Money movement behind charity, by Sonia Nigam

Konstantin Dubovitskiy
And today, as a guest speaker, we have Sonia Nigam, founder and CEO at Change. And today we'll be talking about a
bunch of things primarily related to the nonprofit space correlated with the for profit, specifically the bridge between
the two and how some random things work, like rounding up the amount of purchase that you're making at Target.
How does that end up going into a actual nonprofit? What happens on the back end that no one really understands.
So that being said, Sonia, let's kick it off light and easy. Tell us about yourself and about change.
Sonia Nigam
Definitely. Thanks for having me on. So yes, Sonia here, co founder of Change, you know, predating Change. I grew
up in the Bay Area, California. I went to Northwestern where I majored in computer science and met my now co
founder. And following graduation, I was a software engineer at Braintree, which is the API first payments company
under PayPal. When 2020 came around the onset of COVID 19, my co founder and I were already incredibly
passionate about the giving space and all the inefficiencies we saw. And we thought it was kind of a now or never
moment to be able to come in and bridge the gap. You put it perfectly. And so went ahead and found in Change.
CHANGE is an API first way to send donations to any change charity in the US and beyond that's in good standing.
Sonia Nigam
And the big aha is that we also help you with all of your state compliance. And that's kind of the small thing in the
room that most people don't really know about. We help companies like Mars do point of sale transactions. We help
fintech companies like Brex with, you know, allowing folks to donate credit card points and so many other use cases
that can go into. But we're really that underlying giving infrastructure to let any for profit give back.
Konstantin Dubovitskiy
Perfect. And that. Keith, let's start there. Let's start with the structure of the disbursements. And thank you for the
very concise but rich background here. I love when people don't spread it across five minutes. Let's start with the
distribution side of it. Right. You propose essentially the ability for nonprofits, or sorry, for profit companies to
donate to nonprofits of their choosing. That implies that you have a massive network of charitable foundations. How
do you manage that? Do you have a list of millions of those nonprofits that are just in the US Alone, or do you reach
out to the nonprofit as they are added to the list of the desired endpoints by the for profit corporations?
Sonia Nigam
That's a great question. So the big infrastructural investment that we made as a company is we set up a a partner
donor advised fund. That means that's a completely independent 501c3 majority independent board. But a donor
advised fund exists with the sole purpose of being able to accept funds in that are earmarked for charity and then re
grant them out to end charities. And what that allows us to do at change is we've set up a really robust payments
network and system of APIs for businesses to be able to integrate us these funds land directly into a donor advised
fund. So it gives those end businesses comfort to know that these aren't sitting in another for profit's hands. These
are sitting in a 501C3's hands. And that 501C3 is then actually disbursing those out to the end charity.
Sonia Nigam
That disbursement rails is also provided for by change. And so what we do there is we actually go ahead and check
all of the necessary IRS state lists, the California lists, the OFAC fee, you know, you name it, everything that you as a
business would want to make sure that the charity is in good standing. That's what we're doing. And the 1.3 million
number you see floating around on our website or when we talk about it, those are all the charities that have passed
those vetting checks and are eligible to receive payments from this donor advised fund. What we do is once we
receive funds for your charity, if we have them onboarded, great, we immediately send them. If not, we go ahead and
actually onboard their ach information. So send it that way.
Sonia Nigam
And in a rare case, but we do support it, we'll also send a paper check if the charity has sometimes protocols in
place for a vendor, for example, where they have to receive the payment via paper check.
Konstantin Dubovitskiy
Very familiar with that part. So we're not going to dig into that one. Let's talk about the onboarding. So again that's as
my wife has been working at a nonprofit for quite some time before she went to Costco. The question there is the
communications with those nonprofits. So do you just reach out to them and say hey XYZ company wants to donate
X amount of money to you. We need to onboard your we need to get your banking information order to send you the
funds. Is that how it works?
Sonia Nigam
Yeah. Yes, you. That's a very concise and quick way to put it. We pretty much do a variety of outreach, whether it's an
actual individual calling them up, automated letters to their IRS registered addresses, contacting them, saying there's
x amount of funds waiting for you. If you sign up here, they will be remitted that day. We also do have nonprofits that
just sign up when they find out about us because they proactively want to get involved with this network. They want
to, you know, see if they can work with companies more proactively. But in either way, we make it super simple. They
just go to our website, they go ahead and add basic information about the nonprofit if they're using a domain that's
associated to the registered IRS domain or able to verify them very quickly.
Sonia Nigam
And even though they go ahead and attach their bank account, we do. We use Finix. But we also, you know, we've
talked about this, Constantine. It's a very simple flow, the typical plaid like experience. And then they're ready to go.
They have a full fledged dashboard to be able to do all their tracking from there. And if they ever want to make
changes, the dashboard is their home for that. The checks themselves are always being run against that charity. So
on the off chance that they fall out of compliance, let's say at the state level or the national level, they'll be contacted
and basically act to ask to fix that status so that they're able to be eligible again on the platform.
Konstantin Dubovitskiy
I see. Okay, gotcha. So to make changes, they have to go through change dashboard. Just had to throw in a pun
there, or at least something that looks like one. Let's move on past that one. I should have come up with something
better than this. But anyways, let's pretend that didn't happen and ask the question about what exactly are you? So
again, you change itself as a for profit organization just works in the nonprofit space. But the other side of the coin is
the for profit companies that are actually making the donations. So what's the main selling point there to those for
profit companies? What is your value prop that you're reaching out to the companies with?
Sonia Nigam
Yeah, for any company that is looking to run a give back campaign, which is becoming a very tried and true way for
companies to be able to connect with the next generation of consumers who are proven to shop with their values,
you know, they want to make sure their wallet is going towards organizations that support causes they care about.
Whenever these companies set their sights on running a cause related campaign, there's a moment where they
realize, oh shoot, there's a lot more compliance here than I realized. And that's where our value prop really comes to
shine. When you see things like donations at checkout or percentage of purchase going to charity under the hood.
What very much could be happening is that business is registering a bond in a variety of states.
Sonia Nigam
They are making sure they're getting money to the charities in the state mandated timeline. They are reporting up to
the states about how much revenue they accrued tied to that campaign versus how many funds they actually raised
for the charity tied to that campaign. So there's a slew of compliance workflows that come alongside our payment
stack. And that's really where the beauty of change comes to light. So if these businesses are saying, hey, I want to
run this campaign, get it started next week.
Sonia Nigam
Instead of historically getting all the paperwork in place, making sure they're registered in different states, getting the
bonds, making sure that charities have also done their paperwork, we say you'll be basically set up in a way where
you can set up those campaigns and get started within minutes and we'll make sure that your paperwork and your
legal is always up to date.
Konstantin Dubovitskiy
Legal being up to date is valid, honestly. In that case. Yeah. Now that we've covered the actual proposition, let's talk
about the fun back end of it. You've mentioned during our multiple pre interview chats that sometimes you
campaigns around rounding up transaction amounts, which is I think every single person who has ever been in the
US is familiar with. And that standard process where you see at the register the question of would you like to round
up to a full amount of your purchase to donate to XYZ charity? What happens there on the back end? Step by step?
Sonia Nigam
Yeah. So we have two flows. The first flow is that at checkout itself a split transaction is run and we are directly
integrated with the end business as a merchant account where the donation funds can directly land and then enter
our entire disbursement backend. That's rare, but we do it for select payment processors. For a broad majority of the
businesses that work with us, the integration is much more async. So the way it works is that they have the roundup
or add on donation option at checkout. If the consumer goes ahead and adds it to their cart, the merchant processes
that as one transaction using the same payment processor they always use. Upon success, they'll actually use our
donations API to record the fact that they collected this donation and earmarked it for a given charity.
Sonia Nigam
So by the way of example, let's say it's a 20 cent roundup. They would hit our API and say 20 cents for one to be
planted. They'll go ahead and do that throughout the month, throughout the week. It just depends on their Schedule.
And on that regular basis our system will go ahead and add all that up and then actually send them an invoice if
that's their preferred system or directly ach debit the total amount recorded, at which point our system takes it. And
let's say that we collected $100,000. $20,000 of it is going to one tree planted, 50,000 is going to another
organization. We're actually handling all the distributions because we're kind of the point of truth with the way that
the API works.
Konstantin Dubovitskiy
Right. So you're essentially just sitting there tracking. You're not making individual withdrawals every time there's a
20 cent transaction roundup.
Sonia Nigam
Exactly. Just for the sake of their microtransactions, it wouldn't be efficient. We batch them up on a regular basis.
The one exception being when providers like Stripe, for example, make it very simple through Stripe Connect to able
to do split transactions. The business themselves will maybe opt to do that if they don't want to custody the funds
and avoid having it hit their bank account at all. And so we'll go do it in that case.
Konstantin Dubovitskiy
Right. And then again, at the end of the period, whatever that period may be, daily, weekly, monthly.
Sonia Nigam
Exactly.
Konstantin Dubovitskiy
You pull the funds from the account that the company tells you to and then you disperse the funds to the end.
Nonprofits. Correct.
Sonia Nigam
Exactly. Yeah. You nailed it.
Konstantin Dubovitskiy
Delightful. All right, now everyone here knows how the roundups look like. And that was my main interest for the
entire episode, to be completely honest with you. How the hell does that operate? Because I always thought how on
earth does this make money if every time you pull funds it costs at least 20 ish 10. So a little bit less than that
perhaps, if you have a good deal. Now I know. And now everyone who is listening to this knows as well. So that is
delightful. Let's talk about some other ways that the for profit companies actually raise money for these charitable
foundations. Anything that's particularly interesting, anything that's worthy of, you know, paying attention to get a lot
of what, not a lot of put. I think 99% of our listeners are for profit for a good obvious reason.
Konstantin Dubovitskiy
We are talking about payments after all. So Bob, for those listeners, what are some of the interesting ways that
you've seen companies actually raise good amounts of money for the charities of their choosing?
Sonia Nigam
Yeah, so we see really interesting use cases in E Commerce, but those are more familiar. Those are point of sale
roundups, percentage purchase. They're very tried and true, they're great loyalty drivers and they're an awesome way
to be able to raise funds at scale really effectively through your consumers. But some of the more, let's say rare use
cases that also drive a lot of money are in the gaming industry. And so in particular we've been seeing a huge rise in
sweepstakes. And these sweepstakes can be sweepstakes to go, let's say go on a cruise and see a Diplo concert
where x percent of it is going to charity all the way to actually sweepstakes in a physical item like a car. It's been
really interesting to see the way that these types of experiences can raise millions and millions of dollars.
Sonia Nigam
And it's really just from the sake of people wanting to be in the game. They love the idea that it's benefiting charity. It
does give the experience or the prize provider an option to be able to reflect their values into the experience. But that
in particular we've seen a huge uptick and we've seen companies that are all the way from SMBs to huge
conglomerates launch campaigns like this. We've also seen a ton of auctions get really popular. We have some folks
who focus in the golf market that raise quite a good amount of money. I think folks in golfing really will do a lot to be
able to go on an interesting course. That's something that we've learned in the process.
Konstantin Dubovitskiy
All right, time to bash on golfers. We're not going to talk about how much native land they kill with grass, but let's talk
about the legality of the giveaway slash raffles sweepstakes.
Sonia Nigam
Yeah.
Konstantin Dubovitskiy
What is the legal side of it? Because again, technically speaking, it is not gambling necessarily. What is it qualified
as?
Sonia Nigam
Yeah, that is something called a professional fundraiser. Typically, not always, and I will always say this is not actual
legal advice.
Konstantin Dubovitskiy
Of course not.
Sonia Nigam
But a broad majority of the companies in that use case that we work with are registered as professional fundraisers,
which is a super highly regulated classification as a business. And that now means that all the funds you raise,
including the fees that you might be taking, like let's say 50% is going to charity. 100% of those funds have to go to
charity and the charity is obliged to send the 50 back. And so it introduces a whole new slew of payments. Because
now we're having funds go into the donor advised fund, but we're also having funds go back to the company. And
that could be variable, it could be a percentage, it could be a fixed amount because they have fixed costs.
Sonia Nigam
And so there's a lot of New configurations we had to introduce to our API and our dashboard to be able to support
that. And then in addition to that, there's also stricter payment timelines. So for example, in the state of New York,
two business days is if you're one of these types of companies, you accept funds for the nonprofit, and within two
business days, you have to show that you've actually sent the funds over. And so, you know, previously were talking
about batching and being able to have the flexibility of letting it grow and then invoice. But in the case of these types
of companies, we actually have to very regularly, on a daily basis, pull funds from them to be able to meet these
state guidelines. Yes, exactly.
Sonia Nigam
And in addition to that, those businesses are also getting registered in a variety of states. They're getting bonds in a
variety of states. And the reports go on and on. And so while this is a super interesting use case, it's also highly
regulated and it's where our platform has really grown to serve them in a, hopefully a helpful way.
Konstantin Dubovitskiy
Hopefully. So, I mean, yeah, again, everything that touches that space becomes, I'm not gonna say toxic, but very
hard to manage. From the legal perspect, that is good to know. And yeah, people, if you want to gamble a little bit for
the sake of charity, go ham. I fully support that for once. So obviously changes website is going to be there. Sonia's
LinkedIn is going to be in the description. So if you want to go for change with change, give it a go. Now let's talk
about the start my catch up. Let's talk about the challenges of the industry in general. Go a little bit more into the big
space, which is, you know, you've been running change for over five years.
Konstantin Dubovitskiy
What do you think is the biggest challenge for non profits when it comes to money movement specifically, again,
from someone who's saying the mach. From someone who is occasionally seeing nonprofits who refuse to take ach
and go for physical checks. What's the main actual issue with the money movement process in general?
Sonia Nigam
Yeah, yeah. For the money movement. You know, a lot of charities don't necessarily understand the inner workings of
how payments work and how these, how the money's moving. But their number one goal is to receive the money as
quickly as possible. And there is a disconnect in which payment methods will allow you to necessarily be able to
receive those funds as quickly as possible. And so a lot of what we're doing is educating people the benefits of
moving to a digital world. But with that being said with paper Checks with all the operations and the balancing and
the fraud that takes place there, that's a huge issue in the charity space. And moving them to an ach first world could
really help that. In addition, one major pain point when it comes to giving is that these charities really have specific
reporting requirements.
Sonia Nigam
And this is a learning curve for us as a platform as well. Who's sending funds to these charities? It's incredibly
beneficial for them to know the donor information. It's important for them to understand the campaign, the state. In
some ways, they actually are obliged to be able to send an acknowledgement or a tax receipt. And so for this reason,
having metadata attached to every payment is incredibly important. And it's something that a lot of platforms don't
realize. And so charities actually spend a ton of time just trying to reconcile these funds. And you know, that $10,
$15 donation can suddenly cost them money just because of labor costs pretty quickly.
Konstantin Dubovitskiy
Makes sense. And yeah, I was going to say reconciliation issues is one of the questions that I've input here and just
didn't cover. Decided to keep it vague. I'll give you any specific options, but you covered it yourself. The light. In that
case, let's go into what, generally speaking, usually is the wrap of the question or rep question for the entire episode.
It might be actually shorter episodes. You're running through questions way too fast and I'm not creative enough to
come up with stuff on the fly today. With all that being said, let's pretend like you have the power to whisper into,
directly into the brains of 8 billion plus people who are wandering this planet. What would it be that you whisper into
their heads? It has to be obviously payments related. We can't, we can't do anything else.
Konstantin Dubovitskiy
Just one thing about payments that they will instantly alert 8 billion plus people.
Sonia Nigam
Okay, interesting. I feel like I'm going to be so skewed if I'm doing this from the lens of change, from the lens of what
I've been talking about today. It's definitely that digital payments aren't scary. And the reason I say that is because
this attachment to paper checks is something that I didn't anticipate necessarily when coming into this space. But a
lot of folks have this perception that paper checks are safer, are more secure, are, you know, oh, there won't be a data
breach. And so thus it's a safer way to get funds to another organization when in fact that's not true. And there are a
lot of safety tips when it comes to digital payments. But when done right, it's a more effective and secure way to get
funds to an end charity.
Sonia Nigam
And then in addition to that, there's a huge perception that paper checks are a way to avoid fees. And I totally
understand the fatigue with credit card processing fees and banking fees, but there's so many platforms like yours,
like ours, that are doing a lot of work to be able to drive those fees down and make it very economically viable for
companies and individuals of all sizes to send digital payments. And when done right, for the nonprofit, as I
mentioned, they actually are saving a lot of money because what folks don't realize is that even though it's not
dollars coming out of your payment, there is someone on the other side processing these payments.
Sonia Nigam
And when they're trying to track down a check and it's bounced in the mail and they're trying to talk to the postal
service, and now it's getting reissued and they finally get it, but there's no metadata, who is this from? That is so
many hours and resources coming out of an individual that equates to money. And just like that, it was more costly
to the nonprofit than a digital payment would have been. So long answer for a very short question, I would say digital
payments are not scary to everybody on the planet.
Konstantin Dubovitskiy
Yeah, yeah. As you said as the counterpart and the digital payments, it's crazy to me to hear that ACH is the faster
route. I feel like ECH are dinosaurs. I know that should be dying as well. And people are like, oh, yeah, we'll consider
switching to each. I'm like, from what vision Carriers? Is that what you're using right now? What is. Anyways, I'm not
gonna rant about that either. A lot of rants have been stopped today. So I think it's a successful run of an episode.
And that is. Yeah, that's a great takeaway, honestly. 100 agreed. And yeah, people, if you're still using physical
checks, look at your other options. Consider how much time, money and resources are being spent on that and look
at alternatives. With all that being said, I think it's a good place to wrap up the episode.
Konstantin Dubovitskiy
We'll say that, you know, this was intentional and we are trying out the new format, which is 25 minutes or less
compared to our usual episode links. So here's a rep. My usual call to action is going to be check out the description
of this episode. There's gonna be a bunch of stuff such as Sonia's LinkedIn change, of course. My substack I'm not
gonna be ashamed to do a personal plug here. Personal plug? It's still about payments? It's just in depth payment
coverage, like ACH disputes, R codes, accelerating your ACH payments. A lot of ACH related stuff. Obviously for
good reason. So check it out, and as always, have a great day.