We examine the closure of one of the most popular online fundraising platforms in the UK and explore questions about financial viability and the need for charities to perform adequate third-party risk assessment
The company issued a statement, saying: “Given the significant investment required in [VMG] for it to remain competitive, and without the brand exposure provided by the London Marathon, Virgin Money has decided to wind down the platform.”
Charities currently working with VGM should expect a full service for fundraising and donations until 30 November 2021. Virgin Money has also committed to helping charities find alternatives wherever necessary and says that it will contact all charities registered with the service.
VMG was established in 2009, coinciding with Virgin Money’s sponsorship of the London Marathon. The platform was presented as a non-profit entity that would direct a greater proportion of donors’ gifts to charities, with fees only covering operation costs.
The platform proved popular and quickly became a staple of fundraising efforts in the UK. Since 2009, for example, VMG has supported more than 20,000 charities and raised more than £900 million. Alongside JustGiving, VMG was one of the most recognisable platforms in the UK charity sector.
The closure of VMG raises questions about the future of online fundraising platforms. It highlights concerns around commercial viability, demonstrates the increasing popularity of alternative fundraising models, and emphasises the importance of risk assessment for charities using third-party options.
In this article, we discuss the impact of VMG’s closure on the UK charity sector. We look at some of the above concerns and provide some advice for charities to help them prepare for the future.
The most obvious concern is the commercial viability of fundraising platforms. VMG was one of the most popular options on the market, but it’s pricing structure was not dissimilar to other platforms . So, the closure of VMG draws attention to wider questions about financial sustainability.
Simply put, the issue might not sit solely with VMG, but with the viability of the peer-to-peer fundraising model. One obvious outcome is an increase in costs, with price hikes aiming to secure viability, which could in turn change consumer behaviour. This means charities could instead explore other fundraising models that provide a greater return on investment (ROI).
Alternatively, if price hikes do indeed occur and the peer-to-peer model remains a strong option, less money will reach charities, which means less money will reach service users.
Another concern is that VMG is part of a trend already in motion. Other fundraising models seem to gain increasing traction, such as fundraising through social media platforms – particularly on Facebook.
Social media platforms arguably offer charities greater incentives, allowing them to raise funds with little to no cost, meaning charities can receive more of the money they have raised.
Critics of social media platforms, however, point to the complexity, often suggesting payment can take a long time to reach the charity, which can cause issues with budgeting and scheduling, among other problems.
Others have suggested that, historically, social platforms can create dependency, monopolising certain operations, before sharply increasing costs, forcing organisations to meet such costs.
Either way, the VMG closure raises some serious concerns about future viability. It is entirely possible that online fundraising platforms cannot sustain themselves financially with the current pricing structure, or that many platforms will simply be priced out of the market.
Two potential problems emerge: closures and price increases. And charities need to be prepared for both eventualities and include them in their risk assessment.
Preparation is key. The VMG closure has highlighted that third-party platforms may shut down or wind down without consultation, without warning. Even big players could close or change their operations or pricing, leaving charities with additional labour and costs – and thus a decreased ROI.
That risk applies to all third-party platforms. Social media organisations are particularly liable to change, for example, with platforms regularly shifting operations to the chagrin of users. Charities need to stay alert and informed about such changes and ensure they have contingency plans in place.
Charities should include all third-party platforms in risk assessments – and take seriously the risks that they pose. That means grasping all potential problems and the impact of those problems, attempting to understand and quantify risk will help to mitigate it.
Charities should also aim to diversify income streams, if needed. If your income depends entirely on one or two fundraising models – perhaps based on one or two platforms – that poses a huge risk, particularly if you face price hikes or closures of the platform you depend on. Charities should evaluate their income streams, quantify the risk of each stream, and diversify income if necessary.
Preparedness is essential to sustainability. The closure of VMG should serve as a reminder to charities that they need to practice caution and prepare for third-party closures and changes.
The real impact of the VMG closure will start to show over the next few weeks and months. We may see other platforms face similar issues with financial sustainability. We may see price increases. We may even see a widespread shift away from online fundraising platforms towards other models. The key is to stay informed, so you can make the right decisions.
Charity Digital can help. We are going to release a podcast on the future of online fundraising platforms on 14 September 2021. The podcast features some brilliant guests who will discuss financial viability, risk assessment, what charities should do next, and so much more.
We are also putting together some videos to help you decide on the best fundraising platforms to suit your needs. Each video will cover some of the core online fundraising platforms – and some of the lesser-known options – and run through their overall functionalities and pricing.
And, of course, you can visit the Charity Digital website for heaps of informative and entertaining content. Check out some alternatives to VMG in our article on The best online fundraising platforms for charities. Or look at our Digital Fundraising hub for lots more information and guidance.