Three Ways Technology Will Fix What's Broken in Philanthropy

A woman looks at a tablet while sitting by cardboard boxes marked with the word donations. — (Image credit: Getty Images)

I’m among the first to advocate that giving to charity is one of the best ways to improve your life. Some studies even show there is a link between generosity and happiness. But it’s no secret that the philanthropy sector is facing serious shortcomings that are preventing people from being more generous.

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According to research from Independent Sector, public trust in nonprofits among Americans is dropping despite the fact that most charities have a positive impact on the world. The reasons cited by respondents are no surprise: high overhead, political agendas, corruption, scams, mismanagement, and small demonstrable results. Even for donors active in charitable giving, it can be hard to stay inspired without transparency and visibility into their donation’s impact.

To encourage more people to give and remain engaged, the charitable sector needs new systems to make the giving journey better: more efficient, transparent, relevant, collaborative and impact-focused. The good news is technology will provide the means to allay many of the sector’s headwinds, opening up more potential for those who don’t give to give and those who do give to give more.

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Here are three ways technology will fix what’s broken in philanthropy over the next decade:

1. Financial technology will bring more scale and capabilities, rapidly lowering costs and hassle.

It may surprise you, but still today only a small percentage of total charitable dollars actually transact online. This is because the flexibility and perceived costs of offline methods like paper checks and wire transfers still have advantages for many donors and charities.

Online giving platforms will advance in capabilities and achieve greater scale, lowering transaction costs and giving donors and charities increasingly centralized places to transact or receive charitable dollars (even complex donations).

When giving moves online, it will bring greater efficiency and transparency as well, fostering clearer emphasis on the impact and relationship-building involved in giving, not the administrative steps and costs.

2. Technology will usher in an unprecedented era of coordination and connection among donors.

It’s valuable for a donor to know what causes, organizations and projects people they trust are supporting. It provides opportunities for personal connection and likely exposes them to new values-aligned opportunities. Today, this is hard. Giving is quite private.

Technology will increasingly facilitate ways for donors to collaborate, such as establishing social giving funds among communities and friends, where charitable resources can be pooled together seamlessly and anonymity maintained when it’s needed.

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The first generation of these capabilities is already starting to emerge among modern donor-advised fund sponsors.

3. Data, machine learning and ai will enable leaner, higher-trust giving decisions.

Analytics and artificial intelligence will likely touch every sector of the economy, and giving will not be an exception. An ever-increasing pool of rich data between donors and nonprofits will enable machine learning and AI to help donors discover organizations that are much more likely to inspire them, lowering the fundraising costs for nonprofits in the process.

Second, as more impact data flows, there will be greater ability to offer donors a prediction of the type of impact their gift is likely to create.

Finally, as better predictability of matching between donor and charity emerges, these two parties can better invest their relational time and capital between each other, increasing the speed and depth of partnerships that develop in the space.

So, while charitable giving has had its fair share of setbacks, over the next decade we can expect technology to usher in more collaboration, transparency and relevancy for philanthropy — and as a society we’ll be better off for it.

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In the meantime, as individuals we can take action by opting for the applications and organizations that make it easier to give. Charityvest is just one example, but other like-minded organizations, including Every.org, The Giving Block, and PayPal Grants, like these are the ones that will move the industry forward.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Stephen is President of DAFs at Foundation Source, a philanthropy technology company serving donors, institutions, and workplaces with turnkey philanthropic solutions. He is also the founder and a board director of Charityvest, a donor-advised fund sponsor, and Chairman of the Board of Teen Advisors, a nonprofit helping teenagers confront the young adult mental health crisis through peer-to-peer influence. Prior to building philanthropy technology, he worked as a consultant to philanthropists, corporations and private equity, most recently with Bain & Company.