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Comment by bowlofpetunias | Hacker News Reader

People should start to understand that crowdfunding is not a trivial business from a legal and regulatory perspective.

Yes, PayPal sucks, but you can run into this crap with any bank or payment service provider you don't have clear and direct business dealings with, and who you haven't informed upfront about what you're up to.

Also, it's just plain lazy and irresponsible of IndieGogo to pay out via PayPal, at least not without big fat warning signs. Of all the options available, this is pretty much the worst.

It's very naive to think that you can just accept money in exchange for unverifiable promises and not set off all kinds of alarm bells. Expect frozen assets to start to happen more and more often with crowdfunding, and not just at PayPal.

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I'm surprised PayPal still haven't taken a clear stance against crowdfunding like Amazon Payments have. That's part of the problem - it's really vague as to what situations PayPal will intervene in.

That's funny, because Amazon Payments is exactly what crowdfunding site Kickstarter uses[0] to pay out to projects.

[0]: http://www.kickstarter.com/help/amazon

I think that Kickstarter has their shit together, and the risk of a chargeback from Kickstarter to [project leader] is relatively low, compared to the risk of a project funded directly through Amazon Payments.

I don't know how indiegogo works, but in the case of Kickstarter, I would assume that Kickstarter is collecting the payments, arbiter of refunds in the case a goal is not met, and does not have access to the money in the interim.

Then Kickstarter uses Amazon Payments to disburse the funds to project lead? I am uneducated and did not contribute to the fund, so I don't really know how it works. Can you enlighten?

Not 100% sure but I think kickstarter uses amazon's deferred payment api. Basically they get authorizations from the donors to be charged a certain amount on their credit card, but the amount isn't charged until the crowdfunding ends successfully. If the goal isn't reached nothing is charged on credit cards, if it is, the money is sent to kickstarter's amazon payments account, and from there kickstarter sends it to the project after taking its cut.

Ah. So, it sounds lower risk for Amazon, but I don't really know how indiegogo and paypal interoperate, so maybe it's the same exact pattern.

Sounds like a fantastic racket for Kickstarter!

EDIT: I've read more of the comments and it sounds like IndieGoGo has nothing to do with Paypal. They were separate funding efforts, from the same landing page. "You can pay by IndieGoGo or Paypal."

I presume the reason I couldn't figure this out from the Mailpile website is that they stopped mentioning the PayPal option when it was clear that Mailpile wasn't going to get paid by PayPal in any kind of short order. You can pay IndieGoGo or you can send Bitcoins.

That's how I'd run my business if I didn't have a product yet. You'd have to be crazy to use PayPal for that.

EDIT2: I guess IndieGoGo does offer the PayPal option. I don't understand enough about how this is put together to have an informed opinion. If PPUSD and credit cards are all handled by PayPal, then it would seem that PayPal does indeed have some risk. Maybe it's actually accepting credit cards that's crazy. _THOSE_ have some serious anti-fraud guarantees, and there's more to fraud than simple non-delivery.

Yeah, and after kickstarter got big Amazon got cold feet and won't let anyone else in http://www.techdirt.com/articles/20120809/09213019977/amazon...

Amazon Payments took a stance against it? When? Kickstarter uses them.

About two years ago - Kickstarter is grandfathered in.

They kicked out unglue.it: "Amazon has decided against “boarding fresh crowdfunding accounts at this time”. "

http://www.techdirt.com/articles/20120809/09213019977/amazon...

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