Paypal clarifies crowdfunding terms
"There is a distinction between crowdfunding and preselling"
Online payments company Paypal is working with crowdfunding sites to minimise the problems posed by campaigns that don't deliver.
"PayPal has started to engage crowdfunding campaign owners early on to clearly understand their campaign goals and help them ensure their campaigns are compliant with our policies and government regulations," said Tomer Barel, chief risk officer, in the company blog.
"Together with the crowdfunding sites, we identify if campaigns are strictly fundraising or preselling merchandise. We enable their campaigns without interrupting payments under the condition that the campaign owner is explicit and transparent to their contributors that there is no guarantee of delivery regarding the rewards being offered upon contribution."
He also pointed out Paypal was the first company of its kind to specifically change its policy to address the complications of crowdfunding.
"At FundRazr we believe the new PayPal policies help clarify to contributors the risks associated with giving to these types of campaigns, commented crowdfunding platform FundRazr's Bob Mulholland.
"It tackles the fundamental problem that contributors need to understand that a project may not be successful and that, if that happens contributors won't receive their product. By ensuring that the contributor is required to acknowledge this risk as part of the payment process, there is a higher probability that they will make a better decision about their participation in the project and will have better expectations of what may happen."