At a time when savings are important, how do we engage consumers in the act of saving and reinstitute a culture of thrift in America? One promising way is to ensure that the act of saving is fun. Prize-linked savings (PLS) products are structured to do exactly that - help motivate individuals to save by rewarding smart savings behavior. PLS models have been implemented internationally and now applications of PLS are being tested in the United States – by financial institutions, businesses, entrepreneurs, non-profits, even state lotteries – to help more people save through the excitement of winning.
There are many opportunities to layer-in the prize-linked savings concept to increase the savings behavior of all consumers, especially more financially vulnerable Americans. D2D continues to explore areas where PLS can be applied, including debt repayment tools, prepaid cards, personal financial management tools, large financial services firms, and U.S. Savings Bonds. D2D believes these channels have the potential to reframe consumers’ financial behaviors beyond traditional savings and scale to a much larger market.
To demonstrate the viability of PLS in financial institutions, in 2009 D2D and Michigan credit unions created Save to Win™ (STW), the first scaled PLS-based program. Save to Win offers special balance building certificates of deposit (CDs) that enter members into raffles for cash prizes with each deposit of $25 or more. Michigan credit unions that participated in the initial pilot demonstrated that the possibility of winning – both a large $100,000 annual jackpot and a range of regularly awarded smaller prizes – encourages people to save Michigan credit unions increased their engagement with financially vulnerable consumers and kept them coming back for more – 64% of Save to Win accounts rolled over from 2010 to 2011. Save to Win Michigan has grown to over 40,000 unique accounts saving more than $70 million.
The success of Save to Win Michigan inspired other states and entities to launch similar PLS programs to better serve consumers. The state of Nebraska signed on to STW at the beginning of 2012 and is showing promising gains. In 2012, Save to Win Nebraska engaged 10 credit unions and opened 1,643 Save to Win accounts. These STW accountholders saved over $1.9MM, representing an average savings of $1,200. In January 2013, North Carolina became the third state to offer the Save to Win product in seven participating credit unions.
D2D is also currently leveraging the national obsession with lotteries to create new savings products with broad consumer reach. D2D believes that state lotteries offer a unique and ideal distribution channel to offer a PLS product. A product offered through the lottery could 1) be designed to fit in well with other lottery products and generate high levels of excitement, 2) attract a wider and diverse set of consumers with the chance to win, without the risk of losing, and 3) reduce access barriers by being available throughout the lottery's retail footprint.
Prize-Linked Savings resources:
- Building Financial Security Through Fun – Findings from the Save to Win Expansion
- A Winning Proposition: Creating Economic Opportunities Through the State Lottery
- Playing the Savings Game: A Prize-Linked Savings Report
- Saving Whilst Gambling: An Empirical Analysis of U.K. Premium Bonds
- PLS Legislative Success
Additional PLS resources can be found here.
Prize-Linked Savings Updates:
- Washington State Launches Save to Win
- D2D Publishes Paper on the Expansion of Save To Win
- D2D and the New America Foundation Hosting PLS Event