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) vehicle. 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.
PLSAs have attracted customers who were, hitherto, familiar with only raffles or lotteries, but now were guaranteed saving security as well as promised an attractive incentive in the form of lotteries.[1] It was, as the press quoted, a "no-loss lottery". 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.[1]
Around the world[edit]
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.[2][3] In South Africa, the First National Bank created a program called the Million a Month Account (MAMA), aimed at increasing savings accounts among unbanked people. It was later closed after the state-run lottery sued them for infringing upon their monopoly.[4]
In the United States, PLSAs are often illegal due to state laws which limit lottery activities to the state-sanctioned lottery.[5] PLSAs have been introduced in Michigan, Nebraska, North Carolina, and Washington.[6] As of 2017[update], laws in a total of 20 states have been changed to permit prize-linked savings accounts.[7]
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.[citation needed] See Islamic banking
See also[edit]
References[edit]
- ^ a b "Prize-Linked Savings FAQs" (PDF). US Legislative Coordinating Commission. Retrieved 22 May 2013.
- ^ 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 S.; Tufano, Peter; Hurst, Erik; Guryan, Jonathan (2011). "Making Savings Fun: An Overview of Prize-Linked Savings". In Mitchell, Olivia; Lusardi, Ammamaria. Financial Literacy: Implications for Retirement Security and the Financial Marketplace. Oxford University Press. doi:10.3386/w16433. ISBN 978-0-19-969681-9.
- ^ Nyamakanga, Regis (2008-03-31). "South Africa: Million a Month Account Ruling Sets Precedent". Business Day (Johannesburg). Retrieved 2017-12-01.
- ^ 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.
- ^ Legislatures, National Conference of State. "Prize-Linked Savings 2016 Legislation". www.ncsl.org. Retrieved 2017-12-01.
