Transaction Enrichment Analysis Reveals Trends in Charitable Giving, Tax Deductions and Refunds

By Mark Leher

Charitable organizations rely on donations to support their communities and causes all-year around. Alkami researchers, using an exclusive transaction enrichment process, analyzed consumer transaction data to better understand when the average American considers charitable giving. The team also explored seasonality around tax refund and payment cadences to evaluate how these fluctuations may impact consumer spending and cash flow.

How American Consumers’ Charitable Giving Amounts Peak

While nonprofit and other philanthropic causes can benefit from reliable, year-round giving, the prevailing belief is that most Americans wait until the end of the year to pass along any monetary gifts. Traditionally, this is attributed to a blend of a season of giving mentality around the holidays along with the impending deadline to make eligible contributions for the concluding tax year, as donations to 501(c)(3) organizations are typically tax deductible.

Alkami researchers sought to better understand this widely held belief by conducting transaction analysis of monetary gifts to more than 150 different major charities from account holders across our panel from January 2022 through March 2024. While there are 1.4 million tax exempt charitable organizations in the U.S., Alkami’s research provides an overview for evaluating general trends among major charities. The study confirmed charitable giving is seasonal, with gifting peaking in December 2022 and 2023. Notably, the amount per gift increased in the data set by 17.2% while the number of donors showed no significant rise.

Key Takeaway

Regional and community financial institutions (RCFIs) may look to encourage charitable giving as part of their tax planning and financial advisory services, providing additional value to their account holders. RCFIs looking to become more engaged with their communities can explore supporting charities through volunteerism, fundraisers, or corporate giving programs with employee payroll deduction.

When American Consumers Donate Across the Seasons

While dollar amounts may peak toward the end of the year, Alkmai Research wanted to determine whether the total number of donations also peaks in December. This can be important information to help nonprofits and other charitable organizations better understand and manage their finances as consumer donations ebb and flow.

Alkami researchers further examined consumer trends by evaluating whether, and when, the number of charitable donations peaked. The data revealed donation frequency, unlike amount, does not show any clearly demonstrable seasonality across the 27 months that were evaluated. This indicates that, while philanthropically-minded Americans are likely to give more in December, they are also likely to give regularly throughout the year.

Key Takeaway

Reminders to give may be more prevalent during year-end, but RCFIs could offer additional value to their account holders by providing reminders, or through dedicated financial planning services, to make donations throughout the year. Financial health can also be promoted to consumers during key times such as early spring when account holders may be experiencing an influx of income due to receiving a tax refund, helping them appropriate funds to savings funds or charitable gifting more regularly.

Who Receives American Consumers’ Charitable Donations

As much as dollar amounts matter, so does where philanthropic contributions are headed. Singular contributions by living individuals make up 71% of charitable giving, and these Americans tend to have favorite causes they repeatedly support.

Alkami research revealed clear leaders when it comes to receiving donations from American consumers, uncovering repeat behavior, with nine of the top 10 organizations from 2022 making the list of top 15 for 2023.

Key Takeaway

RCFIs have a unique opportunity to be top-of-mind for their account holders when it comes to annual or regular charitable donations. With many of these organizations able to accept funds via credit and debit cards, RCFIs can encourage their account holders to use their bespoke cards moving forward and increase transaction frequency. RCFIs would also be wise to consider that a donation to an account holder’s favorite charity could be a great incentive to encourage debit card usage. A small donation to an account holder’s favorite non-profit in exchange for moving recurring payments, like mobile phone or streaming subscriptions is a win-win that pays off for the financial institution in the long run.

When American Consumers Receive Tax Refunds

With annual tax filings not officially due until April 15, 20-25% of Americans wait until the last two weeks prior to the deadline before filing. Many could be incentivized to file early in order to gain access to the extra funds they expect, or hope for, from their tax refunds.

Alkami researcher’s analysis confirmed the majority of taxpayers are receiving their refunds well in advance of the April deadline. In both 2022 and 2023, 52% of refund dollars were paid out in the first quarter of the year. While 2021 data shows a lower 44% paid in the same time period, the deadline was also postponed to May 17 to provide financial hardship relief in the wake of the COVID-19 pandemic.

How Consumer Tax Payments Impact Seasonal Fund Availability

While April 15 looms large for most Americans, a portion of the population is also responsible for making additional payments for situations such as estimated tax payments for interest, capital gains, or self-employment income. These payments are in addition to or beyond the funds automatically deducted from a typical paycheck.

Interested in learning how these payments impact cash flow for consumers, Alkami researchers explored federal tax payment volume based on a panel of account holders. The data indicated that while April remains the focus of seasonality, those making estimated payments account for spikes in financial activity in June, September, and January.

Key Takeaway

RCFIs can take measures to provide for the unique needs of consumers who are required to make estimated tax payments on a quarterly basis. Transaction analysis can reveal these specific account holders to banks and credit unions, helping them personalize messaging around financial management strategies, savings advice and payment reminders. This can also help RCFIs develop deeper relationships with consumers who may have a higher net worth or generate investments outside their traditional income, paving the way for more profitable product and service exchanges.

Alkami Technology Digital Banking Solutions

Alkami Technology, Inc. is a leading cloud-based digital banking solutions provider for financial institutions in the United States that enables clients to grow confidently, adapt quickly and build thriving digital communities.

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