Monday, May 9, 2016

PayPal won't refund money sent to crowdfunding projects

PayPal seems to have noticed a sharp increase in failed crowdfunding projects, and is now bailing out on its Purchase Protection plan in this area. From June 25th onward, you'll crowdfunding payments will be ineligible for protection.

Using PayPal to make online payments is attractive on several fronts. Not only you don't have to enter your credit card data into strange online stores, but you get Purchase Protection as well, that allows you to ask for a refund should anything go wrong.

But crowdfunding projects are a complete different beast, and Paypal is ending its Purchase Protection for these projects. The thing is, a crowdfunding project is basically an investment. It's not a sale nor even a pre-sale, but that didn't stop users from asking their money back when such projects go south (and sadly, there's no shortage of those.) Interestingly enough, this change will impact Indiegogo the most (as Kickstarter doesn't accept PayPal) which has traditionally been the home for most fraudulent and failed projects - even though Kickstarter also has its fair share, though not as many.

In any case, this is just a reminder for, when it comes to crowdfunding projects, you're basically lending money to an unknown party based on trust. And that may pan out... or not. Just don't go crying to PayPal because you made a bad bet, at least not after June 25th.

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