PayPal is amending its Payment Protection Policy in various countries to exclude protection for Crowdfunding projects.
Although the UK is not in the list of countries currently affected, Paypal are not ruling out extending it to all countries in the near future, which we anticipate them doing so.
The countries which have the new policy includes the US, Canada, Japan and Brazil.
So why have they made this move? Well, if you didn’t already know, Crowdfunding projects are not always guaranteed to deliver. For example, a recent study into the crowdfunded web site, Kickstarter, found that 9% of projects ‘failed to deliver rewards‘. What this means is that those people who invested in an idea on the site lost their money.
And there you have it. Any crowdfunded project does not guarantee a reward, product or whatever you invested your money into. If the project fails, you lose your money.
But the trend of investing in crowdfunded projects is growing and it is gaining a lot of popularity. So when all these new customers lose their money because an idea fails, they are not impressed and want their money back. They don’t understand the risk associated with crowdfunding. And because of the growing popularity of crowdfunding, more opportunities to invest are popping up.
Therefore, PayPal have stated that their amendment “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“, i.e. they don’t see why they should also share in your risk.
So, when looking at a crowdfunded project, remember that there is a chance that the project could fail and you could lose your money. But it could also fly and you end up with that innovative and sought after item that initially gained your interest! And that’s why crowdfunding exists!