Let’s look at Nobel Prize-winning thinking and some recent trends in donations to charities.

Behavioural economist Richard Thaler won the 2017 Nobel Memorial Prize in Economic Sciences (aka the Nobel Prize in Economics). This was for work which “incorporat[ed] psychologically realistic assumptions into analyses of economic decision-making. By exploring the consequences of limited rationality, social preferences, and lack of self-control, he has shown how these human traits systematically affect individual decisions as well as market outcomes.” In short, ‘nudge theory’… apparently small influences that impact our decision-making: “a nudge, as we will use the term, is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not.” (Thaler and Cass Sunstein)

Now to charities….

Making donations easy… and much more

One area where small influences have been having an impact and are likely to have future impact and also drive design is in donations to charities. The rise of contactless payments has proven an interesting ‘nudge’ factor that has positive and negative consequences.

Why negative? As an anecdotal example after Thaler’s win, nudge theory was explained thus: when you are in a shop looking to buy lunch and the card machines (contactless or otherwise) fail, but there is handily a cash machine outside the shop, it is more than likely that the vast majority of would-be card-paying shoppers will rather put their shopping back than be inconvenienced and go to the cash machine. A small inconvenience can influence behaviour.

It appears this has been the case for charities recently. Brand new research by Consumer Intelligence has found that 37% who regularly donate money to charity collectors say they have cut back in the past year — and on average they estimate they have donated £14 less and that 58% of adults say they are using less cash than a year ago. The Chief Executive of Consumer Intelligence said: “Contactless is convenient and secure so it is understandable that so many are happy to ditch cash… but there must be some concern that it is hurting charities with so many people admitting they have cut donations simply because they do not carry cash.” In summary, Consumer Intelligence found that the fall in the use of cash (easy to put in a collecting tin for example) as apparently hit charities: the ‘nudge’ effect of some forms of giving being less simple.

Why positive? Because charities are innovative and able to embrace behavioural change. Changes in giving tendencies will also open up new relationship (beyond coins in a tin) possibilities. We have commented previously on charities using different forms of technology to open up and modernise giving options (see this BBC report). At the heart of these developments is some form of ‘nudging’: what influences decisions and actions and what fits with current behaviours and trends in doing something. Beyond the technical aspects (and some associated nudges) of giving, new behaviours can create opportunities to engage with donors and potential donors in new ways. For some, that engagement is due to a wish to understand the impact created by a charity (it is not enough to ‘just write a cheque’) or a general desire to be more closely connected to ‘ethical’ (an example from the FT on this topic) or social missions across their daily and financial decisions. In some ways the public is nudging here, as matters of ‘ethics’ and social responsibility and connection are put more front and centre in a wide range of relationships.

New methods… consider the regulation and governance

Any new methods of seeking donations needs to ensure compliance with fundraising standards and regulations as well as the proper and appropriate collection and use of any data and information (our forthcoming seminar will cover these issues- sign up here). Strong compliance in this area is not just about adherence to rules. Rather, the charity’s style of operating should have good governance hard-wired to underpin its flourishing activities and support effective, as well as complaint, fundraising and interaction with the public.

Indeed, charity trustees and senior management should perhaps consider what nudges (or the like: other behavioural models are available!) are best introduced or focused upon generally to instil strong and effective governance. Governance which is designed fundamentally to support the charity’s purposes.