PayPal makes changes to rules related to crowdfunding

By Nicel Jane Avellana

Mar 14, 2014 08:08 AM EDT

Payments platform PayPal has overhauled its policies related to crowdfunding which would improve their relationship with the crowdfunding community, VentureBeat reported.

The revamped rules come in the wake of dozens of well-known crowdfunding efforts that have had their funds frozen by the e-Bay-owned payments platform. Project creators, like that of Lab Zero Games Chief Executive Officer Peter Batholow, was one of those who experienced the freeze last year. Through crowdfunding, Lab Zero was able to secure about $700,000 for their game Skullgirls. However, PayPal froze the account linked to Lab Zero Games because, according to Batholow, the payments platform was "terrified of chargebacks." Because of the freeze on the company's account, he was not able to give the salaries of his employees on time, the report said.

In the past few months, however, PayPal had already started to roll out the changes. The first is that PayPal is now talking directly with owners of the crowdfunding campaigns early in the game to ensure that they don't run afoul of any of PayPal's rules or that of the government. The second major change is where PayPal and crowdfunding sites collaborate to determine if the campaigns are mainly to pre-sell the merchandise or are strictly done to raise funds, the report said.

PayPal Chief Risk Officer Tomer Barel said that while there are risks to crowdfunding, customers these days now better understand what they are getting into. Together with their partner crowdfunding platforms, PayPal aims to make the difference between crowdfunding and pre-selling very clear for every campaign to those who wish to support it, the report said.

Barel told VentureBeat in an interview, "Once we make that distinction clear, once the consumer has full transparency that this is indeed a crowdfunding initiative and there is a likelihood of [rewards or perks] not being fulfilled, we feel positive we should not interfere and put any limitations on these activities." 

© 2024 VCPOST, All rights reserved. Do not reproduce without permission.

Join the Conversation

Real Time Analytics