PayPal policy change to reduce crowdfunding headaches

In the wake of repeated outcry over frozen accounts, PayPal has announced it will be revisiting its policies to better take into account crowdfunding campaigns. Multiple crowdfunding projects have seen their PayPal accounts frozen due to perceived fraud or other discrepancies, including SkullGirls and, more recently, Yatagarasu Attack on Cataclysm. In both cases the issue was eventually resolved, but repeated criticism of the money transfer service's risk assessment management has prompted PayPal to look into "overhauling" its approach. "It's clear that our existing policies and processes aren't working quite right for this particular fundraising model," PayPal's vice president of risk management, Tomer Barel, wrote in an a company blog post. "We are now in the midst of overhauling our policies in this space." Barel continues:

"We're talking to the major crowdfunding players that we work with to put in place a permanent solution that avoids unnecessary account limitations. But making this work for all stakeholders -- contributors, entrepreneurs, crowdfunding sites and us -- is pretty complicated... 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 a policy review is ongoing, PayPal is assigning senior members of its risk management team to oversee crowdfunding campaigns on a case-by-case basis. "It's a small, but important step," says Barel.