The Power of No Loss Prize Savings
New research from Harvard and Oxford has been published on the unique power of no loss prize savings. Prize Linked Savings (PLS) first appeared in the United Kingdom in 1694 as a way to pay off war debt. They’ve since become popular all over the world with hundreds of billions of dollars saved in them globally.
The premise of Prize Savings is simple — savings accounts that offer chances to win large prizes. The prizes are derived from the interest that accrues on deposits and therefore is “no loss”.
Despite their popularity, academic research on them has been thin. This new research studied a prize linked savings program introduced in South Africa and found:
- Prize Linked Savings Accounts (PLS) are really popular
“The product we study was a significant commercial success, attracting millions of new accounts and growing in 18 months to constitute 24% of the bank’s savings deposits.”
- PLS encourages savings instead of gambling
“These results strongly suggest that MaMa was indeed a substitute for lottery gambling, meaning that reduced lottery expenditure is likely one of the main sources for additional savings deposited in PLS accounts.”
- PLS are naturally viral
“PLS prizes have large spillover effects. As opposed to standard savings, PLS creates a buzz that can serve to spread demand for savings across a wider group of individuals.”
- Deposits in PLS accounts are differentiated and more desirable than earning normal deposit returns,
“PLS is more effective at increasing savings than high interest rates.”
- PLS increases net savings (not just moving existing savings)
“A key message of our paper is that prize-linked savings increased net savings in our setting. We do not see any evidence that the MaMa program cannibalized savings.”
This research re-affirms why no loss prize savings is one of the most important and powerful consumer financial products. PoolTogether is a decentralized protocol bringing for no loss prize savings, if you’re interested in shaping the next generation, get involved 👇
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