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With indirect costs as our guide, we examined the financial records of a sample of nonprofits that included domestic and global organizations with annual budgets ranging from $2 million to $650 million. Regardless of their missions, which varied greatly, indirect costs fell into four general categories: administrative expenses, network and field, physical assets, and knowledge management. Because nonprofits can have very different funding models, we decided not to include fundraising costs as indirect costs.
The advantage of a pay-what-it-takes policy is that it eliminates the need for the shadow economy in which funders and grantees purposely obscure financial data and quietly craft end runs around the arbitrary indirect cost spending caps imposed by most foundations. Foundation program officers, for example, often team up with grantees to recategorize underfunded indirect costs as direct costs that the funder covers. Other times, funders approve capacity-building or general operating grants to close the indirect cost gap. As a result, we do not know as a sector what it really costs to achieve impact.
Accurate, comparable data on indirect costs would, for the first time, make it possible to create a set of benchmarks that foundations and nonprofits could use to gauge costs for organizations of comparable size and focus. The indirect costs for food pantries, for example, would look different from the cost structures of nonprofits with regional networks, like the YMCA. And arts organizations would differ from those serving the homeless.
Of course, just making bigger grants to cover indirect costs does not guarantee the intended results. Our extensive literature review on organizational effectiveness confirmed that the social sector has accumulated anecdotal experience linking fuller funding of indirect costs to greater impact, but not much evidence. So early adopters that engage in benchmarking should work together to measure and learn in a way that will advance the state of evidence about what works for the field.
These open questions underscore the need for foundations and nonprofits to set their sights on a research agenda that tests the practical application of segmentation and benchmarking of indirect costs. Such an undertaking would harness the growing momentum for change in the grantmaking status quo while pursuing a path of proven value in the private sector. A lot of hard work lies ahead for paying-what-it-takes to become the solution to breaking the nonprofit starvation cycle, but this work is crucial to building sustainable, long lasting nonprofits that are real agents of change.
-In the top right hand corner of each card, put a theme or category that this card belongs to. If a card can fit in multiple categories, just make a duplicate card. Robert uses color coded cards for an extra layer of organization.
*Animals (Weird stories about animals. For instance, according to the book One Summer by Bill Bryson, the hotel that Babe Ruth lived in for most of his career had a live seal living in the lobby fountain)
-If you are working on a book project where there are a limited amount of themes or you know exactly what they are, it makes sense to introduce a shorthand. For instance, with my last book Growth Hacker Marketing, I had 6 themes that roughly corresponded with the chapters and structure of the book:
Remember there is no right and wrong way to do this. The system that I have was taught to me by someone and I made my own modifications. His way works best for him, and I have a way that works better for me.
According to a large 2022 study, men tend to say \"I love you\" more quickly than women. It takes men an average of 108 days (about 4 months) to confess love and women an average of around 123 days (about 4 months).
For example, those who believe in love at first sight may tell you that it can take just an instant to feel the sparkle. Although, they may also note that this feeling is rarely reciprocated and that immediate love often goes unrequited.
Someone may fall in love with you in a few weeks after interacting positively with you in different situations. But loving you too much, too soon, may also be a sign that they may experience emotional challenges.
Relationship experts agree that falling in love is about knowing who the other person is, more than how soon that happens. This involves learning about their beliefs, challenges, experiences, and behaviors across situations.
We found that embedded finance already accounted for $2.6 trillion, or nearly 5% of total US financial transactions, in 2021, and by 2026 it will exceed $7 trillion, or over 10% of total US transaction value. Demand will grow because the proposition promises to improve customer experiences and financial access, along with providing cost-reduction and risk-reduction benefits to companies throughout the value chain.
We expect the projections in this report to persist despite the current macroeconomic volatility and near-term recession risk. Our projections cover a five-year horizon that looks beyond short-term economic turmoil, including a recession that would chiefly affect the prospects for embedded payments over the next 18 months. We would expect accelerated growth coming out of any future recession, resulting in broadly the same outcomes over a five-year horizon. While all market projections come with risks, our forecasts reflect a sensible central projection of the growth trends in this market.
By 2026, we project that consumer payment transactions through embedded platforms will more than double, reaching $3.5 trillion and earning platforms and enablers $21 billion in revenue. This will flow from faster penetration of embedded payments among industries including retail and food services, where it will nearly double to capture 70% of SMB transaction volume. We might also see new vertical categories emerge as digital payments become more prevalent.
SMBs, which represent 57% of B2B card volume, will be significant adopters as embedded penetration rises from 5% in 2021 to 15% in 2026. Much of the growth here rides on ensuring that late or unpaid invoices are fulfilled, generally by integrating a one-click payment mechanism, initiated by the customer upon receipt. This is especially valuable for SMBs, for whom late payments can threaten viability; by contrast, large enterprises generally have treasury solutions offered by traditional banks, often bundled with lending and investment products.
Some $1.4 trillion poured through online retailers and marketplaces in the US in 2021. Around $50 billion of that went through a BNPL platform, or between 3% and 4% of total sales. By 2026, the total will grow substantially to reach $2.4 trillion in transaction value. With between 10% and 12% forecasted to be embedded, this would bring the BNPL market size to an impressive $265 billion.
We estimate that US BNPL revenues for enablers and platforms came to nearly $1 billion in 2021. We expect that sum to grow (albeit with compressed margins) to around $4 billion by 2026 (see Figure 7). BNPL transactions have soared in Europe, and the US BNPL market will likely follow suit over the next few years. In the UK, BNPL accounts for roughly 5% of online transactions, while in Sweden it makes up 23% of all transactions online.
Competitive intensity will likely compress margins. Today, BNPL enablers tend to achieve take rates of 150 to 180 basis points. By 2026, we anticipate that take rates will shrink to 130 to 150 basis points, despite a potentially rising interest rate environment.
Enabler take rates will likely decline. We estimate that PoS enablers today take a healthy 9% to 11% of the credit value. By 2026, we anticipate a decline to between 8% and 9%. This is still significant, especially when compared with the transaction returns of BNPL, but PoS has higher servicing costs as a consequence of the business model.
Examples of B2B embedded lending include Mindbody Capital, which offers credit to its SMB wellness customers through the core solution powered by Parafin, and Toast, the restaurant management and PoS solution that launched Toast Capital in 2019 to lend to its restaurant customers across the US.
As of 2021, we estimate that around $12 billion in B2B loans transacts via embedded finance. This is based on a total SMB loan value of just under $400 billion, where the individual loans are less than $1 million in value. Of this total, embedded penetration stood at around 3%, underpinned by the market shares of the relative embedded finance balance sheet providers, such as Cross River Bank. We anticipate rapid growth through 2026, with a fivefold increase in embedded B2B lending, bringing the loan volume to between $50 billion and $75 billion, or around 15% of the total, which will also rise slightly to around $430 billion.
Starting as a way for fintechs and neobanks to borrow the banking license of an established bank, embedded banking has historically been limited to prepaid or debit cards. New use cases then emerged, among gig workers and sole proprietors, and our research indicates that the market growth will continue alongside the rise of a broad set of enablers, including Galileo, Treasury Prime, Stripe, and Marqeta.
Some larger platforms may decide to bring in-house certain enabling services in order to unlock marginal gains across that large scale. Relevant services could include some credit and market risk functions, as well as sales and support services, such as collections, which touch customers directly. This already occurs in payments, where platforms are becoming payment facilitators to maximize vertical integration and profits.
In the traditional banking value chain, banks provided products and largely owned distribution and customer primacy. Embedded finance unbundles this business model. Banks still play the role of a regulated entity, managing the associated risks and balance sheets in a low-margin, low-growth business. For larger banks that hold significant customer primacy, the regulated entity role alone is no longer a viable option (see Figure 12).
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