And how nonprofit fundraisers can make these charitable giving trends work for their organizations.
In this series of blogs, webinars, and videos, leaders in the nonprofit fundraising and technology space will explore the trends that we expect to dominate 2024. We'll both identify and explain the trends, and - more importantly - we'll explore the best ways for nonprofits to embrace these trends.
The Trends
While we will identify the top seven trends we expect to see in 2024, other articles, webinars, and videos will look at the giving market as a whole and consider additional trends and examine how all these trends fit together.
At this point, it's hard to go a full day without hearing mention of artificial intelligence and the incredible things it can do. Conversely, those mentions are often followed by a draconian list of dangers artificial intelligence poses to government, data security, the general public, and the very fabric of our society.
According to a recent Stanford Social Innovation Review article, generative AI has moved to the second stage of the Gartner Hype Cycle. This model focuses on the steps that most innovation in the business sector moves through. AI has moved past “innovation trigger” when new technology seems omnipresent and has moved to the “peak of inflated expectations.”*
The primary difference between AI and past technological advancement is the artificial intelligence of it all. In other words, “it’s making decisions that only people could make until right now.”*
Nonprofits tend to be late adopters of technology. This is probably motivated by both a resistance to change and lack of budget for new technology. One of the key differences with AI for nonprofits is that on the surface, it feels like a free tool to add in to your existing technology. However, anyone that's taken an economics class will tell you, nothing is really free.
To understand why you might want to be cautious with free AI programs, we need to understand how tools like ChatGPT work. According to Semrush, "ChatGPT works by attempting to understand a text input (called a prompt) and generating dynamic text to respond. It’s essentially a super-sized computer program that can understand and produce natural language."**
To accomplish this, most of the leading AI tools are trained using massive quantities of data scraped from the web. Most of these tools do not ask for permission to use data from each website it uses. As written content, artwork, music, and other intellectual property is protected by copyright and trademark laws, there may be consequences for the companies scraping all that "free" data.
The first of said consequences appears to be a lawsuit filed by the New York Times (The Times), in December 2023, against OpenAI and Microsoft. The New York Times claims that millions of articles from the Times – which should be protected by copyright laws – were used to train the first generation of chatbots. The lawsuit asks for “billions of dollars” in damages and calls for the destruction of any chatbot models and training data that was built with the copyrighted material from the Times.***
We will further explore AI in an upcoming article as it's a dense topic with a lot of considerations. Overall, it has the potential to make work easier, more efficient, and free up resources that can be reallocated to deepening donor relationships and all the other tasks that still require human beings.
In the meantime, nonprofit leaders should think critically about what tools they're using, ensure there is clear policy for how staff can use AI tools, and set up plans to safeguard secure donor data and personal information. Many software platforms are incorporating AI tools into their existing user interface, so be sue you understand how the technology works and critically read any new user agreements or updated documentation.
Sources for this section:
Keep reading about AI for Nonprofits:
The next trend is one that's fairly new to nonprofits, but has been rapidly gaining attention and importance in the last few years.
2. Donor-Advised Funds (DAFs)
Donor-Advised Funds, or DAFs, are quickly becoming the preferred method that mega donors are giving to charity. In the simplest form, a DAF is a fund that a group of donors contribute cash or stock shares to. Each DAFs has different rules for how and when the money is dispersed to charitable organizations. Currently in the United States, there are very few regulations that govern DAFs.
Some DAFs are small and family owned, while others, like the one run by Fidelity Charitable, have billions of dollars in assets. According the the National Philanthropic Trust's 2023 DAF Report, DAFs held more than $228 billion in 2022.*
Looking at DAFs with a macro lens, most donors like DAFs as they can get quicker tax write-offs and allow for more flexible ways to donate funds and stock options. Critics of DAFs point to a lack of governance and are concerned that they hold on to funds with no clear timelines for when they will be dispersed. The same 2023 report from the National Philanthropic Trust found payouts from DAFs decreased from 28.7% in 2021, to 22.5% in 2022.
As donors control what they donate and how the funds are given to charitable organizations, nonprofits may feel like their hands are tied. However there are steps proactive nonprofits can take to ensure they are knowledgeable about how to have conversations with donors about DAFs and that they offer the right opportunities for donors to make donations from DAF funds.
Sources for this section:
It's not a new phenomenon that as people age they generally have more funds available to support their favorite causes. It is however, a newer idea that young donors may have not only the means, but also a stronger motivation to give that generations before them.
3. Generational Giving Preferences
As we explored in our blog post "Charitable Giving Across Generations", understanding donor preferences is key to ensuring your organization has both short-term and long-term support.
Older donors like members of the Silent Generation and Baby Boomers have been the largest contributor to charitable organizations for many years. It's reasonable to focus a lot of your outreach on these larger donors, but keep in mind members of Gen X and elder Millennials are rapidly increasing their giving, and younger donors like members of Gen Z are forming their preferences for giving as we speak. In the short-term, older donors are going to give the most money, but younger generations are more likely to give their time, in volunteer hours, serve on an organization's board of directors, and have connections to corporate giving opportunities.
As GivingTuesday CEO Asha Curran has said, fundraisers need to “be very intentional and mindful about engaging younger supporters, remembering that they become bigger givers later in life.”
In our blog article we breakdown of overall giving behaviors, some statistics about each generation's giving, how they like to be contacted and their preferred giving method. You'll see that there is significant overlap between generations, meaning you can develop campaigns that are optimized for multiple types of donors and include more than one way to give.
Increasing the majority of donors prefer to give online. Giving USA’s Giving by Generation report found that 76% of Gen Z and 81% of Millennial giving occurred online in 2022, compared to 69% for Gen X, and 61% for Boomers.
As younger donors start to have more influence over charitable giving, we're likely to see changes to the overall preferred methods of giving and also to the patterns in how individuals give to their favorite causes.
Read more about generational giving trends:
4. Storytelling & Transparency
If you've ever fundraised before, you've probably run in to the difficulty of demonstrating the impact a single donation makes to the overall cause you're advocating. After all, "The death of one man is a tragedy. The death of millions is a statistic." This phrase comes from a 1932 essay on French human by German journalist Kurt Tucholsky. (It's often misattributed to Joseph Stalin, but don't worry, there's no evidence he ever said this).
While Tucholsky was going for satire and writing about the horrors of war, this concept applies pretty universally. There's even a term for it in communication studies: anecdotal value. It refers to the value of providing a story, or anecdote, to help someone better understand a larger issue or phenomenon.*
All this to say, storytelling matters. There are many articles that show that storytelling matters even more to younger generations, so it's only going to become important. So while you may be able to tell a great story or anecdote, for it to really have lasting effects, you need to include impact in your story.
According to an article in Philanthropy Journal by Gregg Witt, storytelling is going to be essential if you want to attract the interest and support of younger generations, especially Gen Z. "In a world where the greatest prize is attention," Witt says, "content must capture the imagination, and inspire Gen Z to participate and take action."**
Demonstrating impact is most powerful when you can link it to concrete data and real-life examples. Most nonprofit leaders know this, but they are hampered by a lack of good, real-time data. Nonprofits tend to be slower to adapt to new technology - whether it's a budget issue or an aversion to change notwithstanding. Moving to CRM systems and fund accounting solutions allow nonprofits to not only track financial data and donor information, but also use that data to increase the transparency of their operations.
While all nonprofits in the US that generate over $50,000 annually are required to submit a Form 990, donors, planning committees and boards of directors typically want a deeper level of transparency. Fundraisers, donors, and volunteers need to track fundraising and expenses in real time. This is impossible without the right tools.
You can't give your planning committee an update on sponsorship dollars committed vs. paid unless you have access to both the tool that tracks the commitment and the bank reconciliation. And you can't complete quarterly grant report without tracking expenses by fund and showing that restricted dollars are only being spent on specific activities.
While many nonprofit leaders balk at adding any new expense to their budget, the right software tools may require an investment in the short-term but they will continue to pay off in dividends in the long-term.
Sources for this section:
As younger donors have different preferences when giving, individual giving as a proportion of overall giving is changing.
5. Changes in Individual Giving
In the United States, charitable giving has followed a few standard patterns since organizations like Giving USA started tracking giving in the mid 1950s. Some of the key indicators Giving USA looks at are overall giving and how it compares to the previous fiscal year, contributions by source, and contributions by destination.
In its most recent report (2022), it finds that Americans gave $499.33 billion (USD) to charity. This represents an overall decline of 3.4% from 2021. Adjusted for inflation, giving declined by 10.5%. As in previous years, the largest contribution source was individuals - giving 64% in 2022. This represents year-over-year decline of 6.4%.*
The other sources all increased with 21% from foundations (2.5% increase), 9% from giving by bequest (2.3% increase), and 6% from corporations (3.4%). When looking at contributions by destination, religion topped the list as usual with 27% of giving, followed by human services with 14%, and education with 13%.*
What do all these numbers mean? Does a 10.5% decrease in giving predict the end of nonprofits in the US. Not quite. It is helpful to look at giving over time, rather than year-over-year. According to PG Calc, total giving has increase by 56%, adjusted for inflation, over the past four decades. That works out to a 1.4% increase each year.* There are some years where giving decreased - specifically 1987, following the largest drop in stock market history, and in 2008 and 2009 during the Great Recession. Those years seem to be the exception that proves the rule as giving has increased in all other years.
While giving can be fairly volatile from year to year, it's more stable long-term. Many attribute the decrease in 2022 to the giving market stabilizing from record highs in 2020 and 2021 due to the urgency of COVID related causes and social justice issues.
While the giving market evolves, the number of donors, amount individual donors are giving, and frequency of donations is changing. The Fundraising Effectiveness Project from the Foundation for Philanthropy found that the total number of donors was down in 2021. They attribute this decline to less small and micro donors (total donations less than $500).***
“Persistently declining donations across all donor types shows that the sector needs to focus on agility and adapting to the realities of donor behavior.” said Woodrow Rosenbaum, chief data officer of GivingTuesday.***
Another change we're seeing is the overall decrease in the proportion of funds that come from individual donors themselves. As previously mentioned, Giving USA has tracked increased proportions of total giving from foundations, bequests, and corporations. While individual donors continue to account for the largest proportion, nonprofits would be well served to expand their fundraising strategies to include heavier emphasis on foundations and corporate giving to supplement losses that may occur in individual giving.
Mike Geiger, the president and CEO of the Association for Fundraising Professionals says: "This is an opportunity for our profession to evaluate our current processes and build a more diverse and inclusive donor base, setting our organizations up for future success.”****
Sources in this section:
6. Digital Fundraising
Like most website developers now design with a "mobile-first" mentality, fundraisers need to embrace a giving strategy that is "online-first". Gone are the days of tacking on an online option to a primarily cash and check event. Even in person events often raise most funds before or at the event through peer-to-peer giving pages, event websites, and onsite credit card transactions.
Having an airtight digital fundraising strategy is essential. Not only do you need modern and easy to use webpages, you also need to ensure they load quickly and visitors can find what they're looking for in just a few seconds. According to Website Builder Export, 24% of web visitors will leave a site if it takes more than four seconds to load.*
In addition to your organization's website, you need fundraising pages, marketing, and email tools. M+R Benchmarks found that 14% of all online revenue comes from email messaging **
As with storytelling and transparency, you need to have the right tools to effectively fundraise online. Having a basic donation page and a Facebook page just don't cut it anymore.
Sources for this section:
As nonprofit leaders consider the right tools to enable digital fundraising and financial management, there are a lot of options and models to consider. How do you start a search for the right solution in such a saturated market?
In a 2022 article we explored the differences in software licensing options. The most common ways software is licensed is as "Software as a Service" or SaaS and perpetual licensing. These terms refer to the agreement between the software provider and user and how the user pays to use the software. Typically SaaS software is paid for in monthly or yearly payments and you have access to the software as long as you are actively paying your subscription fee. Perpetual licensing generally refers to a one-time payment to use the software, but it only applies to that version of the software and updates, new features, enhanced security, and other services all come at an additional cost.
People often lump software licensing and data hosting together. You've probably heard SaaS and cloud-based used almost interchangeably. While SaaS software is often cloud-based, these terms are not synonymous. Unlike licensing, cloud-based and on-premises (or on-prem) refer to how the data you access to use a software program is hosted.
The cloud refers to a specific structure of computers, servers, and data hosting, that is provided by the company you’re paying for the software. “On-prem” means the data are housed on a server that located on the premises of the company buying the license. Most companies are moving to cloud-based models for data hosting for a number of reasons.
This topic can get complicated pretty quickly, but generally cloud-based data storage is cheaper, especially for smaller organizations, and it removes much of the data security burden from the organization purchasing the cloud-based hosting. For example, a smaller nonprofit typically has a relatively meager budget to purchase servers, pay for IT staff, and manage proactive data security procedures. With a cloud-based data storage model, the same nonprofit can tap in to hosting from large organizations, like Microsoft, that spend hundreds of millions of dollars annually on data security.
Another benefit of cloud-based storage is hosting data offsite. Many organizations are keeping their COVID era remote or hybrid work policies and employees need to be able to access data on weekends, after normal business hours, or from their remote work locations. With cloud-based storage, all you need to access it is an Internet connection. This means staff can work from any site, including their homes, and access data that is updated in real-time.
Some larger organizations prefer to maintain their own data and run custom versions of software that have features specific to their needs. The nice part of SaaS software is it can use either model. While perpetually licensed software could be cloud-based, it's not as common and would likely be a higher up-front cost, rather than being able to spread the cost out over multiple years.
While we're lumping cloud storage and SaaS licensing in with the rest of these trends, it's not really just a trend at this point. Rather, it's rapidly becoming the industry standard for CRM software, digital fundraising platforms, productivity applications like Office 365, and more. There are many benefits for both the software provider and the purchaser and that is likely why so many companies are moving to this combination of licensing and data storage models.
Now what?
It's hard to go through all this information without feeling extremely overwhelmed. While we covered the top seven charitable giving trends in this article, each trend could be its own article, video or webinar. Over the next several months we'll be doing just that. Stay tuned for upcoming content that explore these topics in more depth. We'll even come back and add in links to new items as we post them!
2024 Trends Series
Additional Resources
