EEVblog Electronics Community Forum
Products => Crowd Funded Projects => Topic started by: MicroBlocks on September 06, 2016, 06:13:37 am
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Today i got the update policy from paypal.
One interesting line was:
Payments for the following are not eligible for reimbursement under PayPal Buyer Protection:
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Payments on crowdfunding platforms
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First nail in the coffin?
After this credit card companies will follow quickly.
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This may be old news, I found this link:
http://www.cnbc.com/2016/05/09/paypal-pulls-buyer-protection-for-crowdfunding-sites.html (http://www.cnbc.com/2016/05/09/paypal-pulls-buyer-protection-for-crowdfunding-sites.html)
As far as Paypal, VISA and credit card companies are concerned, they evaluate the risks of purchases from certain "vendors" according to the number of requests for refunds and buyer protection requests. If they see too many percentage of people having problems with a certain vendor, they will revoke their dealing with that vendor, charge enormous transaction fees to the vendor or refuse to honor buyer protection.
For example, say an average retail store has maybe 0.5% of it's transactions disputed or store doesn't issue refunds, so customer complains and VISA refunds money. Therefore they would charge the store a higher service fee (say 3% instead of 2%) per transaction to cover the "bad payments". Same goes if you enter card numbers MANUALLY instead of using a CHIP-CARD, because the level of fraud and complaints is higher. So all manually-processed numbers get deducted say 2.5% instead of 1.8% (or whatever).
Why should crowd-funding sites be any different? They claim to give 2-3% (or more) to credit card companies, the bank and whatever, keep another 5% (for example) and then the campaign gets the rest.
Well, if there are HIGH NUMBERS of bad campaigns, and VISA/Paypal have buyer protection, then they will not be able to honor the refund. Why? Because once the money has left their hands, they can't just "reverse the transaction" and get it back. The campaign takes the money and runs... leaving a bunch of people a year later complaining and asking for their money back. That money comes from VISA's insurance.. the extra % they charged the vendor/platform for doing the processing. That's fine to cover a few people but not enough to pay back 100's or 1000's of people, a huge percentage of the buyers.
Now eBay can handle things differently because they can see statistically how their buyers/vendors behave, their ratings, feedback and so on. The risk is inherently less and most transactions occur without much of a hitch and they have millions every day I would imagine. So they have a good control on the numbers. Also, everything usually is over in a few days, weeks or months at most. Crowd-funding takes years and has much higher rate of defaults and scams and disappointment.
Sadly, I do not think this will make a dent in crowd-funding. In fact, the more I think about it, the less I think it can or should be regulated. What will eventually stop it is when enough people get BURNED and learn the hard way. Nobody is forcing anyone to buy into crowd-sourcing. You are FREE to use your brain and decide if a product is real or too good to be true. You are free to risk your money. If you are stupid, or greedy, you should lose your money and learn from your mistake.
The unfortunate side-effect is that legitimate hard-working folk who actually DO deliver on their crowd-funding campaigns will suffer. So the bottom line is, do your research. But no matter what the campaign, whether it seems possible or far-fetched, anything can and will go wrong... there is no guaranty of delivery. You can only go on the trust and reputation of the people involved.... And we all know how Batteroo, and Airing and many other so-called "experts" with big degrees and industry leadership have fared, don't we?