They have a huge incentive to keep backers comfortable with using Kickstarter. Too many "scamstarter" projects and it's their brand which takes the hit.
I don't understand the down vote. People actively choose to back projects that are past 100% funding. This means they want to participate. Setting an arbitrary limit in order to protect people seems ridiculous when the information about funding levels is right there, in real time. How is contributing when the project is at 150% funding any more risky than when it is at 50%? You are still in for the same pledge amount.
The only legitimate concern I could see is that by allowing projects to fund well over 100%, you're potentially increasing the risk to all backers as an easier to manage 12k project balloons into a very complex and potentially hard to manage 200k project.
What's interesting about this situation is that if people complain (as some have) to their credit card companies and the charges bounce then kickstarter gets hit with a chargeback fee in addition to the money that was paid in. I've seen chargeback fees of between $25 and $35 per transaction.
Kickstarter doesn't get hit with these fees since Kickstarter isn't processing/receiving the payments. It appears to me that money goes directly to the project owner's Amazon Payments account, so any chargebacks would land there as well.
Even if Amazon lays the blame for the chargebacks on Kickstarter, they're probably safe. Since they're still in business, it's pretty safe to assume their overall chargeback rate is below 1% by transaction volume, as that's the threshold where processors start hassling you because Visa/MC will start hassling them. Given KickStarter keeps 5% of 100% of the volume as revenue, there's a lot of padding there to handle any chargeback fees and still be very profitable.
"It appears to me that money goes directly to the project owner's Amazon Payments account"
Interesting I didn't know that.
"Even if Amazon lays the blame for the chargebacks on Kickstarter, they're probably safe."
Given what you have said though what would be the scenario where they could even do that? If someone is setting up (as you've pointed out) an account with amazon payments then where does amazon have standing to do anything with kickstarter?
First off, I have never run a project on KickStarter so I don't know any of the details first-hand. I'm only guessing -- Amazon has a product called Amazon Flexible Payments Service. One of the things this API allows is marketplaces where you facilitate payments between buyers and sellers and take a cut of the transaction. This is probably how KickStarter works and takes their 5% cut; it's KickStarter's code and API keys that kick off the payment, and while the money ends up in the individual Amazon Payments account of the project starter, the fee gets sliced off and deposited to KS's account. So while they are not a processor or the recipient of the funds, they're still tied to every transaction; plus, they no doubt have a special arrangement with Amazon due to the amount of money they're handling and the fact that Amazon doesn't accept other crowdfunding services as customers of its payment services.