Thinking about this, I suspect people treat charity as only a means to the end of self-cultivation (and sometimes also socializing and teamwork). The personal involvement is the payoff. It's this linkage that fouls when they spend money to get more efficient charity but at the expense of a completely impersonal transaction.

A lot of charities try to personalize the money donation, but that feels like a dirty hack to me. I think in the end we'd be better off cutting the linkage and trying to persuade people that self-cultivation is a worthy but distinct goal. (I think it's seen as a bit unworthy if not sugared with good deeds; consider people's attitude to meditation.)