Lenexa-based CommunityAmerica Credit Union has its eyes on a Michigan lottery — that’s right, a lottery — except this one turns non-savers into regular depositors.
“We happen to think it’s a great idea,” said Rob Persaud, a senior vice president at the $1.9 billion institution and the largest based in the Kansas City area.
Persaud is talking about the lottery that credit unions in Michigan have been running for the last five years. Members win a chance at cash prizes each time they put money into a Save to Win certificate of deposit.
Welcome to the unexpected world where games meet personal finance. The idea is to use the lure and excitement of games to nudge us into making better financial decisions.
Congress and President Barack Obama like the idea too, with the president signing a law in December that opened the door for banks to get into prize-linked savings accounts.
But for now, CommunityAmerica’s hands are tied. Prize-linked savings such as those in Michigan remain illegal in most states. Missouri and Kansas, for example, ban private lotteries and keep prize-linked savings out of the running.
Persaud is hoping Kansas Sen. Jerry Moran — a sponsor of the bill the president signed — can help get the states to open the door this year. And the senator’s willing to try.
“Congress took action last year to remove federal barriers to these programs, and I’m hopeful state governments will follow suit,” Moran said in an emailed statement.
Meanwhile, games and personal finance mix freely in other arenas.
Websites such as Mint.com, SaveUp.com and Smartypig.com reinforce or help establish better saving, borrowing and spending habits with a mix of overt and subtle game-like approaches.
Those in the know call it “gamification,” or an effort to “gamify” money matters.
“Gamification done well is often just taking small elements of what makes games fun, engaging and addictive and applying them to real world situations,” said Matt Davis, founder of gameFI.com, which applies gaming elements to the workplace.
Davis said the emergence of wearable devices such as the Apple Watch promise to connect personal finance and games in real time.
Consider it the thrifty side of the many ways games already feed our other financial urges.
McDonald’s periodically boosts sales with its Monopoly game pieces on the sides of drink cups and burger boxes. And credit cards teach us to ring up more charges by rewarding us with frequent flier miles or points that we can turn into merchandise.
Eight Michigan credit unions launched the first Save to Win accounts in 2009 with a clear target in mind, people who play the lottery.
The idea was to offer a certificate of deposit account that provides the same sort of excitement and element of chance as a state lottery. Depositors would get a credit union lottery ticket for every $25 added to the CD throughout its one-year life.
Credit unions in Nebraska, Washington and North Carolina have joined in as their state laws changed to allow prize-linked accounts. Cash payouts come every month, quarter or year depending on each credit union’s programs.
Across those four states, about 50,000 Save to Win type accounts have opened and filled with $94 million in savings, according to the Doorways To Dreams Fund, which helped design the account.
The key was that about 60 percent of those Save to Win players identify as “financially vulnerable,” with many having never had a CD before, said Joanna Smith-Ramani, Doorways To Dreams’ senior innovation director. They considered locking up money for a year to be a luxury of the rich.
But when their CDs matured, allowing them to take the money out, more than 80 percent rolled their balances into a new one-year CD, collecting a little bit of interest and more tickets for the credit union’s lottery.
“Even when money is pulled out … they’re not abandoning the accounts, and people are building it back up,” Smith-Ramani said.
SaveUp.com uses goal setting and an element of chance to encourage people to save money and pay down debts. Progress toward the goals you set earns credits that can help you win cash and prizes, including a $2 million March jackpot.
“We definitely see people motivated by chances to win much larger amounts of money,” said Katie Bryan, communications director of America Saves, which has partnered with SaveUp.com. America Saves is a campaign the Consumer Federation of America runs to encourage low- and moderate-income Americans to save, pay down debts and build up wealth.
Families living paycheck-to-paycheck often need to take other steps such as budgeting before they can start saving money. But games that aim to get savers started target the right issue.
“If you just get a little bit of savings, if you start the habit, most people are self-motivated,” said Channa Navarro, a financial coach at the Women’s Employment Network in Kansas City.
Other game-enhanced financial products are stirring within the credit union industry but have yet to come to market. One turns the standard credit card rewards game on its head.
With the Independence Card, shoppers would earn points for making charges as with other cards. But cardholders would earn more points for paying off their balances completely each month. Being late with a payment would mean more than a late fee — it would cost you points.
“We want to reward more handsomely those good financial decisions,” said Jeremy Hayes, senior vice president at Assemblies of God Credit Union in Springfield, Mo.
Hayes was part of a group that conceived the card idea through the i3 program at the Filene Research Institute in Madison, Wis.
Independence Card, as they saw it, also would run leader boards that show each cardholder where he ranked in total points among local users.
“It’s a competition without releasing any personal information,” Hayes said.
At Filene, innovation director Andrew Downin is working on another idea called Centsus. It’s an app that asks a shopper to rate how happy he is two days after making a purchase. The app then analyzes shopping patterns and those reported emotions.
The nudge might come early on a workday with a suggestion from the app to pack a sack lunch. It would include a reminder how much you regret spending so much on lunch at work, said an early concept document at Filene.
Downin already gets nudges from his account on Mint.com, a popular money managing tool from Intuit Inc. that tracks his spending.
“Mint can see that I like to go out to restaurants,” Downin said.
And it sends him a notice that his dining-out habit is larger than others in his area. It’s a not-too-subtle suggestion to spend more prudently like his neighbors do.
Slay the monster
Feedback is a key gaming element behind a lot of personal finance nudges. And the faster the feedback, the stronger the nudge.
Davis, at gameFI, makes the point by contrasting monthly bank statements with video games.
“In a video game, if I swung a sword at a monster and I didn’t find out until a month later if I hit the monster or not, that’s not going to be a game I play very often. It’s not engaging,” he said.
Moven is a mobile device app combined with a debit card that helps users know when they’re spending faster than they’ve budgeted. Its spending gauge shows red when your budget is depleting faster than usual, green when you’re spending less.
A British Columbia credit union offers members a program that texts them budget alerts as transactions show up in their account. Davis offers the example of a text message that the gasoline he just bought put him over his monthly fuel budget.
“That does two things,” Davis said. “First of all it gives me feedback about how I’m doing. The second thing it does is it helps me modify my behavior the rest of the month.”
Although a federal law opened the door to prize-linked savings accounts, only 11 states have passed legislation:
Legislation is planned or in progress in eight others:
Source: Doorways to Dreams Fund