Proof of Concept: Rounding Up for Charity

Donating when you shop is the new black: how the process of rounding up shopping bills to the nearest round sum is looking to turn all shoppers into charitable givers, one micro-donation at a time. But does it work?

Autor*in Anna Rees, 12.09.15

Donating when you shop is the new black: how the process of rounding up shopping bills to the nearest round sum is looking to turn all shoppers into charitable givers, one micro-donation at a time. But does it work?

Collection tins used to be a familiar sight at shopping registers, making it easy for shoppers to put a couple of spare coins towards a good cause when they got out their wallets to pay for their goods. But in our increasingly digital world, paying for items with cash or spare change is becoming more and more rare, leaving the collection tins at checkouts somewhat emptier than in the past. To help overcome this, charities are capitalising on the popularity of shopping online and paying by card, setting up programmes whereby shoppers can make small donations each time they shop. Last week, we saw how this is being done via online charity shopping. Today we take a look at rounding up.

Rounding up change online has emerged in recent years as a popular form of fundraising for charities, partially because advances in payment technology have made it so easy and partially because, unlike traditional forms of fundraising, ’rounding up’ (whereby shoppers round off the sum of their purchase to the nearest round figure) is built upon a premise of so-called micro-donations: if a shopping bill comes to 41.37 EUR, shoppers are encouraged to add .63 cents to the bill and bring the total to an even sum of 42 EUR. The consumer is able to make a contribution without making a huge financial sacrifice and, perhaps more importantly, isn’t left a with a guilty conscience that their donation was too small. To this end, rounding up for charity looks to attract a high number donors that give small amounts and make giving back in some small way a part of the shopping process.

How It Works

Generally speaking, there are two main ways that virtual rounding up is done: an organisation proactively undertakes a rounding up campaign and asks customers to add a financial amount to their bill towards the end of the transaction, usually asking them to round up to the nearest round value. The organisation is then responsible for managing the funds they receive and ensuring these are properly donated to the selected charities.

Alternatively, there are also a number of platforms that offer this service to online retailers. German platform Elefunds is one such platform. Brought to life at the end of 2011, Elefunds works with over 100 online retailers to encourage shoppers to round up their purchases and donate the balance to charities. Whenever a customer purchases something from one of the partner retailers, a small Elefunds logo appears at the checkout. When users click this icon, they can round up the sum of their purchase and select which charity they wish to donate the balance to. The full amount is then paid to the retailer which then donates the balance to Elefunds. From there, the money is distributed to whichever charity the shopper has selected.

There are also initiatives that follow this principle and apply it to all purchases made by card. ChangeIt, a Canadian initiative, operates in this way, partnering with financial institutions and allowing people to round up a purchase they make using their debit or credit cards or mobile money. UK organisation Pennies also allows shoppers to make micro-donations to charity each time they pay by card.

Platforms that operate in this field typically take a percentage of the donation as a commission, usually around five to seven percent. ChangeIt, for example, tacks on a 6.9 percent administrative fee to any incoming revenue, which it says is used for customer support, digital and print marketing materials and to create monthly donor reports.

There are also a number of plug ins available for online retailers looking to set up a virtual collection tin as part of their payment infrastructure. Here are a few examples.

A Sum of Small Parts – How Much Money Does Rounding Up Generate?

In it’s first two years of existence, Elefunds collected around 13,500 EUR in donations. Online lifestyle design shop Connox was one of the first companies to partner with Elefunds and has, since 2012, collected 10,000 EUR in donations via its customers rounding up their purchases and paying the balance to charities.

Deutschland rundet auf (translated: Germany rounds up), which predominantly focuses on in-store collections rather than online, has collected over 4.3 million EUR from 94.3 million transactions since 2012. Israeli platform, Round Up, has gathered over 17.7 million NIS (over 402,000 EUR) in donations from more than 136,000 participants since it started out in 2008.

Pennies, which launched in 2010, has donated some five million GBP to charities as a result of rounding up. The organisation states that it has done so through 20 million micro-donations which averages out to 0.25 pence per donation. This may seem like a small amount but the focus of this form of giving is on the volume of donors, rather than the amount donated.

Still, when divided up among the various charities, the financial reward may not be very big. With most donors rounding up to the nearest even sum, charities receive a number of donations of very small financial value – just a couple of cents each – meaning there needs to be a lot donors in order for this method of fundraising to make a significant difference. However, perhaps the true value of this type of giving lies in enabling charitable organisations to tap into the big online retail customer base. This can help them build awareness of their work in local communities and, importantly, lead to establishing relationships with potential long-term donors, something the Children’s Hospital Foundation of Saskatchewan, one of the charities taking part in the ChangeIt programme, emphasised, stating that the awareness building happening as a result of ChangeIt was second to any financial gains made through the initiative: “A typical monthly report from ChangeIt contains 40 to 50 consistent donors plus others giving one-time gifts. The gifts themselves aren’t huge… the average monthly take so far is between $30 and $50. But with an eye to the lifetime value of those donors, [foundation director, Geri Meyer] is grateful for the chance to build relationships that will lead to a healthy database and greater support in the future.”

This sentiment was echoed in a piece Pennies CEO, Alison Hutchinson, wrote for the Guardian, noting how this form of giving in particular helps charities connect with hard-to-reach target groups: “Whilst historically some donors have felt uncomfortable donating small sums of money to charity, being prompted by technology to give pennies seems to be very popular with the UK public. This approach particularly appeals to the under-34 year olds, a hard to reach segment for charities and a core target market for many retailers. A poll last October found that 74 percent of this group say that this form of giving appeals to them.”

The Balance Sheet

Like online charity shopping, the potential to earn big via this method can be slim, income may be irregular and depends heavily on the charities promoting their involvement in rounding up campaigns. In this sense, it might be better to think of these small donations in the same way bar staff (in countries where there is a decent minimum wage) think of tips: a nice bonus on top of a basic income.

What it does do is help modify shopping behaviour by encouraging consumers to make small contributions each time they shop. Perhaps where rounding up offers the most benefit though is the way it helps charities, particularly smaller community organisations, reach out to new audiences and help them build their supporter base. So, if you can afford it, try rounding up your next purchase and donating the balance the charity.

Of course, if you are looking to put your money towards a good cause, you can always skip the trip to the shops and donate to a project of your choice direct. Need more food for thought? Check out RESET’s partner projects to which you can donate direct.

Do philanthropy and consumption mix? As part of a broader analysis of sustainable consumption, we will take a look at charity shopping, the sharing economy and put tech tools that help consumers make more sustainable choices to the test. The aim? There’s a lot of hot air, labels, trends and movements when it comes to ‘going green’ but what actually has an impact and what is just marketing? As part of our latest RESET Special, we are on the hunt for proof of concept – check out all the articles in the series here.

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