April 10, 2023

Why Banks Should Offer Stock Donation Options

Banks are increasingly empowering customers to donate stocks to charity, capitalizing on the growing trend of socially responsible investing, and helping customers to make a positive impact while building loyalty, attracting new customers and acquiring tax benefits.

Banks are some of the most charitable companies. Companies like Wells Fargo, Goldman Sachs, and JPMorgan Chase frequently top lists of most charitable companies around the world. With charitable giving positioned as a priority, what are banks doing to empower their own customers to give back?

When it comes to charitable giving, you might think of writing a check, rounding up your purchase to charity, or making a direct online donation. However, there is another option that can be even more beneficial for both the donor and the charity: donating stocks.

More and more people are turning to socially responsible investing. In fact, according to a 2020 report by the US SIF Foundation, sustainable, responsible, and impact investing in the U.S. has grown by 42% in the past two years, with $17.1 trillion invested. As you might suspect, there’s a  growing demand working in parallel for financial institutions to align with customers’ values and present them with opportunities to make impactful investments. This sort of sustainable investing is especially relevant to millennial and Gen Z investors. According to a survey conducted by Morgan Stanley, 84% of millennial investors are interested in sustainable investing and are twice as likely as investors overall to make sustainable investment decisions.

The intersection of sustainability and innovation is where both traditional financial institutions and modern fintech companies can shine: by offering the option to donate stocks. While traditional donation methods like writing a check or making a direct online donation still have their place, donating stocks can be an even more impactful way to give.

At its core, generosity makes people happier. How can financial institutions channel this phenomenon to improve business? Is there a win-win-win scenario that can benefit everyday people. nonprofits, and financial institutions?

Read on to learn about four benefits for financial institutions of offering stock donation options.

4 benefits of facilitating stock donations

1. Foster customer loyalty

According to a 2023 survey by GoBankingRates, just over 1 in 5 Americans said they would consider leaving their current bank for a better service or product offering. Banks and similar financial institutions need to be creative in order to retain customers – and tech innovation plays a central role. One way for banks to stay innovative is to offer customers a simple way to diversify their methods of donating to charity.

As technology continues to advance, customers expect more convenient and personalized experiences from their banks. Offering additional services like donating stocks can help banks differentiate themselves from competitors and increase customer loyalty. Interestingly, 68% of Fidelity Charitable contributions in 2020 were made in the form of more strategic non-cash assets, including publicly traded securities (stocks, bonds and mutual funds) and non-publicly traded assets (private stock, restricted stock and limited partnership interests), so this trend is certainly rising. Providing customers with more opportunities to engage with charitable causes and giving can also help build a stronger sense of community around the bank's brand. If customers know and trust that their bank is committed to impacting the world in a positive way, they will be more inclined to be committed to that bank.

2. Acquire new customers

Offering customers the option to donate stocks to charity can be an effective way for banks to acquire new customers who might not have considered their services before. It also serves as a powerful marketing tool. As more and more people prioritize socially responsible investing and donating (17% of Americans plan to increase donations in 2023), banks that offer a convenient and accessible way for customers to donate appreciated assets like stocks are likely to attract new business. Millennials and Gen Z in particular are interested in investing with companies that align with their values, and are more likely to donate to charity through online giving, including appreciated assets like stocks.

By offering stock donation options and aligning their brand with charitable causes, banks can differentiate themselves from their competitors and attract a new generation of customers who value socially responsible investing and charitable giving. Additionally, the option to donate stocks may incentivize existing customers to use the bank's other services and products, increasing customer retention and engagement.

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3. Make an impact

Financial companies have a unique opportunity to drive positive change at scale. 81% of U.S. households - or 107.9 million people- were “fully banked” in 2021, meaning they had a traditional bank account and didn’t use any alternative financial products throughout the year. Adding easy donation options directly in a platform that nearly all Americans are familiar with - their bank - has the potential to drastically increase funds for nonprofits. Charities rely on donations to make a difference in the lives of those they serve, and by simplifying the process of donating stocks, fintech companies can enable these organizations to have an even greater impact on their communities. It’s a powerful way for companies to demonstrate their commitment to making a positive impact on society.

The bottom line is that banks have a responsibility to contribute to the communities they serve and to be good corporate citizens. By facilitating easy access to donating, banks can help to support causes that align with their customers’ values and improve the lives of those in their communities.

4. Tax benefits

Donating stocks can be a tax-efficient way to give to charity. When you donate stocks that have appreciated in value, you can receive a tax deduction for the full market value of the stock at the time of the donation, and you won't have to pay capital gains tax on the appreciation. This can be a win-win for both the donor and the charity, as the charity receives a larger donation than it would if the donor sold the stock and donated the proceeds after paying capital gains tax.

In conclusion

Financial institutions should consider offering the option to donate stocks as a way to tap into the growing trend of socially responsible investing, build loyalty with their customers, attract new customers, and make a positive impact in their communities. By embracing this approach, banks and other financial institutions can differentiate themselves from their competitors and demonstrate their commitment to creating a better world.

If you’re curious to learn more about how banks can introduce stock donation options to their customers – or donation options in any form – book a demo with Change today.

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