Direct Debit vs Blockchain: Breaking the Donation Conundrum

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Direct Debit vs Blockchain: Breaking the Donation Conundrum

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Blockchain has the potential to deliver what all people want and have been asking for over the years: payment environments where donors money can be tracked by all parties, ensuring support arrives at the point of need in its entirety.

Writer Richard Cornfield recently examined the questionable nature of donating to charity in today’s myriad of needy causes. He has examined the long accepted method of charitable donations and measured up against DLT in an attempt to establish if exploitative and ineffectual charities can be taken completely out of the equation.

The old model

Many people make snap decisions to upon request through TV advertising to donate to charities, particularly at this time of year. Those more regular donors set up a direct debit order. Street fundraisers are noted for “selling” this last option, given the unfortunate epithet “street muggers” as a result, according to Cornfield.

The problem is these muggers don’t actually work for the charities they appear to be fundraising for but outsourcing third parties who provide fundraising services for a host of different charities. As a result, they are paid a commission for setting up direct debits and are well trained to deal with all objections or considerations offered by potential donors.

Here lies the problem for the man in the street approached for a donation to Syrian refugees or famine in Sudan; where does the money go?

The street vendor makes his cut, typically EUR 50-100 for a direct debit set up but this does not go to the charity, due to the outsourcing company charging the charity about EUR 100, resulting in the donor, in reality, paying EUR 5 per month for four years or so before making any net contribution to the charity itself.

Once the money finally arrives at the charity, such organizations then allow 35% for admin fees leaving about 65% of the donor’s contribution after vendor and commission fees. Cornfield cites the infamous Red Cross case in Haiti after the devasting earthquakes of 2010 which raised half a billion dollars to rebuild homes. The result: six homes at USD 83 million dollars per house, in one of the poorest countries on earth.


Charities such as, BitGive Foundation, and Alice SI facilitate charitable donations to areas in need via cryptocurrency. The donor in these cases can follow their funds via the public blockchain, in some cases through separate tracking platforms giving the funds complete visibility from source to final location. Administration costs can be completely removed allowing for the same payment at the source of a donation to arrive at the point of need.

The only problem still to be overcome is what happens with the funds on arrival at the point of use and how local complexities can be overcome, often in war-torn zones or famine inflicted areas with numerous NGOs on the ground.

Given the knowledge, this is not a difficult choice for the donor, and answers that burning question: Where does my money actually go? With blockchain, donors can give their support with a greater degree of certainty that they are helping a just cause.


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