expanding financial access...pawn broker/ pawn shop. pay day loan. rely just as much as before. did...

©2012 D2DFund, Inc.

Expanding Financial Access

Emergency Savings on a Prepaid Card September 21, 2012


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) )


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


– 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


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


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


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%)


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?


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?



– 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?



– 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 ?


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?


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:


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


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


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


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


‣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


Contact

Sarika Abbi

Director of Ideation

[email protected]

(617) 202-0536

mailto:[email protected]

expanding financial access...pawn broker/ pawn shop. pay day loan. rely just as much as before. did...

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