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PayPal overhauling security policies after crowdfunding issues

updated 07:07 am EDT, Fri September 13, 2013

Changes to come after freezing, releasing Indiegogo campaign funds

PayPal is pledging to overhaul its policies to improve how it deals with crowdfunding campaigns in the future. The payment service is looking into what it needs to change in order to preserve security while also allowing for such funding events to take place, after it recently and publicly froze funds destined to prominent crowdfunded projects.

A post by Tomer Barel, vice president of Risk Management at PayPal, acknowledges the existence of crowdfunding sites, such as Kickstarter and Indiegogo, but states that "because the model is so new, it is potentially open to abuse. PayPal has a responsibility to ensure that the system remains secure, in compliance with Government regulations around the world, and that consumers who contribute to these campaigns understand where their money is going." While it is open to allowing its payment system to be used for such efforts, "it's clear that our existing policies and processes aren't working quite right for this particular fundraising model."

While PayPal doesn't go into detail for what it will be changing In its policies for the most part, Barel does reveal that accounts belonging to crowdfunding campaigns will be reviewed by a "senior member of my team before any action is taken." This in theory will allow for a faster response time for actions in such campaigns, and allows project organizers to avoid the usual feedback channels endured by normal users.

In recent months, PayPal has prevented funds contributed towards projects from reaching its intended destination, such as in the case of open source mail client Mailpile, which Engadget notes found approximately $45,000 in donations being frozen in its PayPal account, under the apparent justification of protecting against charge-backs. After a number of reports, PayPal allowed the funds to go through, as well as donating $1,000 to the project.



By Electronista Staff
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