Many Reward-Based Crowdfunding Projects Are 'Non-Cancellable and Non-Refundable' Investments

Consumer Agency's Monitoring Results of Six Major Platforms

Status of Ready-Made Rewards in Reward-Based Crowdfunding Projects.

[Asia Economy Reporter Lim Chun-han] Recently, the market for "reward-based crowdfunding" platforms has been growing, but it has been revealed that many cases deviate from the original purpose and merely involve group purchases of ready-made products. Additionally, a significant number of platforms have not established appropriate refund policies, making it difficult for investors to get their money back even when there are issues with the products or delivery.

On the 2nd, the Korea Consumer Agency announced that, after monitoring 312 reward-based crowdfunding projects from six major platform operators between March 31 and April 8, 45.8% (143 projects) provided ready-made products as rewards for investment.

The Consumer Agency pointed out that, after investigating 10 platform operators, many lacked proper refund policies related to simple change of mind and other issues. Among the 10 platforms, 8 did not allow investment cancellations due to simple change of mind during the project period. Only 3 platforms allowed refunds if the product provided as a reward was defective or differed from the description or advertisement. Only one platform had regulations permitting refund requests in cases where reward delivery was delayed.

Many consumers thought that reward-based crowdfunding was not much different from online shopping malls. According to a survey of 500 people who participated in reward-based crowdfunding more than twice in the past year, 65.8% responded that it was similar to online shopping malls. 68.4% reported having experienced damages during the funding process. The damage cases (multiple responses allowed) were delivery delays (51%), poor product quality (35.4%), and rewards different from the description or advertisement (30.0%), in that order.

The Consumer Agency recommended that reward-based crowdfunding platform operators strengthen their internal screening criteria to ensure that projects invest in new products rather than ready-made products, which is the original purpose of reward-based crowdfunding. They also advised improving terms and conditions to distinguish projects involving ready-made products from reward-based crowdfunding, guaranteeing consumers’ rights such as the right to withdraw from contracts.

This content was produced with the assistance of AI translation services.