Prize-linked savings account or “PLSA” originated in the United Kingdom as a way to encourage people to save money by adding prize incentives to the savings process. In the mid-2000s, the United States decided to offer this savings model and credit unions launched “Save to Win” by offering prizes on a monthly and quarterly basis. Yotta Savings is the savings account app that lets users save money and for every $25 saved, users can enter into a weekly lottery with prizes ranging from 10 cents to $10M. Yotta Savings’ accounts are not negatively affected by entering the lottery (if you win, your savings can only go up!) Yotta Savings targets millennials who want a fun and motivating way to save money. Yotta Savings is completely free to use and offers a base savings rate of .20%.
AlleyWatch caught up with CEO and Cofounder Adam Moelis to learn more about Yotta Savings and how his interest in behavioral psychology inspired him to create financial products that help people save.
Tell us about the product or service that Yotta Savings offers.
Yotta is a savings account app where you save money and earn free tickets to enter into weekly contests with prizes ranging from 10 cents to the $10M grand prize. Every $25 you save earns you 1 ticket, so the more you save, the more chances you have to win. You can’t lose anything. It’s free and your funds are FDIC insured. Even if you don’t win a prize, your cash still grows over 2x the national average.
How is Yotta Savings different?
Traditional savings accounts are not only boring, but they pay you almost nothing on your savings. Each depositor gets the same rate no matter what. If you put in $500 into a Chase savings account, you get 5 cents a year in interest.
We help motivate people to save more by making it fun. With Yotta, you get the chance to win big and have fun along the way. We also partner with online banks, which enables us to offer a much better value on your savings than you would get from any traditional bank.
What market does Yotta Savings target and how big is it?
The consumer deposit market is massive. There are 187 million adults in the U.S with a bank account with trillions of dollars in deposits. Our product is for this mass market, but primarily focused on millennials looking for something that helps motivate them to build their savings.
What is the business model?
Our savings product is 100% free. We plan to launch a debit card and make money on the interchange. We’re also planning to offer other financial products to our users like any other bank would, only we will always try to use behavioral psychology to help nudge people to make financially smart decisions for themselves. If interest rates return to normal levels, we will also earn a spread on the interest earned from our partner banks and how much we pay out in prizes.
What inspired the start of Yotta Savings?
We were inspired by a Freakonomics podcast about the concept of prize-linked savings as well as the Premium Bond program in the UK. Premium Bonds is a prize-linked savings program that has been run by the UK government since the ‘50s. It’s the no. 1 savings vehicle in the country. Over 33% of the population participates, with over $100B deposited into the program.
Americans spend over $80B on the lottery, but 40% of people can’t come up with $400 in case of an emergency. My cofounder Ben and I are huge behavioral psychology geeks, and the idea of using behavioral psychology to solve the savings problem in this country is very exciting. When we learned about Premium Bonds, we couldn’t believe nothing like it existed in the U.S.
How has COVID-19 impacted the business?
We launched after COVID was already a crisis. The savings rate in the country reached a historic high of 33% last month. People are more conscious about having savings in the event of another crisis, so we expect COVID to make people want to save more in the short to medium term. With interest rates now lower across the board, the opportunity cost of trying to have fun and win prizes with Yotta is also lower, since your bank is probably paying you hardly any interest as is.
What are the milestones that you plan to achieve within six months?
We want to have helped tens of thousands of Americans build an emergency fund that allows them to withstand future emergencies.
What is the one piece of startup advice that you never got?
You usually only hear stories about what worked from the small sample of successful companies and not from the silent graveyard of failures. It’s more important to increase your sample size and learn from the failures of companies that are similar to yours.
You usually only hear stories about what worked from the small sample of successful companies and not from the silent graveyard of failures. It’s more important to increase your sample size and learn from the failures of companies that are similar to yours.
If you could be put in touch with anyone in the New York community who would it be and why?
Dan Ariely. We love behavioral psychology and would want to get his thoughts on how we can use behavioral psychology to help nudge people towards better financial decisions in other areas of their lives aside from just saving.
Why did you launch in New York?
Ben and I have lived here for more than 5 years. We know the NYC tech community here very well.
What’s your favorite outdoor dining restaurants in NYC
City Vineyard.
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