How New School Processors are Catering to Crowdfunders

Payments for crowdfunding platforms have developed to meet a growing demand for functional, flexible and practical payment interfaces.

Well-known payments giants like Amazon Payments and PayPal operate the payments of some of the most popular rewards-based crowdsourcing sites around, but despite their strong reputability in the payments industry, their business models aren’t necessarily adapted to the diverging needs of crowdfunding.

The practice is relatively new and requires different risk assessment approaches than other financial ventures.

Indiegogo, one of the more popular rewards-based crowdfunding platforms, uses PayPal as one of its payment types.

Crowdfunders have had problems with PayPal when it would freeze crowdfunding campaigner’s accounts for purposes of fraud detection.

Such a delay, even when remedied, can damage a project’s enterprise by withholding necessary startup capital.

PayPal has since embarked to fix this issue by rolling out new policies to support entrepreneurs in a productive way while still being thorough and forthright about fraud detection from a campaign’s start.

Kickstarter uses Amazon Payments as its payments interface, which has the benefit of easy access for all potential contributors with Amazon accounts.

However, Amazon Payments can be problematic for campaign starters who have to go through a certification process in order to set up an account with Amazon that can take a week or more.

As crowdfunding has gained popularity, more payments interfaces have emerged, giving campaign-launchers more options outside of major players like Kickstarter and Indiegogo.

Such interfaces are created with crowdfunding in mind and are often more flexible to the myriad of needs of crowdfunding and its campaigners than more longstanding companies like PayPal.

Payment providers like WePay and Stripe differ from PayPal and Amazon in that they’re created with crowdfunding platforms in mind, whereas Amazon Payments is very selective in the crowdfunding platforms they work with.

Therefore, interfaces like WePay and Stripe are more malleable for the platform in question, allowing crowdfunding platforms to mold the payments experience to their particular needs - a very important attribute as niche crowdfunding platforms for certain verticals or sectors grows in popularity.

WePay and Stripe incorporate a fraud-detection system that places investigative pressure in the start of a campaign rather than in the middle or end of the campaign process, thereby employing fraud-detection without freezing campaigner’s funds to prevent losses.

Bitcoin is another payment interface that is gaining popularity amongst crowdfunding platforms.

Since Bitcoin is a decentralized system, its transaction fees are less than other payment methods and also allows more freedom for users without sacrificing security and control.

The growing variety in payments is exciting in that it democratizes crowdfunding as a response to a need for more flexible and innovative payments solutions for more innovative and unconventional crowdfunding initiatives.