D2D and Plastyc Release Findings of Prepaid Card Study
In a study of prepaid cardholders, families reported becoming less reliant on payday loans and pawn shops when funds are needed by tapping into savings accumulated using an easy and accessible savings feature of their prepaid card.
The study was conducted by D2D Fund, a non-profit organization co-founded by Peter Tufano, dean of Oxford University's Saïd Business School and former Harvard Business School professor, to help strengthen financial opportunity for low and moderate income consumers through new financial products and policies. D2D and Plastyc, Inc. collaborated to design a new savings feature on the UPside Card, which launched in November 2011, to help consumers set money aside for a rainy day. In July 2012, D2D Fund surveyed customers of Plastyc, Inc.'s UPside Card to determine how the card's Rainy Day Reserve feature affected families' savings habits and responses to financial emergencies.
Findings of the study included the following:
- Low barriers to access reduced the cost of trying it. Linking the savings tool to a prepaid card and requiring no minimum deposits or balances helped reduce barriers to testing the new feature. 62 percent of the survey participants said they started using the Rainy Day Reserve feature because "it seemed like a good idea" and 49 percent said they started saving using the features because "it seemed easy to try".
- The diversity of the Rainy Day Reserves features has helped people save. 79 percent of participants reported that the Rainy Day reserve has helped them save, with features including the mobile app, the ability to automate savings amount and frequency and a pop up reminder message at withdrawal helping consumers save and hold onto their savings.
- Savers felt better prepared for financial emergencies. 88 percent said they used their Rainy Day Reserve funds to help pay for emergencies and 79 percent said they feel more confident about handling future financial emergencies. With access to the rainy day reserve, consumers have also reported reducing their reliance on alternatives such as pay day loans and pawn shops.
"About half of Americans are unprepared for a financial emergency with low to moderate income households even more financially vulnerable," said Sarika Abbi, the Director of Ideation at D2D Fund. "This study indicates that prepaid cards with savings features like the Rainy Day Reserve can be effective tools to help households save and cope with financial emergencies."
"When Plastyc introduced Rainy Day Reserve last November, our goal was to help our customers save more by making it easy and rewarding," said Patrice Peyret. "To see this kind of validation this early is hugely gratifying."
Since the launch of the Rainy Day Reserve , more than 5,500 consumers have deposited over $5.4 million into the Rainy Day Reserve savings feature. 88 percent of the participants surveyed have an annual household income under $60,000 and 24 percent under $20,000. 58 percent of the households surveyed have dependent children, and 56% are un- or under-banked, reporting no checking or savings account at a traditional financial institution.
Ms. Abbi is presenting these and additional findings tomorrow at the 2012 Assets Learning Conference in Washington D.C. These findings in addition to more in depth insights into the savings behavior of households using the Rainy Day Reserve will be made available in an upcoming publication by D2D.