Courtesy of GoFundMe, crowdfunding now comes with a guarantee, of sorts

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TechCrunch | | Oct 4, 2016

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Unscrupulous scammers have been pilfering money out of charity donation boxes for as long as they have existed. The rapid rise of crowdfunding platforms has moved this practice into cyberspace. GoFundMe today announced that it is fighting back with a limited guarantee, ensuring that the money you drop in a collection bucket goes where you think it does.

Fraud does happen on platforms such as Indiegogo and Kickstarter, but given that backers on product-driven crowdfunding platforms usually expect to get a product in return (even though it may not always be the product they expect), it eventually becomes obvious when fraud has occurred. This isn’t the case for platforms aiming at cause- and charity-based giving, such as GoFundMe, where a donor’s involvement with a campaign often ends as soon as the donation is made.

Between the ease of setting up a campaign, the difficulty of detecting fraud and the ability to set up campaigns on someone else’s behalf, rooting out fraud on online donation sites can be tremendously complicated. It is against this backdrop that GoFundMe is adding a second layer of defense, in the form of a guarantee to its donors and recipients.

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The guarantee is limited in a few important ways, which I believe weakens the company’s commitment to tidying up its image.

In the aftermath of a natural disaster, a number of funding campaigns tend to pop up. After the recent flooding in Louisiana, for example, the Louisiana Record reported that more than 6,400 campaigns were launched, causing the state’s Attorney General to pay extra close attention.

Let’s be clear: Most of the campaigns on the platform are created with good intentions and the money will find its way to the intended targets. Some of them, however, have all the legitimacy of the wife of a recently deceased prince whose father has left him a $1.5 billion goldmine and who needs your help to unlock an inheritance in six easy steps.

A battle of trust

On crowdfunding platforms — and especially ones that involve charitable giving — trust is the No. 1 currency. This puts GoFundMe and its peers in a difficult position. The media spotlight certainly helps raise awareness of the platforms, and successfully raising $10 million for the Louisiana flood victims is a fantastic story. On the flip side, GoFundMe is also regularly in the media’s spotlight with a slowly rising tide of headlines of fraud on the platform, giving some potential donors pause for thought before they hit the “Donate Now” button.

“GoFundMe wouldn’t exist without the empathy of our donors, and the GoFundMe Guarantee is about protecting their generosity with the industry’s first and only guarantee,” Rob Solomon, GoFundMe CEO said. “We want every donor to know that we have their back. It’s a big deal to give, and we want there to be complete peace of mind when you donate on our platform.”

GoFundMe’s PR team is eager to point out that fraud is exceedingly rare, claiming that less than 0.1 percent of all campaigns awaken cause for concern. In its battle to win over the hearts and minds of the backers and the media, offering a guarantee will go a long way, but the guarantee is limited in a few important ways, which I believe weakens the company’s commitment to tidying up its image.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1300+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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