PayPal PreApproved Payments

14
votes

I am using PayPal PreApproved payments for my crowd funding website, where project backers are only charged if the project is successfully backed.

I am worried that high rate of payments will fail when the PayPal API tries to collect the funds when a project is successful:

  • a backer might not have any funds in their PayPal account
  • a backer might close their account once the project is successful (to intentionally stop payment)
  • a backer might remove/cancel their preapproved payment
  • etc...

There are a number of ways that the payment could fail which would mean that the project owner would not get their funds.

Can anyone suggest a way of tightening or securing payments. Please note, that PayPal will only allow you to use PreApproved payments for crowdfunding. Please also note that project owners need to be able to receive the funds from my site. Sometimes, these funds can be as small as $10 or up to $10,000 so we need to use PayPal to pay them as there is not other method of getting the funds to the project owner

2
paypalpayment

2 Answers

8
votes

I've implemented Paypal Adaptive payments and used them for payments at http://www.wethetrees.com and we had the exact problems you are describing. The capture rate is almost random, we were down to 35% with one campaign and had to manually send all backers invoices.

When capturing we had backers with closed/unauthorized accounts, insufficient funds, unavailable payment methods etc. We switched to just doing direct capture for a while, which is great since we get 100% of all pledges, but Paypal closed our account without notice when one of our campaigns mentioned the word "Cuba".

The solution in the end was to scrap Paypal so now we're using Wepay and Dwolla, and we're considering Bitpay (Bitcoin) as well. Seems to like Paypal wants to kill crowdfunding or doesn't understand it. Anything less than a 90% capture rate is totally unacceptable and will cause projects to fail.

4
votes

Preapproval isn't the only thing they'll allow you to use. That's just one part of the Adaptive Payments API, but you could go with a delayed chained payment, too.

This way your account can be treated sort of like an Escrow. You can use the Pay API to create payments in the system that are split between receivers accordingly. Only the primary receiver would get paid at first, though, and then you can call ExecutePayment to submit the secondary payments from the primary account within 90 days.

This way the primary account holds all of the funds so they're available to pay out when the goal is reached. If the goal is not reached the payments could be refunded.