Today, PayPal has announced that as of June 26th, 2016, they would no longer be offering payment protection for crowdfunding campaigns, labeling them as “ineligible… [for] Purchase Protection…” and stating that crowdfunding would no longer be protected because it is seen as more of an investment than a purchase.
This is somewhat similar to what Kickstarter has said regarding campaign fulfillment, with the company revealing last year that over 9 percent of crowdfunded campaigns failed to deliver a product. One can assume that Indiegogo, who allows for PayPal usage in their crowdfunding campaigns, has a similar ratio.
Below is the full statement from PayPal:
“In Australia, Brazil, Canada, Japan, United States and other countries, we have excluded payments made to crowdfunding campaigns from our buyer protection programs. 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.”
These ‘risks’ are highlighted in PayPal’s policy, where they state that “Gambling, gaming and/or any other activity with an entry fee and a prize” would also be rendered ineligible for ‘Purchase Protection.’
As crowdfunding is doubtlessly a nightmare to properly offer ‘Purchase Protection’ for, this turn of events should not come as much of a surprise when one thinks of the reasoning behind PayPal’s decision. Given the propensity for failed projects and other ugly scenarios that have occurred in the past, it is a given that PayPal has footed the bill of disgruntled would-be crowdfunders one time too many. On the bright side, perhaps Kickstarter will finally deign themselves to support PayPal. It’s certainly taken them long enough.
What do you think of PayPal’s decision and the potential ramifications? Let us know in the comments!