CFPB/Amex Study Indicates How to Motivate Consumers to Save
In a study conducted by the CFPB, with assistance from American Express, researchers found that offering a monetary incentive was most effective in motivating consumers to set money aside in savings accounts. The research results from the study, “Tools for Saving: Using Prepaid Accounts to Set Aside Funds,” also indicate that having a savings option reduced consumers’ use of payday loan services.
The 12-week study, as part of the CFPB’s Project Catalyst program, involved approximately 540,000 prepaid card users, many of whom were low- to moderate-income consumers and didn’t have access to traditional savings accounts. The research examined consumers’ use of American Express’ Serve GPR prepaid card and its “reserve” feature, which enables cardholders to earmark money for saving that is separate from funds used for regular transactions.
To promote saving, the study tested four different promotions, as well as a combination of the promotions, which included: emails highlighting the benefits of saving; direct mail containing a refrigerator magnet encouraging individuals to imagine what they can do with money they save using the savings feature; promoting automatic transfers from their transaction accounts into the savings feature; and a promotional incentive that gave customers $10 on their prepaid card if they put $150 in the savings feature by a certain date. The promotions all had varying degrees of success. But offering customers a $10 incentive for using the savings feature during the 12-week period was highly effective at getting consumers to save, according to the report. Furthermore, savings balances were maintained—and generally didn’t decrease—months after the study concluded.
Having a savings account appears to have curtailed consumers’ use of payday loan services. Participants offered $10 incentive were 20 percent less likely to use a payday loan service in the past year. Participants who were offered a combination of the $10 incentive and various forms of encouragement to set aside funds were 41 percent less likely, according to post-study survey responses.
“The results emerging from this [test] suggest that incentivizing prepaid card customers to save, and providing an opportunity for them to do so using a savings feature that keeps funds dedicated for saving separate from those used for spending, could provide tangible financial benefits,” according to the report’s authors. “Consumers in this pilot demonstrated a willingness to take up the savings feature, indicating interest in alternative savings vehicles, and some customers also reported actual changes in their financial behavior.”