over 20 countries wanted to expand its CSR commitment through fundraising. To do so, the company chose a number of charitable organisations that use RaiseNow technology and installed their donation forms, using the company’s corporate design, on the intranet site. Regardless of which country they work in, employees can now make a donation to a charitable organisation of their choice using one single form found in the intranet, and without having to go to different websites.

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Donation form Save the Children
Impressive potential

To date, there is no comparable provider for digital fundraising in Switzerland, and only a few exist worldwide. The potential is enormous: the volume of worldwide donations is estimated at 300 billion USD spread across 10 million charitable organisations. In Switzerland alone, there are significantly more than 10,000 NPOs, of which around 3,000 are of a charity nature (500 of which are ZEWO-certified). The volume of donations is increasing annually, says donations expert Marco Zaugg. In 2015, RaiseNow processed 140,000 transactions with a cumulative volume of 15 million CHF. Year to date, the volume has already reached over 200,000 transactions and 25 million CHF. “But this corresponds to only 2.5 percent of the market volume. If we were to increase the share of digital donations to 25 percent in the next five years, then we would be at 2 million transactions in Switzerland alone”, calculates Zaugg. That would be around four to five million transactions globally. Looking at these numbers, it is clear that RaiseNow also wants to grow abroad. “We have a worldwide focus. As a Social Enterprise, however, we also want to ensure that making a donation is an enjoyable endeavour for donors. Making digital, straightforward and quick donations should become the norm.”

The important thing is how Switzerland develops as a country.

The prospects are bright, but Zaugg also sees a danger that Switzerland could be overrun by a big influx of providers from Europe and the US. According to Zaugg, the important thing is how Switzerland develops as a country. “If the framework conditions are unattractive from a regulatory perspective, then startups will take up their place of domicile in other locations.” He says that the legislators and FINMA have, however, now recognised this.

How much money goes directly to the cause?

“For ZEWO-certified charitable organisations, administration costs can amount to a maximum of 20 percent, which means that at least 80 percent of the money reaches the cause directly”, explains Zaugg. “This number does not, however, provide any indication of the actual impact that an aid project has. A charitable organisation could, for example, pay standard industry salaries for highly-qualified employees, which means the administrative costs are higher, but the result is that they have a greater impact. Donors should be aware of this.”

How much does it cost to make a donation with RaiseNow?

Example: Donation made by a private individual

Donation CHF 100.00
Credit card fee CHF 1.50 (1.5%)
Transaction fee CHF 0.25
Total CHF 98.25

Fees vary depending on the payment method: Twint costs between 0.02 and 0.20 CHF depending on the amount of the donation, a PostFinance payment 2%, Paypal 3.4% and a donation by SMS around 6%.