It is astonishing to see how technology has and continues to revolutionise many industries. The way we bank, eat, travel and live is incredibly different today from the way things used to be a few short years ago.
Terms such as crypto, blockchain and robo, amongst others, are becoming increasingly common and current in our vocabulary today, and while many industries seem to be embracing the “new ways” there is one that seems to be way behind the curve.
There are currently just over 168,000 charities in the UK with a total annual income of close to £80bn, according to the Charity Commission for England and Wales. Many believe that the actual number of charities in the UK is in fact closer to 200,000 although normally it is only the top few that grab most of the attention and receive much of the funding, for that matter. Transparency or the lack of, has also been the major headline this year following the scandalous cases of Oxfam and Save the Children, resulting in a great deal of scepticism and distrust.
In need of modernisation
The industry is evidently in need of a real shake up and modernisation, and one of the ways to do this is via technology, which could very well solve the efficiency, transparency and traceability issues. Above all, technology could also provide access to new and currently untapped market segments such as the millennials and Gen X and Z, who are increasingly conscious of making a social impact, but like to organise their life via smartphones.
The application of blockchain technology could add not only to the security of donations and charitable projects, but also change the charity fundraising landscape completely by facilitating a radical transparency of donations as well as rebuilding trust and traceability. The opportunities obviously come with challenges and the regulators are still trying to get to grips with all these developments and bring in an adequate legislation – particularly in the case of cryptocurrencies. Although currently being tried and tested by a mere few in the sector, the charity industry as a whole really needs to wake up and catch up with this phenomenon.
The real advantages and benefits of blockchain are notably evident in the work of St Mungo’s, the homelessness charity, which is claimed to be one of the first charities to embrace the technology. Alice – the platform it uses for raising funds – allows donors not only track how their donations are used but also have the option to receive refunds if the charity fails to achieve its promised goals.
Other more prominent examples include the Bill & Melinda Gates Foundation which, in fact, a few years back used blockchain to help more than 2.5bn people with no bank accounts; and the UN World Food Programme’s blockchain powered Building Blocks initiative that facilitates transparent, secure and fast cash transfers. The system provides better beneficiary data protection, reduced or almost no payment costs and a stronger control over financial risks.
While blockchain will undoubtedly help to restore trust in charities, donations made in cryptocurrencies could also provide access to larger, global audiences. Eradicating issues such as international exchange rates and onerous international bank transactions, crypto donations could be particularly important to charities with low-value local currency.
Other blockchain-based donation platforms such as GiveTrack and AidCoin – where transactions are fully traceable and transparent – have resulted in smart contracts containing a set of fundraising rules that allow the transfer of funds on a condition only if specific requirements are satisfied.
There might be enough credible evidence and success stories to encourage other non-profit organisations to follow suit, but it feels that the industry is still greatly hesitant to embrace this “new way”. Perhaps it is only a matter of time, but one way or the other this “new way” is here to stay and here for good.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.