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PayPal May Be Trying to Distance Itself From Bad Crowdfunding Campaigns

PayPal HQ

This is an interesting bit of non-GoFundMe news for anyone interested in payments and, more specifically, refunds. As we know, GoFundMe stopped using PayPal years ago. Their reasoning is as follows: “In an effort to ensure a delightful, frustration-free fundraising experience, GoFundMe no longer uses PayPal to process and deliver donations.” As a PayPal user myself, I’m not sure what’s more delightful than swiping my PayPal Business Debit card when there’s money in my account but that’s neither here nor there, I guess.

Crowdfund at your own risk

Though GoFundMe’s anti-PayPal stance isn’t new, PayPal’s policy set to take effect in June is:

PayPal has announced plans to eliminate its Purchase Protection coverage for customers who give money to crowdfunding projects. The new policy takes effect on June 25th, 2016, and says “payments on crowdfunding platforms” are ineligible for protection. The broad move could be a response to the well-documented frequency of fraud and failure on crowdfunding platforms — one Kickstarter study found that 9-percent of all its projects failed to deliver rewards.

This is significant given the fact that PayPal’s Purchase Protection policy could be considered one of the single most important drivers of online commerce in the last nearly two decades. While we can’t protect against ourselves drunk Amazoning at 2 in the morning, we can safely order ugly bootleg dresses from China on eBay and know we’re (mostly) protected from our own stupidity. That extra layer of confidence in PayPal means we can take a gamble on buying things sight unseen from strangers on the internet — which is the entire backbone of ecommerce.

The Verge reports that the change mostly affects Indiegogo, as Kickstarter already has a CYA policy in place preventing chargebacks on undelivered projects.

Of course, you still have the option to whine to your credit card company if you stupidly funded a zero gravity Jägermeister keg slash cooler slash Bluetooth speaker that failed to deliver. Good luck with that.