What Mastercard’s New Policies Mean for Your Nonprofit

This fall, Mastercard is rolling out new recurring payment policies to mitigate chargebacks and billing disputes. While these changes are intended for product and service subscription companies — from Netflix to Microsoft suite to your favorite podcast to your meal delivery kits, which are increasing in popularity — this change affects nonprofits, too.

Donors who make recurring gifts via Mastercard, including your monthly donors, will be under the new policies set forth by the credit card company, which go into effect on March 21, 2023.

Here are the new rules that apply to nonprofits⁺

1. When the donor creates their recurring gift and provides their credit card information, the nonprofit must disclose the terms of the gift, including the amount that will be billed and the frequency of the donation.
   
   Example: Your card ending in *9999 will be billed $25.00 on the 15^th of each month unless you make updates to your sustainer gift.
2. After the donor has set up their recurring gift, the nonprofit must immediately send a confirmation through email or other electronic communication method (like texts) that includes the terms of the donation and clear instructions on how to cancel their gift.
   
   Example: Thank you for making your first monthly gift of $25.00 to Nonprofit ABC! Your card ending in *9999 will be billed $25.00 on the 15^th of each month. If you’d like to change the amount or frequency of your gift (or cancel it all together) please contact us at hello@nonprofitabc.com or 123-456-7890.
3. Each time a recurring gift is made, the nonprofit must provide the donor with a receipt via email or other electronic communication method. This receipt must include instructions for canceling the recurring donation.
   
   Example: Thank you for your continued support of Nonprofit ABC! Your card ending in *9999 was billed $25.00 today.  If you’d like to change the amount or frequency of your recurring gift to Nonprofit ABC (or cancel it altogether) please contact us at hello@nonprofitabc.com or 123-456-7890.
4. On their website, the nonprofit must provide clear, easily accessible instructions on how to cancel the sustainer gift.
   
   Add a button to your giving pages that says “Manage Recurring Giving.” This can either lead to your donor portal (Classy and Blackbaud have these) or to a landing page with instructions on how to edit or cancel a recurring gift.
5. If a gift’s cadence is less frequent than every six months (or 180 days), the nonprofit must send an email reminder between 7 and 30 days before the gift processes. This reminder must include the subscription terms and instructions on how to cancel the gift.
   
   Example: Thank you for your continued support of Nonprofit ABC! Your card ending in *9999 will be billed $250.00 on September 1, 2022. Currently, you have set up an automatic gift of $250.00, which is billed annually on the first business day of September. If you’d like to change the amount or frequency of your recurring gift to Nonprofit ABC (or cancel it altogether) please contact us at hello@nonprofitabc.com or 123-456-7890.

⁺ To read the exact language of Mastercard’s new policies, please review Section 5.4.1 (pages 185-186) of Transaction Processing Rules, released on June 14, 2022. 

The Good, the Bad, and the Ugly of Mastercard’s New Sustainer Gift Processing Policies

While Mastercard’s intent to force better business practices on subscription-model companies is reasonable (in 2020, 60% of chargebacks were related to recurring billing, and of those, more than three-quarters of cardholders claimed that they did not authorize the charges), the impact to nonprofit organizations is worse than an afterthought. In fact, nonprofits are not specifically addressed in the policies at all.  

If you outsource your gift payment processing, you may be in luck. It’s likely that the giving payment processor already has these automated communications in place as part of their ongoing donor relations management. Talk to your gift processing software provider for more information about the steps they’re taking to follow these new rules.  

These Policies May Cause Undue Burden on Nonprofits

Some nonprofits, particularly those who don’t outsource gift processing, will be burdened by the additional work caused by these regulations. The policies may require nonprofits to hire more staff or invest in additional tech. And other nonprofits (think: membership organizations and those who rely on face-to-face sustainer sign-ups) have legitimate concerns that these required communications will cause additional cancellations. Hiring more staff, purchasing new tech, or losing donors all impact a nonprofit’s finances, which ultimately may diminish  how much good the nonprofit can do.

These Policies Encourage Straightforward Donor Communication Practices

Most importantly from a donor-marketing perspective, these policies encourage nonprofits to communicate clearly about gift details with their donors. And the truth is, it’s never a bad thing to be forthright with your supporters.

You may be concerned that all these reminders on how to cancel a sustainer gift will cause more cancellations. That’s a valid concern! A good comparison might be the “Unsubscribe” button required at the end of your mass emails. Sure, a few people will cancel their gift, just as a few folks unsubscribe from your emails every time they are deployed.

But making it easy for people to opt out — of emails, of recurring gifts — reinforces a sense of transparency and trust, and builds stronger and more ethical relationships with the folks who continue to opt in.

If a donor chooses to cancel their recurring gift due to financial changes or new philanthropic priorities, making that process difficult will not make her more invested in your cause. She will ultimately cancel anyway, and the bad experience may keep her from supporting you in the future when her situation changes again.

September 2, 2022 update:

The Nonprofit Alliance (TNPA), of which TrueSense is a proud founding member, is gathering data and information to advise Mastercard on how these new policies affect our industry. More than 200 nonprofits signed a letter outlining concerns. This collective effort of our industry led by TNPA resulted in a 6 month extension for nonprofits. Originally the policies would have gone into effect on September 22, 2022. Now nonprofits are expected to comply beginning March 21, 2023. Connect with TNPA for additional updates as the policies continue to be clarified.