Leave a comment

PayPal Drops Crowdfunding Protection

NicoleMotta - May 9, 2016 - 11:23 AM
PayPal Drops Crowdfunding Protection
PayPal has announced that it will soon eliminate Purchase Protection coverage for crowdfunding projects.

(CCM) — Effective June 25th, PayPal is making changes to its User Agreement, including dropping crowdfunding protection. PayPal has announced that it will soon eliminate Purchase Protection coverage for users who donate to crowdfunding projects on platforms like Indiegogo. In a statement on this change, PayPal said, "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." In addition to dropping Purchase Protection for crowdfunding projects, the new policy adds two more categories to the company's list of items ineligible for the feature: payments or purchases from government agencies, as well as gambling, gaming, and other activities with entry fees and prizes.

While PayPal is dropping support for users donating to crowdfunding campaigns, it is not completely eliminating its support for crowdfunding. "We work with our crowdfunding platform partners to encourage fundraisers to communicate the risks involved in investing in their campaign to donors," said PayPal. An independent study by the University of Pennsylvania into popular crowdfunding site Kickstarter revealed that 9 percent of its projects "failed to deliver rewards." The study also showed that projects with goals under $1000 were most likely to fail, but a whopping 73 percent of funders would still donate to another project if one failed. In response to the study, Kickstarter said, "We want everyone to understand exactly how Kickstarter works — that it's not a store. Amid creativity and innovation, there is risk and failure."

Photo: © iStock.
Add comment


Great for PayPal. Thats a smart move and other payment companies will likely follow suite. Personally after getting burnt backing a few Kickstarter campaigns I moved onto crowdspeaking. Platforms like HeadTalker allow me to help creators without getting screwed. I backed 40+ Kickstarters and 6 flopped. 3 of the 34 rewards I got were broken by the first day I got them. Kickstarter is fun but don't expect too much or you'll get a sour taste in your mouth like I did.