expanding financial access€¦ · why emergency savings? – consumers are vulnerable to financial...
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©2012 D2DFund, Inc.
Expanding Financial Access
Emergency Savings on a Prepaid Card September 21, 2012
©2012 D2DFund, Inc.
Why Prepaid Cards?
6 billion The number of times that a pre-paid card is used in one year (Federal Payments study,
2009)
$375 billion Total dollars loaded on open loop and closed loop prepaid cards as
reported by the Mercator Advisory Group (Robert M. Hunt
et al., 2011)
32% The percentage of American consumers with a form of a prepaid card (CPCS, 2009)
Opportunity for Financial Inclusion
Prepaid Card Usage is Large and Growing Opportunity to Save Some
4.4 million The number of unbanked
and underbanked households using general
purpose (FDIC National Survey ,2009) )
©2012 D2DFund, Inc.
Why Emergency Savings? – Consumers are vulnerable to
financial emergencies – 46% of Americans do not feel
they can come up with $2000 in 30 days (Lusardi et al, 2011)
– LMI consumers are especially
vulnerable (D2D, 2011) – 89% worry about their ability
to cope – 51% have no emergency
funds
0%
10%
20%
30%
40%
1 2-3 4-5 More than 5 I dont know None
Number of household emergencies experienced in the last 12 months
Households with Emergency Savings Households with No Emergency Savings
©2012 D2DFund, Inc.
– Sustainability + No interest earned on funds in the savings pocket + Consumer satisfaction, stickiness, attractiveness of product
Challenge to Savings
Opportunity Product Features
Reaching consumers
Motivating savings by emotionally linking it to consumers Bundling savings with other products
Branded as a Rainy Day Reserve, to keep you and your household safe A feature on a prepaid card, creating a more diverse and accessible financial tool
Driving use Making the act of saving more accessible Making the act of saving easy
No minimum deposits or balance requirements Manually deposit funds when available Automate savings
Maintaining savings
Ensuring easy access to savings Creating barriers to limit use
Funds immediately available for use on card once transferred to spending pocket Reminder when you go to withdraw
Test: Emergency Savings on a Prepaid Card
©2012 D2DFund, Inc.
Rainy Day Reserve Users*
10%
25%
32%
33%
Family Status
Married with nodependent children
Married withdependent children
Single with nodependent children
Single withdependent children
24%
43%
21%
12%
0%
10%
20%
30%
40%
50%
$0 - $19,999 $20,000 -$39,999
$40,000 -$59,999
$60,000 ormore
Household Income
* Survey sample represents ~14% of Rainy Day Reserve users
44%
56%
Un- and Underbanked vs. Banked
Have an account withfinancial institution
Do not have anaccount
0% 10% 20% 30% 40% 50%
$0
$1 to $2,000
$2,001 to $5,000
$5,001 to $10,000
$10,001 to $20,000
$20,001 to $40,000
$40,001 to $50,000
Above $50,000
Household Assets
©2012 D2DFund, Inc.
Early Findings: Reaching Consumers – Demand for Savings Feature is Strong
– 8.8% have taken up the savings feature – More than 5,500 savers
– Branding of the “Rainy Day Reserve” Resonates with Consumers + "Why Save Now? To be prepared for emergencies and build
security for your future. Your Rainy Day Reserve will help you…”
17%
12%
70%
0
Did this message help you decide to save in the Rainy Day
Reserve? I don'trememberNo
Yes
©2012 D2DFund, Inc.
Early Findings: Reaching Consumers – Low barriers to access reduce the cost of testing
it out: Top three reasons consumers began using the Rainy Day Reserve: + To save money (84%) + Seemed like a good idea (62%) + Easy to try (49%)
©2012 D2DFund, Inc.
Early Findings: Driving Use
– Consumers are engaged in saving + $5.4 MM have been deposited in the savings feature + Over 59K deposit transactions
– Features of the product are helping consumer save
0% 20% 40% 60% 80% 100%
Other
None of the features help me save
Ability to access RDR on mobile app
Ability to automate a savings amount & frequency
Ability to set up a savings goal amount
Ability to access RDR on the Upside website
Ability to transfer money from spending account…
What features help you save in the Rainy Day Reserve?
©2012 D2DFund, Inc.
Early Findings: Maintaining savings
– Features of the product are helping consumers hold onto savings until needed + One-third of respondents indicate that the withdrawal pop up
message deterred them from withdrawing
0% 10% 20% 30% 40% 50%
Other
With autosavings feature, it is easier to hold on tosavings
No additional features prevent me fromwithdrawing from RDR
Not having immediate access to my savings, Ineed to go onto my mobile app to transfer…
Not having immediate access to my savings, Ineed to go online to transfer funds out of savings
Having a savings goal set up that I am trying toreach
What features help you hold onto your savings and not withdraw from the Rainy Day Reserve?
©2012 D2DFund, Inc.
Early Findings: Maintaining savings
– Consumers are using funds for more emergent needs
0% 10% 20% 30% 40% 50% 60%
Other
I have not yet withdrawn money
Buy gifts, for weddings, birthdays, etc.
To pay down debt
Help out a friend or family member with a financial emergency
Buy something I wanted, for myself or someone in my…
To pay for weekly expenses
Cover a household financial emergency
To pay monthly bills
Since opening the Rainy Day Reserve, for what reasons have you withdrawn funds?
©2012 D2DFund, Inc.
Early Findings: Maintaining savings
– Consumers can begin saving and rebuilding their RDR shortly after withdrawal
0% 10% 20% 30% 40% 50%
Immediately
Within a week
Within a month
Within 3 months
Within 6 months
Havent saved again
Other
After you withdraw funds, how quickly are you typically able to begin saving again ?
©2012 D2DFund, Inc.
Early Findings: Helping Households Save
– 79% of consumers believe the RDR has helped them save
0%
5%
10%
15%
20%
25%
30%
$0 $1-$50 $51-150 $151-$250 $251-$500 $501-1000 More than$1000
I don'tknow
How much have you been able to save in the RDR?
©2012 D2DFund, Inc.
Early Findings: Helping Households Save
With RDR, consumers indicate less reliance on borrowing from social networks, charging their credit card and usage of pay day loans
0% 10% 20% 30% 40% 50%
Borrow form Family/ Friends
Borrow from Retirement or other long term savings
Cash for gold
Check casher
Credit Card
Pawn broker/ pawn shop
Pay Day Loan
Rely just as much as before
Did not use any of the above before
Other
Because of my Rainy Day Reserve savings, I have relied less on the following:
©2012 D2DFund, Inc.
Early Findings: Coping w/ Emergencies
0%
10%
20%
30%
40%
50%
1 2 to 3 4 to 5 Morethan 5
None I dontknow
How many financial emergencies have you faced
since you started saving in the Rainy Day Reserve?
Did you use the savings in your Rainy Day Reserve to help you pay for any of these financial emergencies?
– Consumers are using their RDR to manage financial emergencies
3%
9%
12%
45%
31%
I dont know
No
Yes, it helped me payfor all
Yes, it helped me payfor one
Yes, it helped me payfor some
©2012 D2DFund, Inc.
Early Findings: Confidence in Future
– With the RDR, consumers feel more confident in their ability to handle future financial emergencies
43%
36%
2%
4% 15%
With the Rainy Day Reserve, do you feel more confident that if your household experiences a
financial emergency in the future, you will be able to better manage it?
DefinitelyI think soNoProbably notUncertain
©2012 D2DFund, Inc.
Early Findings: Stickiness
– RDR has the potential to improve the attractiveness and stickiness of a prepaid card
10% 2%
88%
Do you plan to continue using the Rainy Day Reserve over the next 6
months?
Maybe
No
Yes
4% 15%
3%
78%
Does the Rainy Day Reserve change how you would recommend the UpSide card to
friends/family?
I dont know
No
Yes less likely
Yes more likely
©2012 D2DFund, Inc.
Takeaways – Prepaid cards can be an effective tool to address the challenges to
saving (reach, use, maintain)
– Potential to positively impact LMI consumers and help the industry retain and attract consumers
– Potential is huge. + 4.4 million unbanked and under banked households using general
purpose prepaid cards + With access to a savings tool on their prepaid card, to generate and
replenish a $500 rainy day fund, this would result in an ongoing $2.2B rainy day reserve
©2012 D2DFund, Inc.
‣US (Boston) based not-for-profit
‣Focus on scale, sustainability
‣Record of linking private sector capabilities to public & non-profit ideals
‣Co-founded in 2000 by then Harvard Business School Professor, now Oxford Dean, Peter Tufano
Doorways to Dreams (D2D) Fund Mission: Strengthen the financial opportunity and security of low and moderate income consumers by innovating, incubating and stimulating new financial products and policies
©2012 D2DFund, Inc.
Contact
Sarika Abbi
Director of Ideation
sabbi@d2dfund.org
(617) 202-0536
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