Message (and Money) In A Bottle: Facebook’s Money Transfer Implications for Nonprofits and For-Profits
This summer Facebook rolled out a way to transfer money between accounts through simple messaging. (Check out a great primer on the service here at Investopedia.) It’s only available in the States for now, which rightly has some thinking that the real power for a feature like this is elsewhere in the world due to our entrenched credit card usage. Facebook’s other dabbling in more virtual currency have been very hit-or-miss, and mostly miss if you count the millions of “Facebook Credits” cards floating about department stores. This simplified way to send money may have legs in the U.S. because of it’s easy tie to what else Facebook is great at: Causes.
We’ve seen political campaigns, families in time of need, and entrepreneurial products blossom through Facebook and beyond thanks to channels and tools that help spread the word through Facebook but then take the transaction off-site to YouCaring, Kickstarter, candidate sites, and more – not to mention the legacy of Facebook Apps. So what happens when it’s that much easier to raise money within the message itself?
There are some user-experience, if not outright functional, barriers to getting people comfortable with sending money through Messaging. From the Messaging-a-Page experience to how you figure out that back-end experience if it’s an exchange for goods and services, there are some major kinks to work out. But – it’s certainly coming. We even see tells in the system itself.
Despite the obstacles, you could technically use the service right now and the exact implications of how you’d tally things might be shaky. Nonprofits could begin to accept donations and businesses payments. So for the early adopters or those wanting to prepare for the wave, we wanted to get better footing. We asked David C. Acree, CPA of the fantastic Meadows Urquhart Acree & Cook, LLP in Richmond, VA to help put some perspective on this service:
If someone donates to a non-profit over Facebook’s $ transfer feature, how does it affect tax write-offs?
Donating through Facebook Money Transfer will work the same as any other donation method. And it’s important to recognize that there will be the same limitations as other donation methods. For example, if you are paying to attend an event hosted by a nonprofit, all of that money may not be tax deductible. It is still ultimately up to the nonprofit to determine the actual deducible amount.
Is an additional document needed when a donation is made, in order for it to “count?”
One should still keep transaction records as well as an email from the organization (usually this is a donation proof letter) to substantiate the transaction to the IRS.
What are the implications for businesses if they were to use the Money Transfer feature on Facebook?
If Facebook Money Transfer is easier for small businesses to use, then there is no reason not to recommend it. It can help the business expedite the revenue collection process and therefore improve cash flows, as well as offer a way to connect with clients or customers. Businesses should be aware that if they are sending payments, they should keep a list of categorized transactions in order to prepare proper Form 1099s at the year-end, if needed.
So – if you are an authorized representative (since the company Pages can’t accept money yet) you could begin accepting payment today. It’s worth noting that this could also start happening before you’ve actually started authorizing it – so it may be important for you to communicate and clarify your organization’s stance.
Ultimately it will come down to whether users embrace the technique. As we would always say: watch the behavior. Regardless of even a massive wave of acceptance, if it remains this easy for the average user to simply click and send, it could very well become a much easier way for you to expand digital payments without requiring more clicks and barriers before funds come in. Something tells me we’ll see more specific uses for business and donations develop in time for the last year of the presidential election. Reducing steps and clicks is what Facebook is aiming for: keeping you inside the bubble for even these small personal, company, or nonprofit transactions so they keep your eyes and clicks in Facebook, not wandering the Internet.
by: Dean Browell, PhD – Executive Vice President