Charitable giving is on the rise as grants from donor-advised funds increased 27% to almost $35 billion, according to 2020 IRS data. And while the United States has long been the most charitable country in the world, the size of donations and where they’re coming from is changing, says Charityvest Co-Founder and CEO Stephen Kump.
“What is the shift?” Kump writes in Forbes. “The dollars are shifting from income to assets, especially as wealth moves across generations. Giving young people access to digital tools will change charitable giving.”
Kump co-founded Charityvest, a modern donor-advised fund that is positioned to capitalize on this shift from gifting cash to gifting assets with Dwolla’s account-to-account payment solution powering the donations.
With Dwolla’s Virtual Account Number (VAN) feature, Charityvest was able to launch a new product that allows end users to invest their Charityvest balance tax-free in ETF (exchange-traded fund) portfolios.
“Dwolla is the vendor solution that meets our unique needs.” says Charityvest Co-Founder and CTO Jon Koon. “We couldn’t imagine a better partner for payments than Dwolla.”
Using Virtual Account Numbers
Charityvest was founded on the idea of giving users who supported charitable causes access to fee-free giving. To facilitate fee-free transactions on their platform, the founders behind Charityvest knew the best solution was access to a unique account-to-account payment service provider.
When Charityvest launched in 2019, they launched with Dwolla.
“Dwolla has been amazing to work with since the beginning,” Koon says. “They’ve gone above and beyond by understanding the unique solution we provide for those who want to make the world a better place. Y’all understand our business, so you understand the risks involved and you’re willing to spend the time to consult and brainstorm about it with us.”
With Same Day ACH (which recently increased transaction limits from $100,000 to $1 million), Charityvest is able to facilitate large ACH transactions quickly—an essential feature for a platform that depends, in part, on high-dollar donors.
When Charityvest initially launched with Dwolla, the platform was a “give from one place app,” Koon says. The payments architecture was relatively straightforward. End users deposit money in their Charityvest accounts and are then able to make grants to any IRS-recognized nonprofits. End users receive one tax receipt no matter the number of charities they donated to.
“The architecture for that was quite simple,” Koon says. “You connect your bank with Dwolla and then when a user sends a contribution, it moves directly—funding source to funding source—from the user’s bank account to Charityvest’s account.”
As the platform grew, the team decided to add investing to the suite of features on their platform. And with that, they needed a new product.
Charityvest was one of the first pilot clients of Dwolla’s VANs feature. A VAN, on the Dwolla Platform, is a unique account and routing number generated to enable bank transfers with the user’s Dwolla Balance.
When Charityvest was ready to venture into investing, implementing additional payment methods and more complex funds flow was feasible given the flexibility of Dwolla’s payment API–it made their investment product possible.
Between December 2020 and December 2021, Charityvest’s transaction volume increased 237%. After implementing VANs in September 2021, three months later, the company experienced their highest transaction volume month yet.
“As far as Dwolla handling that spike and anticipated growth in our transaction volume,” Koon says, “it’s not something we think about. Dwolla’s platform performs.”
Making a New Product Possible
Charityvest accepts donations from several different payment providers, including Stripe, Coinbase, PayPal and others to collect contributions in the form of stocks, ACH transactions, wire transfers, cryptocurrency, paper checks and credit card payments.
Each payment provider is assigned a VAN, so Charityvest can easily track where each contribution is coming from and can organize and reconcile accordingly. More than 50% of contributions on their platform come through stocks or ACH transactions, Koon says.
Here’s how it works: Jake wants to set aside $1,000 for charitable donations, so he creates an account with Charityvest to deposit the money in Charityvest’s donor-advised fund (Dwolla facilitates that ACH transaction). Jake’s $1,000 can grow in the stock market (Alpaca debits Charityvest’s Dwolla Balance, using the VAN, to invest the funds). After Jake’s investment has appreciated in value and grown to $1,500, he elects to donate a sum to his charity of choice. The grant disbursement can be made via an ACH transaction, wire transfer or check. If the disbursement is made via ACH, that transaction is facilitated by the Dwolla Platform.
VANs are an essential part of Charityvest’s investment feature because they allow Charityvest to direct several different payment methods to a single place so the funds can be invested. With the Dwolla API and webhooks, Charityvest gets real-time notifications on payment statuses, so they know when money from a specific modality (associated with a VAN) has landed in the fund.
“Dwolla’s VANs have helped us simplify our complex payment flows.”
‘Catalyzing Generosity Through Technology’
When Koon and Kump were evaluating payment service providers to help launch their startup, Dwolla’s “first-class customer service” and meticulous attention to risk and compliance were significant differentiators.
“I think what really sold us on Dwolla was the first-class customer service, in addition to excellent developer documentation and a smooth, reliable API,” Koon says. “Dwolla’s been amazing to work with. We never have any problems with Dwolla and really enjoy the relationship.”
Fast-forward to 2022 and Charityvest has big plans for the future. In addition to their new investments offering, the company is considering how to make the platform more social, so donors with “a shared set of values” can interact and give to charities together.
“Our mission is to catalyze generosity through technology,” Koon says. “Dwolla is central to that mission. The VANs offering is the Grand Central Station for moving money. ACH is our biggest modality, and Dwolla has been amazing from the beginning.”