Online payments system Paypal will soon be excluding payments made to crowdfunding initiatives from its Purchase Protection policy.
From 25 June, users who contribute via Paypal to crowdfunded projects that fail or do not deliver the returns they promise to backers, will not be able to receive refunds from Paypal.
"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," the payments company said in a statement.
Other items and services made ineligible for Purchase Protection by the approaching policy update include "gambling, gaming and/or any other activity with an entry fee and a prize," and "anything purchased from or an amount paid to a government agency".
Risky business
In an independent study into popular crowdfunding platform Kickstarter, Professor Ethan Mollick of Wharton School at the University of Pennsylvania found that 9% of Kickstarter-funded projects failed to deliver rewards to backers for their funding. Mollick also found that just 13% of failed projects offered refunds to their unrewarded backers.
"[I]t is important to realise that these results apply only to Kickstarter, and other crowdfunding methods and platforms that have different policies or approaches may have higher failure rates," said Mollick.
"We want everyone to understand exactly how Kickstarter works - that it's not a store, and that amid creativity and innovation there is risk and failure," the platform said in comments about the study.
"We work with our crowdfunding platform partners to encourage fundraisers to communicate the risks involved in investing in their campaign to donors," Paypal said in its statement about the policy change.
Share