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PayPal updates its policies on crowdfunding

PayPal updates its policies on crowdfunding

March 14, 2014 | By Christian Nutt

PayPal's chief risk officer, Tomer Barel, has posted a new official blog regarding its new policies on releasing money to crowdfunded projects.

In the past, the popular payment service -- which is used by many home-grown crowdfunding efforts and also by IndieGoGo -- has been hesitant to release the totality of funds raised because of the possibility that users who are unsatisfied with the results of a crowdfunding campaign may choose to reverse their payments, which could get tricky if they've already been disbursed.

This has affected game projects including Yatagarasu, Skullgirls, and Dreamfall Chapters -- all of which ran into issues getting funds pledged by fans released by PayPal.

The company now draws a distinction between "preselling" and "crowdfunding":

"In crowdfunding, the process involves speculatively supporting a new concept that may, despite the best of intentions, not make it to market. In 'preselling' there is an expectation that you will get something tangible for your money... even if it takes months for delivery," Barel writes.

Now, Barel writes, PayPal will work with those who run their campaigns to make sure money can be disbursed in a timely manner -- even when it's a riskier crowdfunding effort:

"Together with the crowdfunding sites, we identify if campaigns are strictly fundraising or preselling merchandise. We enable their campaigns without interrupting payments under the condition that the campaign owner is explicit and transparent to their contributors that there is no guarantee of delivery regarding the rewards being offered upon contribution."

To find out more, you can read Barel's blog post or peruse the company's updated rules regarding crowdfunding.

These changes follow on from discussions launched by Barel last September following several high-profile (game and non-game) issues with fund disbursement.

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