Paypal changes policies to support crowdfunding


“Crowdfunding is fundamentally different from regular ecommerce,” begins Tomer Barel, Paypal’s chief risk officer. “There is a distinction between crowdfunding and ‘preselling’. In crowdfunding, the process involves speculatively supporting a new concept that may, despite the best of intentions, not make it to market. In “preselling” there is an expectation that you will get something tangible for your money…even if it takes months for delivery.”

That’s why, Paypal has traditionally not been supported by crowdfunding platforms. That’s changed.

“Many crowdfunding sites allow their campaign owners to pull money out before they have reached the final goal in order to begin creating and funding the concept, a process that often begins even while the crowdfunding process using PayPal is continuing,” says Barel. “If it is not made clear that there is no guarantee of product delivery, this can cause regulatory and risk issues (and upset customers) when the final goal isn’t reached.”

Back in October Paypal began to support Kickstarter and Indiegogo, the major crowdfundung sites, but if you ran your own campaign it was a struggle to get the money vendor’s support. This is changing.

“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.

“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.”

“Over the last few months,” continues Barel, “these changes have allowed us to help thousands of campaigns build momentum and focus on their fundraising goals without interruption.”

This is great news for developers. In the past studios like Project Zomboid’s The Indie Stone have had development stall because pledges from backers were put on hold.