Paypal ending payment protection for crowdfunders

Indiegogo et al too subject to "risks and uncertainties" says provider

Customer pledges to crowdfunding campaigns via services such as Indiegogo will no longer be covered by Paypal's payment protection scheme, the provider has announced, citing the nature of the payments as 'investments'.

The move means that anyone who supports a campaign via Paypal will no longer be entitled to recovering their cash should the company behind the campaign fail to deliver on its promises. The changes will come into effect on June 25, 2016, with Paypal saying it will affect all users of the service. Cover for payments to government agencies and gambling companies will also be withdrawn. A full list of the changes coming in the update is available on the company blog.

"In Australia, Brazil, Canada, Japan, United States and other countries, we have excluded payments made to crowdfunding campaigns from our buyer protection programs," a statement reads. "This is consistent with the risks and uncertainties involved in contributing to crowdfunding campaigns, which do not guarantee a return for the investment made in these types of campaigns. We work with our crowdfunding platform partners to encourage fundraisers to communicate the risks involved in investing in their campaign to donors."

Most crowdfunding services don't charge backers until a campaign has hit their target, but if a successful campaign fails to meet the promises it made to backers, recovering costs can prove complex. It's unknown whether Paypal's update will elicit any changes to the policies of crowdfunding entities themselves.

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Latest comments (1)

Iain McNulty Software / Game Developer, YanxenA year ago
Let's cut through the business-speak here, in other words crowd-funded projects are too liable to the developers taking the money and running, and/or not churning out the title promised (especially in the case of Indiegogo's flexible funding model).

Ironically, with the buyer protection out of the picture, Kickstarter will probably allow Paypal as a payment processing merchant now.
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