connect, collect, communicate

Rapidata’s Charity Direct Debit Tracking

Report 2014

About Rapidata

Rapidata Services Plc has been supporting charities, not-for-profits and commercial companies with the collection, administration, and processing of Direct Debit payments since it was founded in 1997. Our partnership approach and outsourced solutions have seen Rapidata become the leading Direct Debit specialist in the UK.

But we do more than just Direct Debit processing.

Our years of experience and innovative use of technology enable us to work with our clients to maximise the services they use. By providing cost effective collection services tailored to meet their exact requirements, such as Rapidata’s eDirectDebit for online fundraising, we aim to allow our clients to concentrate on their core activities.

Since 1999 when we became involved with not-for-profits, we have become recognised as a voice in the sector for regular giving. Our relationship with the sector also saw us expand our services geared towards not-for-profits to help them to achieve their fundraising goals through optimising their processes and results. We are very proud of our commitment in this area and are members of the Institute of Fundraising and Fundraising Standards Board.

We are based in Crawley, West Sussex, and have a great team of people working across the UK. If you have any questions about the services we offer or would like to discuss any challenges you may be facing, we would love to hear from you.

Tel: +44 (0) 1293 601111Fax: +44 (0) 1293 601112Email: info@rapidata.co.uk Twitter: @Rapidata_UK

rapidataservices.com

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Introduction

Welcome to Rapidata’s Charity Direct Debit Tracking Report 2014, which monitors cancellation trends from over 6 million charity Direct Debits.

Direct Debit has become increasingly important to UK charities in recent years, contributing the largest share (29%) of individual donations, far exceeding card/cheque and cash payments1.

Figures from BACS, released at the beginning of March 2014, also indicate a year-on-year increase in the number of Direct Debit donations in 2013, with two million more transactions made this way than in 2012.

The growing emphasis on donor stewardship ensures that this form of giving has become an even more sustainable income source that enables charities to manage their resources, core costs and key projects even more effectively.

Cancellations of Direct Debits can have a significant impact on charities’ income. Rapidata monitors all Direct Debit activity and this report focuses on cancellations, enabling charities to understand the general market trends, benchmark their own activities and anticipate future changes, communicating with their donor base accordingly.

In our last report, released in 2011, we revealed the full scale and dramatic rise of Direct Debit cancellations during the recession and noted early signs of a recovery in 2010. Since then, we have continued to monitor these trends and track Direct Debit and

cancellation activity. This report includes newly published data for the calendar years of 2011, 2012 and 2013 in addition to those from former years, providing the most comprehensive and up to date picture of cancellation rates yet.

Some key events took place over this time frame, ranging from the general election in May 2010, which brought some economic stability, to the Chancellor revising down growth rates for the economy one year later. Optimism returned in 2012, with some momentous events, which include the Queen’s Diamond Jubilee celebrations and the London 2012 Olympic and Paralympic Games and, in 2013, the first concrete signs of an upturn in the economy were evident and the birth of Prince George, the future king.

In this report, we look at the changes in cancellation trends during and post the recession, as well as the impact of these events. We are pleased to present key findings that indicate a dramatic recovery in donor retention post the recession.

As ever, I welcome your feedback so please do not hesitate to get in touch if you would like to discuss any of the issues raised in the report.

Scott GrayManaging Director of Rapidata Services Plcsgray@rapidata.co.uk

1Source: UK Giving 2012/13 – An Update, Charities Aid Foundation, March 2014

Dramatic fall in charity Direct Debit cancellation rates The average Direct Debit cancellation rate across the calendar year in 2013 was not only markedly lower than that of 2012, but fell below pre-recession levels to a record low of 3.1%, the likes of which have not been since 2006-07.

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Cancellations in 2013 buck the trend Rather than following the typical Direct Debit cancellation cycle peaks, in 2013, cancellations fell throughout the year with smaller, less sustained peaks.

New data indicates that major events can prevent or delay cancellations The euphoria around major events such as the 2012 Olympic and Paralympic Summer, the Royal Wedding and Queen’s Jubilee, can prevent or at least defer cancellations so that charities benefit from additional payments.

Key Findings

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History will show that UK fundraising weathered the storm of this last recession rather well and that this will have been done best by those who concentrated on regular giving.

The future may be unpredictable but one thing is for sure; regular giving and more regular giving is the best way of ensuring your charity lives on way into the future.

Mark Astarita, Director of Fundraising, British Red Cross

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Although the UK is far from the market buoyancy of the pre-recession era, 2013 was a year of economic recovery. The nation’s optimism was spurred on with the appointment of Mark Carney as head of the Bank of England in July of that year.

Low interest rates were maintained throughout the year and unemployment levels fell sooner than forecast. With renewed confidence in the economy and employees generally less fearful of redundancies, many people were feeling more financially stable than in recent years.

2013 was not just a good year, but a great one in terms of cancellation rates, with a decline from the peak of 4.05% in January to close in December at just 2.4%. Such lows have not been seen since the pre-recession era of 2006-07; the most positive indicator yet that donor retention is firmly on the rise.

Cancellations in August, October and November were the lowest recorded in those months since Rapidata’s tracking began in 2003. Rates fell below 3% four times, in contrast to 2012, when this was the case just twice.

Direct Debit Cancellations in 2013

This is absolutely great news for the sector - what we are seeing here is the ‘feel good factor’ associated with coming out of recession. People are starting to feel more optimistic and thus less likely to cancel charitable contributions.

Adrian Sargeant,

Director of the Centre for Sustainable Philanthropy,University of Plymouth and Professor of Fundraising at Indiana University

Jan Feb Mar April May June July Aug Sep Oct Nov Dec

Canx Rate % 4.05 3.28 3.06 3.50 3.09 2.69 3.43 2.85 3.29 3.01 2.59 2.40

Monthly Cancellation Rates During 2013

*The cancellation rate is the number of Direct Debits cancelled in a calendar month as a percentage of total live Direct Debits.

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The dramatic fall in cancellations is the clearest sign yet that charities’ investment in stewardship, along with the backdrop of a more robust economic landscape, is succeeding in encouraging supporters to keep on giving.

Scott Gray,Managing Direct, Rapidata Services Plc.

In the last year we have begun to see ‘green shoots’ in the economy and the recovery has been going from strength to strength. People could well be feeling more confident about the future and their ability to give more to charity as they perceive their disposable income increases.

Mark Bishop, Director of fundraising, Prostate Cancer UK

4.50%

4.00%

3.50%

3.00%

2.50%

2.00%1 2 3 4 5 6 7 8 9 10 11 12

Chart 1: Direct Debit Cancellations in 2013

Months Jan - Dec

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Rapidata has now collated over ten years of Direct Debit cancellation data to build a clear picture of the longer-term trends.

Chart 2 shows the average annual percentages for each calendar year, illustrating the marked fall in cancellations from the 4.33% peak in 2008 down to pre-recession lows of 3.1% in 2013. After a particularly positive year for cancellations in 2010, they rose again in 2011 and have declined steadily since then.

The Longer-Term Picture

Positive trends in Direct Debit giving reflect greater economic confidence and the fact that charities and donors are increasingly making use of Direct Debit in effective ways for payments and for giving.

Professor Cathy Pharoah, Professor of Charity Funding, Cass Business School

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The Longer-Term Picture Chart 2: Average Annual Cancellation Rates (2003-2013)

4.50%

4.30%

4.10%

3.90%

3.70%

3.50%

3.30%

3.10%

2.90%

2.70%

2.50%2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

3.52%

3.24% 3.10%

3.11%

4.33%

4.05%

3.32%

3.79%

3.56%

3.10%

3.52%

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The UK economy was formally in recession for 18 months from quarter two of 2008 until late 2009. Markets picked up again in early 2010, but unemployment figures rose in the following year and the Chancellor downgraded his growth estimate. Having narrowly avoided a double-dip recession and with living costs remaining high, the road to recovery was slow.

In our first tracking report (published June 2009), Rapidata revealed the dramatic impact of the economic downturn, with Direct Debit cancellations skyrocketing to reach a peak of 5.63% in January 2009. The chart below illustrates the full impact of the recession on cancellations.

The Recession

Chart 3: Impact of the Recession on Cancellations

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3.50%

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4.50%

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1 2 3 4 5 6 7 8 9 10 11 12

Recession (2008 - 2009)

Post Recession (2010 - 2013)

Pre Recession (2003 - 2007)

Months Jan - Dec

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When superimposing the cancellation data from 2013 onto the same chart (see chart 4 below), it is clear how pivotal the year was in returning cancellations to the pre-recession lows.

In January 2009, with the full roar of the recession ringing in our ears, 5.63% of Direct Debits were cancelled. By December 2013, cancellation rates were down to a remarkable 2.4%. The difference may only be a few percentage points but for charities as a whole those few points mean millions of pounds.

Mark Astarita,Director of Fundraising, British Red Cross

Chart 4: 2013 – The Return to Pre-Recession Lows

2.50%

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3.50%

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4.50%

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2.00%1 2 3 4 5 6 7 8 9 10 11 12

Recession (2008 - 2009)

Post Recession (2010 - 2013)

Pre Recession(2003 - 2007)

2013

Months Jan - Dec

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Even during economic hardship, major events can have a dramatic effect on cancellation trends. In addition to the catastrophic impact of the recession, a number of high

profile events in recent years have, at times, sustained donations or deferred the date of cancellation, benefiting charities with one or more extra payments.

Major Events

Chart 5: Impact of Major Events, 2010-2012

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Months Jan - Dec

1 2 3 4 5 6 7 8 9 10 11 12

2012

2010

2011

BGeneralElectionMay 2010

CAppointment of the coalition GovernmentMay 2010

FLondonOlympicsJuly 2012

EQueensJubileeJune 2012

GLondonParalympicsAug 2012

ADEC Haiti AppealJan 2010

DRoyalWeddingApril 2011

A

B C

D

E

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2010 was an extraordinary year for cancellations. Early signs of an economic recovery, the general election and appointment of a coalition government bred much-needed consumer optimism. At the same time, a series of major international appeals (including the DEC’s Haiti Appeal), highlighted the needs of those less fortunate and reminded many of the importance of charitable giving. The average annual cancellation rate fell from over 4% in 2009 to 3.32% in 2010.

But, the recovery was to be short-lived as the economy struggled to meet growth targets and the Chancellor revised down his estimates for 2011. Unemployment figures continued to rise along with the cost of living, donors tightened their purse strings and cancellations shot back up again. Although it was a tough year for many charities, April – the month of the Royal Wedding, brought some respite, when rates plummeted to below 2.5% for the first time since 2007, quickly rising again once the festivities were over.

In 2012, the Olympic and Paralympic Games and the Queen’s Jubilee celebrations brought with them clearer signs of consumer confidence and an economic recovery. The average annual cancellation rate fell from 3.79% in 2011 to 3.56% in 2012. Although cancellations rose during July/August in line with the typical cancellations cycle (see Chart 6), they fell sharply in September to the lowest rate seen in that month since 2006.

Positive, uplifting events such as the 2012 Olympic Summer can have a sustained impact on donations, but so too can international crises and relevant appeals led by international aid agencies in response.

High profile campaigns remind people of the diverse work that charities perform and, in the case of international disaster appeals highlighting the plight of those facing life-threatening situations and extreme poverty on a mass scale, they can make UK residents starkly aware of the contrast to their own environment. In this situation, supporters not only dig deep to find additional support but will often be less likely to cancel their ongoing donations.

Scott Gray, Managing Director, Rapidata Services Plc

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The Direct Debit cancellation cycle is the pattern that cancellations tend to take throughout the year. This is a useful benchmark when tracking regular giving levels and can help charities counter increases in cancellations with appropriately timed communications and stewardship programmes.

Our data has historically shown that hotspots for cancellations tend to be during the summer months and after Christmas, as people cut back for the additional expense often associated with these holiday seasons.

The typical cancellation cycle broke down during the peak period of the recession and fluctuated with the impact of major events, but had started to return to a similar pattern in 2012. Peak cancellation months now typically occur in January and between July and November.

The Charity Direct Debit Cancellation Cycle

Chart 6: The Cancellation Cycle2003 - 2013 Average Monthly Cancellation Rate

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2.50%

2.70%

2.90%

3.10%

3.30%

3.50%

3.70%

3.90%

4.10%

1 2 3 4 5 6 7 8 9 10 11 12

Months Jan - Dec14

Chart 7: Impact of the Recession on the Cancellation Cycle

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Recession (2008-09)

2013

2012

Averages(2003 - 13)

Months Jan - Dec

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For 2013, the cycle is less typical, with a fairly continual decline throughout the year including August, which is normally a peak month for cancellations. This decrease reflects a period of economic recovery, also occurring at the same time as record-breaking high profile fundraising campaigns, which include Movember and BBC Children in Need. Such widespread charity awareness campaigns can remind people of the overall importance of charitable giving and may indeed be altering the shape of the annual giving and cancellation calendar.

One might ask why retention patterns aren’t exactly the same as pre-recession levels, but the rationale for this is that people’s anchors have changed in the intervening years. The recession was long enough for the memory of their previous behaviour to fade, allowing the current wave of optimism to create a new baseline level of normal. I’d be hopeful that, barring any challenges in our economy, this pattern of performance will continue next year.

Adrian Sargeant, Director of the Centre for Sustainable Philanthropy, University of Plymouth and Professor of Fundraising at Indiana University.

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This Tracking Report brings great news for the sector, mapping the dramatic decline in cancellation rates. In our previous study, we reported that 2010 saw a return to the typical cancellation cycle and a decrease in cancellation rates. Rapidata’s 2014 report affirms that picture and, although cancellations rose again in 2011, we now see that rates have returned to pre-recession lows for the first time since the global economic crisis took hold.

This shift reflects UK charities’ investment in donor stewardship. Particularly during the recession, many charities assigned a higher proportion of their resources to retaining donors than in former years, in the knowledge that it usually costs less to keep a supporter than it does to recruit.

Many organisations are now implementing complex donor-centric supporter journeys, reflecting the individual interests and donation history of their supporters. With technological advances and charities’ innovative use of mobile giving, social media channels, and email, together with traditional print media, they are able to communicate quickly and easily with their supporter base.

Here at Rapidata, we believe that cancellations may fall further still. But, there will always be peaks and troughs both at a sector level and each charities’ own records may differ from those, depending on the timing of their own key campaigns and activities.

Charities very much favour regular giving over cash donations and so focus more investment and resource in this area. They are inevitably getting more sophisticated at identifying those supporters at risk of lapsing and putting in place robust reactivation programmes, helping to drive down cancellation rates.Mark Bishop, Director of Fundraising, Prostate Cancer UK

Conclusion

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2013 has seen some incredible record-breaking fundraising campaigns, from CRUK’s Dryathlon to BBC’s Children in Need, amongst others. For those charities that have recruited and converted donors to become regular givers, the fall in cancellations is to be widely celebrated.Scott Gray, Managing Direct, Rapidata Services Plc.

Armed with this information and the reasons that each organisation’s supporters give for cancelling, charities can be proactive and counter these peaks with proactive retention prevention measures. Using our Trigger Communications service, charities report an increase in response rates when they diarise communications in line with key trigger points along a supporter journey. These might include the anniversary of their first gift, well-timed thank you notices and upgrade messages.

Together with research from BACS and the latest CAF UK Giving Report that show the continued rise in Direct Debit giving, Rapidata’s latest Tracking Report affirms that there has never been a more positive environment for regular giving.

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Methodology

AppendixCancellation Rates 2003-2013

Rapidata’s findings are based on extensive data gathered from more than one hundred UK charities, covering almost 500,000 collections each month.

The charities represent a wide range of causes and sizes of organisation, and are all charities for which Rapidata has now processed Direct Debit payments for at least the last three calendar years, giving solid data for the time frame in question.

January February March April May June July August September October November December

2013 4.05% 3.28% 3.06% 3.50% 3.09% 2.69% 3.43% 2.85% 3.29% 3.01% 2.59% 2.40%

2012 4.59% 3.93% 3.53% 3.25% 3.64% 2.99% 3.58% 4.20% 3.17% 3.50% 3.60% 2.80%

2011 3.26% 3.67% 3.77% 2.44% 4.10% 3.87% 3.91% 4.58% 4.20% 4.56% 4.15% 3.01%

2010 3.49% 3.10% 3.93% 2.89% 2.80% 3.21% 3.22% 3.49% 3.84% 3.55% 3.41% 2.87%

2009 5.63% 4.43% 4.33% 4.14% 4.25% 4.09% 4.30% 3.57% 4.11% 3.65% 3.49% 2.63%

2008 4.01% 3.53% 3.95% 3.60% 4.00% 4.02% 5.16% 4.40% 5.16% 5.52% 4.77% 3.89%

2007 3.35% 2.90% 2.75% 2.25% 2.47% 2.30% 3.04% 3.54% 3.61% 3.51% 3.90% 3.71%

2006 3.33% 2.92% 3.12% 2.98% 3.64% 3.33% 3.18% 3.39% 3.10% 3.04% 2.78% 2.11%

2005 3.78% 3.19% 3.13% 3.06% 2.96% 3.39% 3.15% 3.93% 3.71% 3.39% 3.13% 2.03%

2004 4.13% 3.25% 3.56% 3.01% 3.36% 3.42% 3.46% 3.88% 2.92% 4.92% 4.04% 2.34%

2003 - - - 3.90% 3.50% 3.48% 3.84% 3.31% 3.81% 3.62% 3.42% 2.79%

Recession (2008-09) 4.82% 3.98% 4.14% 3.87% 4.13% 4.06% 4.73% 3.99% 4.64% 4.59% 4.13% 3.26%

Post-Recession (2010-13) 3.85% 3.50% 3.57% 3.02% 3.41% 3.19% 3.53% 3.78% 3.62% 3.66% 3.44% 2.77%

Pre-Recession (2003-07) 3.65% 3.07% 3.14% 3.04% 3.19% 3.18% 3.33% 3.61% 3.43% 3.70% 3.45% 2.60%

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