PayPal sorts out its crowdfunding policy

17 Mar 2014  by   Paul Younger
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Crowdfunding a game in advance of its release is now the norm but that wasn’t always the case. Game developers needed some way to get the funds for their projects and the most obvious method of payment was through PayPal.

Many developers have struggled to implement a PayPal payment system for their campaigns due to PayPal’s policy on crowdfunding and in the end some just gave up or spent weeks attempting to rectify the problem with PayPal.

The reason crowdfunding was such a grey area for PayPal is that a project has no tangible product when the campaign launches. PayPal were uncomfortable to shift funds to a developer in case the product never accentually materialised.

PayPal’s Chief Risk Officer Tomer Barel explains why crowdfunding is such an issue for the company on a new blog update.

“There is a distinction between crowdfunding and “preselling”. 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.”

“Many crowdfunding sites allow their campaign owners to pull money out before they have reached the final goal in order to begin creating and funding the concept, a process that often begins even while the crowdfunding process using PayPal is continuing. If it is not made clear that there is no guarantee of product delivery, this can cause regulatory and risk issues (and upset customers) when the final goal isn’t reached.”

PayPal has realised that their policy needed some tweaking and new guidelines were drawn up in which they “welcome” developers to “raise money for video games, movies, or new gadgets”.

It’s taken some time for PayPal to clarify their position on crowdfunding. Developers such as Crate Entertainment who were raising funds for Grim Dawn had real problems with PayPal, it was an incredibly frustrating experience for them. Let’s hope PayPal’s policy is now clear and developers can crack on with development instead of worrying how they can receive the funding.

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