In light of today’s challenging macro environment, Americans’ savings accounts may need some saving themselves.
Inflation is top of mind for increasingly embattled consumers, with PYMNTS Intelligence finding that nearly three quarters of millennials (73%) describe themselves as living paycheck to paycheck as rising rates and more continue eating away at their purchasing power. Nearly half of consumers (47%) across all age groups have traded down for at least one former favorite grocery product to save money.
That’s why PYMNTS sat down with Owen Monagan and Oisin Tiernan, co-founders and CEO and CTO respectively of Layup, a challenger bank offering prize-linked savings accounts (PLSAs) for sports fans. We chatted about how PLSAs can help low- to middle-income earners make more responsible financial decisions.
“Our gamification layer is really the juice that drives our business. Everyone has an equal chance, and while some people win big, most importantly, everyone on our platform puts money away in their savings,” explained Monagan.
“We grew up in Ireland. And in Ireland, a concept called prize bonds exists, where you save money, and instead of earning a conventional interest rate, you receive tickets to a lottery,” Tiernan said. “This lottery drives excitement, which drives people to save. And the concept doesn’t just exist in Ireland. It exists in Australia, in South Africa. Over a third of the U.K. population has a premium bond account, which is the prize-linked savings mechanism there.”
In 2014, PLSAs came to America when the U.S. Congress passed the bipartisan American Savings Promotion Act. The variable rate of return of PLSAs is statistically proven to help low- to middle-income earners save more money, while reducing their spending on lottery tickets and other gambling vehicles.
“We just knew from our experiences in Ireland that this was the perfect time to apply this concept [of PLSAs] to the growing and major issue [of sports betting] in America,” said Monagan.
Leveraging digital gamification to reinforce positive behaviors, like saving money or not gambling on sports, can do a lot to accelerate the adoption of new behavioral patterns — including making smarter financial choices.
PYMNTS Intelligence in has found that 20% of consumers overdrew their accounts in the last 12 months, and 60% of those who did so had an overdrawn account past their bank’s free grace period, according “The Credit Accessibility Series: How Consumers Use Overdrafts.”
Complicating matters, additional PYMNTS Intelligence in “The Paycheck-to-Paycheck Report: The Nonessential Spending Deep Dive Edition” revealed that one in every five paycheck-to-paycheck consumer reports that at least one reason for their financial crunch can be attributed to their proclivity for nonessential spending.
“When PLSA was introduced in South Africa, it increased the mean number of saving in the country by 38%,” Monagan said. “And this isn’t rocket science. You sign up for our products like you would any other neobank, you go through KYC (know your customer) and all the normal steps. And you fund money into the savings account as you save money with us, and as you do that you earn opportunities to play in our games and competitions.”
“It’s all just interchange, interest, all the traditional mechanisms but wrapped up in a completely different format. And that’s what really makes our product fun,” he added.
Gamifying financial education is a promising approach to addressing the savings challenges faced by U.S. consumers. By making learning about personal finance engaging and interactive, gamification can help individuals develop essential financial skills and habits. With regular engagement in gamified financial education, users are more likely to develop healthy financial habits, such as saving consistently and avoiding unnecessary debt.
“If sports can encourage a man going to a game to paint his face blue, it can hopefully encourage him to deposit $50 into a savings account,” Tiernan said. “Gameplay is really going to drive excitement for us, and excitement is what drives the behavior.”
“We’re not building a better bank. We’re building a sports entertainment product that promotes positive and healthy financial habits,” Monagan noted. “We don’t see ourselves as offering a competitive interest rate, we more see ourselves as competing with these sportsbooks or fantasy sports, for attention. And we think we can grasp that attention because we have a simple solution, and people don’t have to risk their money.”