Recast­ing the mid­dle man’ — the role of char­i­ties in the age of dis­in­ter­me­di­a­tion (part one)

In part one of a two-part series on the role of dis­in­ter­me­di­a­tion in char­i­ta­ble giv­ing, Mered­ith Niles takes an in-depth look at some of the ways the pub­lic respond­ed phil­an­throp­i­cal­ly to the war in Ukraine. She draws on sev­er­al research stud­ies to look at donor moti­va­tions and help you answer the ques­tion, should fundrais­ers be con­cerned that peo­ple might stop giv­ing via char­i­ties altogether?’

Written by
Meredith Niles
Added
June 21, 2023

‘Donors don't give to charities; they give through charities to the causes they care about.’

Many fundraisers will have likely heard the expression above. It’s a familiar phrase among us because, in just a few words, it captures a critical insight into donor motivations and reminds us that our causes are more important than our organisations. But should charities be concerned that people might stop giving via charities altogether? 

In April 2022, when I wrote the essay this series in based on, there was quite a bit of attention given to a new method of offering support in a time of crisis. Individuals around the world were booking AirBnB accommodation in Ukraine that they had no intention of using, in order to transfer cash to Ukrainians that they could use wherever they needed it.[i] 

Other stories described high-profile acts of giving in response to the war – many of which appeared to bypass charities. This included numerous reports of people driving vans of supplies to bordering countries.[ii] And actors Mila Kunis and Ashton Kutcher raised over US$35 million in crowd-funded donations, all to be divided between two commercial companies providing support on the ground.[iii]

These kind actions garnered significant attention, but should fundraisers be concerned that the charities’ traditional roles as the trusted broker between donors and people in need of help will be disrupted? And if so, what should we do about this potential disintermediation?

I believe that while the current impact of disintermediation on charities is probably less than one might think – stories like those above should be seen as a gift to charity leaders. It’s free insight into the kind of supporter experience that those potential donors value so much, because they will create it for themselves.

In this series I will use some examples of disintermediated giving in response to the war in Ukraine to think more about donor motivations, and offer some suggestions for how charities might tap into these to inspire greater giving. 

Of course, I am writing from the perspective of a fundraiser, not an academic. I am starting from what I have observed and, where I can, referring to academic studies that confirm that what I have seen to be true in practice, true in theory, and/or that might offer an explanation as to why this is the case. I don’t have comprehensive knowledge of all the relevant academic literature on this topic, but I hope that fundraisers like you might find my perspective useful, nonetheless. 

When it comes to charitable giving, what do we mean by disintermediation?

In its simplest form, disintermediation refers to the removal of the third person in a transaction between two parties – or ‘cutting out the middle man’ if you will.

With respect to charitable giving, there is not an agreed definition of what disintermediation is. But today I will focus on examples that involve a donor providing support directly to the ultimate beneficiary – as opposed to a making financial contribution to a charity that then delivers support to the beneficiary (which I will refer to as ‘traditional charitable giving’. Disintermediated giving might involve offering cash directly to a person experiencing homelessness, collecting supplies of clothing or food to be delivered to people in crisis, or contributing to a crowdfunding campaign set up to cover an individual’s medical expenses. 

Without an agreed definition of what constitutes disintermediated giving within the charity sector, it is difficult to measure how much is taking place, and therefore whether, and by how much, it is growing relative to traditional charitable giving. The headline amounts being raised on crowdfunding platforms – £17.2 billion annually in North America alone, with a projected compound annual growth rate (CAGR) of 14.7 per cent over the next four years – are impressive. Yet a significant majority of this funding represents investments in commercial ventures, not philanthropic giving [iv]. And is notoriously difficult – if not impossible – to get an accurate picture of the overall level of giving even in a single country, let alone a reliable breakdown by channel.[v]

New platforms are enabling disintermediated giving (making it more visible) – but disintermediated giving itself is nothing new.

Humans are naturally social creatures who have offered support to others in our communities long before we organised religious institutions or charities to facilitate this behaviour (and well before platforms like GoFundMe could disrupt those institutions). Even after we developed more formal ways to support others, much mutual aid continues to be informal, never captured within a charity’s income statement. 

There are now billions of pounds being raised through crowdfunding platforms, flowing to individuals in need rather than to charities, but not all of this is money has displaced what would have been donations to charities.Some of it surely represents money that would previously have been offered from one friend to another in the form of cash or cheques – without it being so easily counted (i.e. channel shift). 

And some crowdfunding undoubtedly represents peer-to-peer support that never would have been offered were it not for the ease of the platform combined with the power of social media. This, of course, turns certain campaigns into viral sensations (i.e. market growth). 

Previously, a heart-warming story about a faraway individual in need might have made the local news. But it would have been challenging to channel the sentiment which that story inspired into direct support. Now all that is required to unlock mass support is a link to a crowdfunding page. However, there is some reason to believe that the existence of this new channel (online crowdfunding) has only shifted giving behaviour at the margins. 

For instance, one survey of the donors to crowdfunding sites in the United States of America (USA) found that 41.6 per cent of their giving was to close friends and family. A further 10.8 per cent went to friends of friends or acquaintances, and just over five per cent of their giving went to strangers.[vi] (This study also showed that 21.6 per cent of these donors’ gifts via crowdfunding sites were to traditional charities, further evidence that not all giving on crowdfunding sites is necessarily disintermediating a charity.)  

And while the novelty and ease of the new crowdfunding platforms might have inspired some net increase in peer-to-peer giving, it also does not follow that this will have come at the expense of charitable giving. 

However, while there is research that suggests that many people do not clearly choose between giving to charity or supporting a cause through other means[vii], there is also evidence to suggest that very few of us go through a rational calculation of what our overall budget for giving (formal or otherwise) should be and then allocate that budget among different options.[viii] For most of us, a donation is closer to an ‘impulse buy’ than a car payment. So, there is little reason to think of giving as a zero-sum game between competing causes.[ix] 

Some evidence suggests that giving to one cause may not decrease giving to others – it may lead to an increase in overall giving.

A study looking at new data on American households’ disaster giving in 2017 and 2018,  found that for Americans who reported donating following recent disasters, 78 per cent did not report any change to their other charitable giving because of their disaster-related giving.[x] And 12 per cent reported an increase in their giving to other causes. 

So, the fact that crowdfunding platforms are growing does not in itself threaten traditional charitable giving. Many also facilitate giving to charities and the growth of online giving platforms has encouraged competition. This has led to innovation and feature development – such as platforms accepting donations in multiple currencies or sharing donation pages seamlessly via social media platforms. All these innovations benefit charities. 

Even in situations where there is a clearer argument that charities are being disintermediated – such as in the case of the ‘phantom’ AirBnB bookings mentioned above – it is not clear how much displacement of charitable giving has actually occurred. 

Firstly, it is hard to know at this stage how much money was given via cash transfers to AirBnB hosts. A Tweet by the AirBnB CEO (Chief Executive Officer) on 12 March 2022 claimed that US$15 million had been transferred via unfulfilled bookings.[xi] This is presumably a global figure, including contributions from all countries. While the amount raised has certainly grown since then (and is in addition to donations made by members of the public and the senior management of AirBnB to the AirBnB Foundation, which pledged to help provide accommodation to Ukrainian refugees), it is still a fraction of the amount that has been given to charities.

In the United Kingdom (UK), the Disasters and Emergencies Committee (DEC)* appeal for Ukraine raised over £300 million in its first seven weeks (from launch to 21st April 2023).[xii] It then went on to become the largest appeal in the DEC’s nearly 60-year history, raising over £400 million and setting a new Guinness World Records title for the most money raised by an online campaign in one week. It has now surpassed the previous highest grossing appeal, which was in response to the 2004 tsunami in Asia and raised £392 million.[xiii]

Research conducted by nfpResearch showed that, among members of the UK public, donating directly to a charity or to the DEC appeal ranked as the most popular method of giving in response to the war.[xiv]

* The Disasters and Emergencies Committee (DEC) is an umbrella body composed of 15 of the largest UK humanitarian relief charities that launches joint fundraising appeals and coordinates relief efforts in response to natural disasters and other emergencies.

However, this healthy level of donations to charities is not reason enough to be complacent.

The same nfpResearch study referenced above showed that only 40 per cent of those surveyed thought that giving directly to a charity or to the DEC appeal was the most effective way of making a difference. Charities are not automatically entitled to the trust of the public, and if a majority of the public do not think that supporting charities is the best way to help, then charities have some work to do to shift that perception. 

Indeed, over the longer-term, even though charitable giving as a percent of gross domestic product (GDP) in many developed markets like the USA and UK has held relatively steady, the number of people giving to charity has been in decline for some time.[xv]

The result is that charities are becoming increasingly dependent on a smaller pool of donors. This longer-term trend is a more existential threat to charities and disintermediated giving is arguably a symptom, not a cause, of the real problem – charities collectively failing to inspire people to become donors.

In part two of this series, I’ll offer some suggestions for why disintermediated giving is, in some situations and for some individuals, more attractive than traditional charitable giving, and I will offer some ways in which charities might respond.

Editor’s note: If you enjoyed part one of this series on disintermediated giving then stay tuned for part two – coming soon to our website and newsletter. If you don’t want to miss it, please sign up to our weekly email.  

This series is based on an essay which originally appeared on in the Journal of Philanthropy and Marketing. SOFII is very grateful to our Chair, Meredith Niles, for allowing us to share her thoughts with you here. 

IMAGES: © All images, Canva

REFERENCES

[i] Sweney, M. (2022). Ukraine Airbnbs receive bookings in effort to get money to residents. Guardian

[ii] Iles, L. (2022). Meet the volunteers from South London driving ambulances with medical supplies to Ukraine. Tooting Nub News

McTaggart, I. (2022). David Cameron joins the Ukraine war effort by driving lorry to Poland (telegraph.co.uk) 

[iii] Sachdeva, M. (2022). Zelensky praises Mila Kunis and Ashton Kutcher for £26m Ukraine appeal. Independent

Sottle, Z. (2022). Mila Kunis and Ashton Kutcher raise $30 million in donations for Ukrainian refugees. CNN

[iv] Shepherd, M. (2020).Crowdfunding Statistics (2021): Market Size and Growth. Fundera.

[v] Eberhardt, S., Saxton, J., & Murphy, C. (2019). Give and Take: The challenges of measuring public generosity in the UK. nfpSynergy

[vi] Ackerman, J., & Bergdoll, J. (2021). 4 new findings shed light on crowdfunding for charity.

[vii] Schulman, K. (2022). Nonprofit-ness? The Agitator.

[viii] Bagwell, S., de Las Casas, L., van Poortvliet, M., & Abercrombie, R. (2013). Money for good UK: Understanding donor motivation and behaviour. NPC

[ix] Karlan, D., Tantia, P., & Welch, S. (2019). Behavioural economics and donor nudges: Impulse or deliberation? Stanford Social Innovation Review.

[x] Bergdoll, J., Clark, C., Kalugyer, A., Kou, X., Osili, U., Coffman, S., Innamorato, C., Kumar, S., McGill, L., Saronson, B., Sato, G., Davis Jones, M., Entcheva, R., Gulliver-Garcia, T., Webster, R. (2018). U.S. Household Disaster Giving in 2017 and 2018. Lilly Family School of Philanthropy, IUPUI; Candid. Center for Disaster Philanthropy

[xi] Chesky, B. (2022). [@bchesky] One week later, 434,000 nights have been booked. That's $15M going to Hosts in Ukraine On behalf of our Hosts [Embedded Tweet with link attached] [Tweet]. Twitter

[xii] Disasters and Emergencies Committee. (2022). The Duke and Duchess of Cambridge meet DEC aid workers as Ukraine appeal reaches £300 million

[xiii] May, M. (2023). DEC Ukraine Humanitarian Appeal has raised over £400mn - UK Fundraising

Armour, R. (2022). DEC sees Ukraine appeal become its second biggest of all time. TFN Scotland.

[xiv] Murphy, B. (2022a). Here's the Highly Creative Thing People Are Doing on Airbnb to Support Ukraine, Inc. Murphy, C. (2022b). The Ukraine crisis response shows the appetite of the public to help, but also the risk to charities of disintermediation.

[xv] Lilly Family School of Philanthropy, IUPUI. (2021). The Giving Environment: Understanding Pre-Pandemic Trends in Charitable Giving. Data on Declining US Donor Participation.

About the author: Meredith Niles

Meredith Niles (she/her) is the chair of SOFII’s board of trustees. 

Meredith began her career in investment banking, working in New York, Frankfurt and London for Goldman Sachs. Meredith moved into the voluntary sector as an investment director at venture philanthropy funder Impetus Trust where she set up a fund focussed on reducing reoffending. After the fund was successfully closed, Meredith joined Marie Curie, initially to set up a fundraising innovation department, before assuming her most recent role as executive director of fundraising and engagement. 

Meredith is passionate about helping voluntary organisations thrive. She is especially committed to strengthening the voice of women and girls, and making a difference within the London community. Meredith has served as a trustee of Hestia Housing and Support, Toynbee Hall, and BookTrust and currently serves on the boards of Plan International UK, Trust for London, and the Charities Aid Foundation (CAF). She is a fellow of the Advisory Panel of Rogare, the fundraising think tank, and serves on the Chartered Institute of Fundraising (CIOF) Standards Advisory Board. She recently co-edited Change for Better, a book about how insights from behavioural science can be harnessed to create social impact. Meredith lives in London with her husband and their three sons.

Related case studies or articles

Don’t be out of tune on Ukraine

What is ‘top of mind’ for your donors right now? Claire Axelrad explains why it is always important to address what really matters to your supporters and help them contribute to solving urgent problems. 

Read more

Trends of the Covid-19 pandemic on fundraising in the UK and the USA

Could a focus on young people and new avenues of fundraising be a key to beating the fallout from the coronavirus pandemic?

Read more