Our friends at CFED will likely have to update their map for the next Assets and Opportunity Scorecard, as states around the country take a look at their banking regulations, in the wake of Congress' passage of legislation to remove barriers to prize-linked savings. Prior to passage of H.R. 3374, federal law prohibited banks from engaging in games of chance, although state legislation could permit credit unions to offer prize-linked promotions. With the removal of this federal obstacle, only state policy stands in the way of financial institutions that want to use prizes to encourage account opening and savings activity.
Encouraged by positive outcomes from prize-linked savings interventions created by D2D Fund in partnership with credit unions in some states and intrigued by initial results in the states that have allowed such initiatives, more states are reviewing their own policies. As in the Children's Savings Account field, program demonstrations proved that an idea that--at first glance--seems improbable (poor children can save; a savings lottery can encourage financial responsibility) can, indeed, work, and policy is now following programming's lead. Advocates within the asset movement are teaming with financial industry insiders, as their mutual interests in sparking savings align (see legislative victories in Rhode Island and Washington, for example, which resulted from partnerships between the credit union industry and asset practitioners). Even researchers like us are having conversations with state policymakers who have questions about prize-linked savings and want to better understand the theory and evidence that might explain the incentives' pro-savings effects.
Even prior to federal legislative victory last December, a survey of the states reveals steady progress. Indiana and New York allowed credit unions to offer savings promotion raffles in 2014; Connecticut included community banks in 2013 legislation; Maryland amended its lottery laws in 2012 to allow savings promotion raffles; Nebraska did so in 2011 (and now has a Save to Win initiative with D2D); Washington and North Carolina also acted in 2011; and Maine and Rhode Island were first in 2010.
And the policy push that is generating more prize-linked savings initiatives is likely not to stop with replications of the existing models. Folks like D2D are actively considering how approaches could build on the 'gamification' of saving, including by leveraging the wide reach, robust infrastructure, and considerable market identity of state lotteries as a conduit for saving, including among low-income and otherwie financially marginal households. There may be opportunities to transition from the congressional victory on prize-linked savings to removal of other obstacles to saving, too, including asset limits within means-tested programs. In both cases, policy change can dismantle barriers to the asset accumulation and savings behavior of low-income Americans, relatively low-hanging fruit in the pursuit of greater financial security and economic mobility.
Policy progress on prize-linked savings also reflects the growing breadth and strength of the asset-building movement, now large and strong enough to allow organizations and advocates to take on more specific 'angles' within the broader policy field. Cumulatively, victories on these different policy elements can help to reshape financial institution practices, economic opportunities, and, then, life outcomes, for disadvantaged Americans.
We're looking forward to next year's map.