Prize-linked savings account
A prize-linked savings account or PLSA (also called a lottery-linked deposit account) is a savings account where some of the interest payment on bank deposits is distributed in larger amounts to fewer people according to a periodic lottery. They are attractive to consumers as they function both as a lottery (as there is a chance of a large prize) and as savings (the deposit is never lost unlike normal lotteries). PLSAs are similar to lottery bonds except they are offered by banks and can be held for a period of time determined by the consumer. Sometimes the returns are in-kind prizes rather than cash.
Around the world
Prize-linked savings accounts have been offered in Argentina, Brazil, Colombia, Germany, Indonesia, Iran, Japan, Mexico, Oman, Pakistan, Spain, South Africa, Sri Lanka, Turkey, United Arab Emirates and Venezuela. In the United States, PLSAs are often illegal due to states laws which limit lottery activities to the state-sanctioned lottery. PLSAs have been introduced into Michigan, Nebraska, North Carolina, and Washington. Additionally, laws in Maryland and Rhode Island have been changed to allow PLSAs. In Iran, PLSAs are the most common form of savings account available to the public, as they are viewed to be in compliance with Islamic law which forbids one to earn guaranteed interest on assets. See Islamic banking
The advent of PLSA seems to have made a profound impact in many countries around the globe as the general public, who were, hitherto, familiar with only raffles or lotteries, now were guaranteed not only saving security but also promised an attractive incentive in the form of lotteries. It was, as the press quoted, a "no-loss lottery". The jackpot in UK is said to have reached a million pounds.
It is also considered that the PLSA has substantially contributed to motivating people to save. With fifty years to its inception in the United Kingdom and well over 20 million people investing in premium bonds to the tune of more than 25 billion pounds, the PLSA scheme seems to have firmly established itself there.
The PLSA program in Michigan, USA, launched as the "Save to Win", was introduced following research and demo made by Peter Tufano from Harvard Business School. During this research, 56% of the participants were non-savers before the program.
- Guillén, Mauro F. & Tschoegl, Adrian E. (2002). "Banking on Gambling: Banks and Lottery-Linked Deposit Accounts". Journal of Financial Services Research. 21 (3): 219–231.
- Kearney, Melissa Schettini; Tufano, Peter; Guryan, Jonathan; Hurst, Erik. "Making Savers Winners: An Overview of Prize-Linked Savings Products". Published in "Financial Literacy: Implications for Retirement Security and the Financial Marketplace," ed Olivia S. Mitchell and Annamaria Lusardi, Oxford University Press, 2011.
- Dubner, Stephen. "Could a Lottery Be the Answer to America’s Poor Savings Rate?". Retrieved 2013-05-21.
- "Save To Win". Retrieved 2013-05-21.
- Kirby, Michelle. "PRIZE-LINKED SAVINGS ACCOUNTS". Retrieved 2013-05-21.
- "Prize-Linked Savings FAQs" (PDF). US Legislative Coordinating Commission. Retrieved 22 May 2013.
- Broverman, Aaron. "Prize-Linked Savings Accounts". Bank Rate.com. Retrieved 22 May 2013.