Prize-Linked Savings in Bloomberg News on the Heels of Powerball Jackpot
Last week, the multimillion dollar Powerball jackpot drove millions of consumers to purchase lottery tickets. Bloomberg likened this phenomenon to a broken vending machine that eats spare change, noting that the odds of winning big are lower than those of becoming president of the United States. Playing the lottery can create a sense of hope about the future with consumers hoping to win a “life changing” amount with a small investment.
D2D talked to Bloomberg View about how creating a new lottery product, where the price of the ticket went into a savings account, could create a boon for consumers who could save through the lottery with each play. This product would be based on successful prize-linked savings products offered in different channels and available in other countries. The lottery’s ability to engage very-low income consumers (who make less than $12,000 per year) could provide a valuable inroad to building savings for financially vulnerable populations. If very-low income consumers, who spend about five percent of their income on scratch tickets annually, shifted to buying savings lottery tickets, they could save $3,000 over five years. That’s enough money for essential items like a washer and dryer or a down payment on a car. A prize-linked savings product that could leverage the distribution network and excitement of lottery play could have a big impact on those consumers who need it the most by providing a product they want to use in familiar places.
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