Mobile operators benefit from donations

29/10/2008

Many UK charities use text messages to raise funds. Donors are encouraged to text in to make a gift. The donation later appears on their phone bill or is deducted from the amount outstanding on a pre-paid phone card.

In our view the amount that is siphoned off from these donations by third parties is unacceptably high. It isn’t at all unusual for 35-40% of the gift to be spent on fees. H.M. Revenue and Customs demand a small slice in the form of VAT on the cost of servicing the donation. The mobile marketing agencies that run the campaigns also take a slice, typically 5-6% of the gift. The charity also has to pay to rent the short code (i.e. the number that individuals text to) which can also incur a cut of circa 6%. And if the donor uses a pay-as-you-go mobile, even the newsagent that sold the card figures in the calculation.

All this is small change in comparison to the amount the mobile networks take. The Institute of Fundraising indicates that they can keep between 15 and 19% of any donation, while the cost to them of processing the donation is estimated at only around 3p. They also make 10p from the standard message charge that donors pay for sending the text in the first place.