Smartphone Giving, Part 3: Safety, Privacy, and Legality?

Part 3 of a 3-part series. If you have not read Part 1 or Part 2, you may want to start there.

IS THIS A SAFE WAY FOR PEOPLE TO GIVE?

Safety is an important consideration when offering your donors a new way to give – safety on both the giving and receiving ends. In most cases, peer-to-peer money apps do not have the same level of security that an online giving platform using credit cards does. Scams have been plentiful for Venmo, Cash App, and Zelle. The articles linked at the end of this piece highlight the possible risks of scams and fraud when using smartphone apps to receive donors’ gifts.

As with online giving platforms, an app for smartphone giving should provide details on their security used to guard donors’ information. If the platform does not offer adequate information about security in a detailed and transparent way, you may want to look elsewhere.

Remember that one of the reasons credit card donations come with fees is that most credit cards provide mechanisms for you to identify fraudulent charges to your account and have charges reversed. This is often not the case with peer-to-peer money apps.

WILL IT PROTECT THE PRIVACY OF OUR DONORS?

Since many churches are still in heated battles over the question of whether the pastor should know what members give (the 2016 Book of Discipline, ¶340 speaks to this and should have settled this debate), it appears privacy is a high priority for many members. If you have used Venmo, you may have noticed that beyond being just a tool for moving money from one person to another, it is a social app. The social component is that those in your social network can see what amounts (and messages) you’ve sent to others via Venmo unless you have intentionally opted to make the information private.

Unlike Venmo, Cash App doesn't try to be a money-oriented social network. As a result, it avoids some of the fundamental privacy problems built into Venmo's DNA. However, Cash App still collects data from users about their preferences, where they shop, and what they buy. Zelle does not offer any social media experiences, and since transfers are from bank account to bank account, it is fair to expect that giving data will be much more private. Admittedly, this is hard to confirm with so many different banks participating.

WILL IT AFFECT OUR RECORDING, ACKNOWLEDGING, AND REPORTING GIFTS?

This is a very important question and consideration, but one that is so context-specific that an answer can’t be provided here. It is important to understand the limitations of the smartphone giving apps and what information your church usually receives from donors. Most of these apps will give the church the name, amount of the gift, and a transaction ID. If the donor is someone already in your contribution database, you would need to find that record, manually record the gift, and find a way to record the transaction ID (in the event of multiple gifts from that person in the same amount). If the donor is not in your database, (perhaps a first-time giver) you’ll probably have to track the person down to get the additional information you need to create the donor record. Doing this is also important to enable you to acknowledge and thank the new donor.

Contrast this with online giving platforms that require donors to provide all that information when they make their first gift. Even more significant, many of these platforms provide compatibility with numerous brands of church management software to allow automatic downloading of electronic gifts into your contribution database. When the time comes for sending quarterly statements, both in-person and electronic gifts are all entered and up to date.

Most online giving platforms provide donors the ability to designate their gift to different funds of the church. At the time of this writing, none of the cash apps give that option. This may or may not be an important consideration for your church. Any online giving platform worth its fees will give people the opportunity to schedule recurring giving to your church. This would be a complicated process for a peer-to-peer cash app – if it is possible at all.

ARE THERE LEGAL CONSIDERATIONS THAT APPLY TO THESE DONATIONS?

Beginning in 2022, the IRS will track the use of Venmo, Cash App, Zelle, and PayPal payments to recover tax revenue that has gone unreported through peer-to-peer transactions – the equivalent of “paying someone under the table” in the pre-digital culture. These third-party payment companies will report to the IRS if you receive more than $600 per year. Michelle Singletary, financial columnist for the Washington Post says, “The IRS doesn’t care how much you split checks on payment apps, but it wants to know about that B&B income.” So yes, sometimes these apps have been used to hide income and avoid paying taxes.

Churches that have a tax-exempt status will not be affected by this, provided their finances are in order.

1. You should not begin receiving donations via one of these apps until there is an account in the church’s name, with the church’s correct Employee Identification Number (EIN). The EIN is the business equivalent of a Social Security number, and it should be protected with the same sense of urgency. Don’t even consider receiving peer-to-peer funds to a personal app account.
2. You should have documentation of your tax-exempt status. For United Methodist churches, this documentation is provided through a “group ruling letter”; a copy for your United Methodist church may be requested at this website from the General Council on Finance & Administration.
3. If you begin receiving donations through one of the apps mentioned above, you will probably receive an IRS Form 1099-K from the vendor you chose. Don’t worry; there is no tax involved for tax-exempt organizations. Keep the form with other tax records you have. You will need it when you complete file Form 990.

Finally, the fear of being scammed can immobilize us or force us to lose faith in all digital systems that touch every part of our lives – from finances to communications to healthcare to shopping and entertainment. We can choose to be afraid and hide in our closets with a bag of money, or we can educate ourselves and be wary travelers on the digital highway of life. Zelle, Cash App, and Venmo offer helpful suggestions to protect individuals (or churches) from scams and fraud. Feel free to click on the articles below from each of the vendors. You might also explore articles from news sources outside these companies. However, be aware that many vendors that offer online giving platforms tend to publish articles that stoke fear and highlight the dangers of using smartphone apps. Respected news sources may have less biased information.

• “How to Avoid Scams and Keep Your Money Safe with Cash App”
• “Understanding Fraud & Scams” | Zelle
• “Common Scams on Venmo”

CLOSING THOUGHTS

In case you haven’t noticed, the world of money and finance is changing rapidly thanks to the ongoing digital revolution. We’ve seen explosive growth in the last decade in the number of online giving vendors and the breadth of services they offer. I know churches that paid thousands of dollars on “giving kiosks,” only to find out within months that the kiosks could be replaced with a $300 iPad and a card reader. In a couple of years, you can bet that there will be new players in the smartphone-giving app world – with new benefits and security. The apps highlighted in these articles may still be around, or maybe not.

Here are the most important takeaways I can offer in conjunction with these three articles:

• Listen to people and explore what tools will make it easier for them to give. More options are better than fewer (or just one).
• All smartphone giving apps are not the same – what seems most popular may not be the best choice for your local church. Do the research, remembering that articles posted by commercial providers of giving options tend to be biased toward their product or medium.
• While opportunities for inspired, one-time gifts are wonderful, the best hope for sustaining support for your church’s mission and ministry will be in programmed recurring giving. The pandemic has been the field test for that goal for churches. At present, you will find this reliably and securely provided by a vender specifically providing electronic contributions for churches. When you find a vendor, explore their options to provide donors a way to give from their smartphones.

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