GDPR for Crowdfunding Platforms: Handling Backer and Donor Data

Crowdfunding has transformed how projects get funded. From entrepreneurial ventures to charity-driven campaigns, the ability to tap into the collective spirit of global backers has democratised fundraising. However, with the growing flow of financial resources comes a significant responsibility: backer and donor data protection. Europe’s General Data Protection Regulation (GDPR) sets strict rules regarding the management of personal information, which crowdfunding platforms need to follow assiduously.

Navigating the complex landscape of GDPR can be daunting for platforms that handle sensitive data from thousands, if not millions, of enthusiastic contributors. Understanding the importance of GDPR compliance becomes crucial for crowdfunding platforms to maintain trust and avoid severe penalities. If you’re operating in this space or planning to launch a platform, here’s everything you need to know about handling backer and donor data responsibly.

Who Does GDPR Affect?

The General Data Protection Regulation took full effect in May 2018. Despite being a regulation specific to the European Union (EU), its influence reaches far beyond Europe’s borders. Any company processing data about individuals within the EU, regardless of where that company is based, must comply with GDPR.

This means crowdfunding platforms operating globally are subject to its rules if they have EU-based contributors, even if the projects they support are based outside the EU. Crowdfunding platforms collect vast amounts of personal data, including names, email addresses, postal addresses, financial details, and more. This means GDPR compliance concerns almost every platform globally.

Understanding the Types of Personal Data Collected

Within the crowdfunding ecosystem, platforms gather numerous pieces of personal data during the backer or donor registration process. The nature of the data collected can often include:

– Name, address, and contact details (such as email and phone number)
– Financial information, including credit card or PayPal details
– Location information (necessary for project shipping)
– IP Address and browsing behaviour
– Social media profiles (for social sign-ins)
– Pledging behaviour and donation history

Understanding that this information is considered personal under GDPR is fundamental. The degree of identification provided through this data means that platforms must ensure robust systems are in place to protect contributors’ privacy. Even aspects that might seem trivial, like donor IP addresses, qualify as personal information.

What Does GDPR Define as Lawful Data Processing?

One of GDPR’s core principles centres around the lawful basis for processing personal data. As a crowdfunding platform, establishing a legal basis for handling backer or donor information is critical. There are six lawful bases for processing personal data under GDPR, but the most pertinent ones for crowdfunding platforms are:

1. Consent: This requires active opt-in by the individual, such as a backer agreeing to have their personal information processed when signing up. Implied consent (e.g., pre-ticked checkboxes) is not sufficient.
2. Legitimate Interest: This can apply when processing someone’s data is necessary for a platform’s legitimate activities, provided that these interests are not overridden by the individual’s rights and freedoms.
3. Contractual Necessity: This may be the cornerstone if a contractual agreement requires the platform to handle a user’s data, such as managing a contribution’s payment or providing delivery address details to project creators for rewards.

When using consent as a legal basis, clarity and total transparency are paramount. If a donor or backer consents to data processing, they should clearly know what their data will be used for, how it will be stored, and how they can withdraw their consent if they wish to do so.

The Importance of Data Minimisation

GDPR places significant emphasis on the principle of data minimisation. Crowdfunding platforms should only collect the data that is strictly necessary to achieve their objectives. For example, do you really need to collect a backer’s phone number, or is an email address and postal address sufficient?

In the same vein, platforms should avoid using data for purposes that were not originally stated at the time of collection. A backer providing their email for project updates should not find themselves added to a newsletter or marketing database unless explicit consent is obtained. Ensuring that only relevant and required data is collected reduces exposure in the event of a data breach and aligns with GDPR’s key compliance pillars.

The Requirement for Transparency and Data Subject Rights

Transparency is another guiding principle under GDPR. Backers and donors should be informed, in plain language, how a platform plans to use their information. This information should be presented upfront, typically via privacy policies and user agreements that are easy to access and comprehend.

In addition to transparency, GDPR arms backers and donors with a suite of rights designed to give them control over their personal data. Crowdfunding platforms must create processes to accommodate these rights, including:

1. The right to access – Individuals can request access to the personal data any organisation holds about them.
2. The right to rectification – Users can ask to correct mistakes in their data.
3. The right to erasure (the “right to be forgotten”) – Under specific conditions, backers or donors can request that their data be deleted, for example, if they withdraw consent or if their data is no longer required for its intended purpose.
4. The right to restrict processing – Individuals can ask to limit how their data is being used.
5. The right to data portability – This allows users to request that their data be provided in a structured format that can be shared with another service or platform.
6. The right to object – Individuals can object to having their personal data used in particular ways, such as for direct marketing purposes.

Failure to honour these rights can result in serious violations of GDPR and lead to significant penalties.

Email Campaigns and Consent

Crowdfunding platforms often operate email campaigns to keep backers engaged with projects and alert them of new opportunities for funding. It’s essential to recognise that email marketing, under GDPR, requires explicit consent. A backer who pledges to a project cannot be assumed to have opted into unrelated mailing lists. Instead, users must have explicitly stated that they wish to receive marketing communications.

Equally important is the need for opt-outs. Each email campaign must include a simple, accessible way for backers to unsubscribe from future communications. The regulation makes it clear that ignoring unsubscribe requests is a violation with serious consequences.

Third-Party Integrations and Data Sharing

Most crowdfunding platforms rely on third-party services for payment processing, shipping, or marketing. GDPR requires platforms to ensure that these third parties also operate within the GDPR framework. This means performing due diligence on service providers, particularly if they store or process any EU-based data.

Platforms should have data processing agreements (DPAs) in place with partners to show their commitment to managing backer data securely. If the third-party provider is located outside the EU, such as in the United States, additional provisions—like Standard Contractual Clauses (SCCs)—may be necessary to ensure compliance across borders.

Handling Data Breaches

In the event of a data breach, GDPR sets stringent reporting requirements. If the breach is likely to result in a risk to users’ freedoms or rights (e.g., exposing financial or sensitive personal data), the platform has 72 hours to report the breach to the relevant supervisory authority.

Platforms must notify affected users promptly, outlining what data was compromised and the steps the company is taking to resolve the issue. Crowdfunding platforms, which store sensitive financial information, are often prime targets for hackers. Therefore, it’s essential to have strong encryption protocols and security measures in place to mitigate risks.

Fines and Penalties for Non-Compliance

The consequences for failing to adhere to GDPR can be quite severe. Fines can escalate to as much as 4% of a company’s global annual turnover or €20 million (whichever is higher), depending on the severity of the infraction.

While crowdfunding platforms may focus on creative projects or social causes, they are not exempt from steep regulatory compliance demands. Ignorance of the law is no defence, so even small or emerging platforms must prioritise data protection as they grow.

Building Customer Trust through GDPR Compliance

Although GDPR can initially seem like a high hurdle to clear, it can be transformed into a long-term asset for crowdfunding platforms. Transparency, accountability, and security are hallmarks of a strong platform that backers can trust.

Ultimately, GDPR compliance ensures that all crowdfunding platforms treat backers and donors with respect, giving them peace of mind that their personal information will be protected. This adherence to best practices in data privacy helps platforms stand out in a competitive marketplace and deepens backer loyalty.

By incorporating GDPR principles into the core of platform operations, companies not only comply with legal requirements but also ensure they foster a community based on trust and security.

Leave a Comment

X