MADISON, Wis. (9/7/12)--Credit unions in the U.S. have been at the forefront of creating prize-linked savings accounts for members, but now banks are looking to catch up with the product offering.
In February 2009, the Michigan Credit Union League launched the Save to Win program that focuses on how much money people save, in contrast to most reward-type programs based on how much people spend (News Now Feb. 11, 2009).
The pilot program in Michigan was supported by a partnership with the Filene Research Institute, the Doorways to Dreams (D2D) Fund, and the Michigan league. Save to Win has been championed by Harvard Business School Professor Peter Tufano, founder of the D2D Fund. The program is underwritten by a grant from the Center for Financial Services Innovation (CFSI).
For every $25 that goes into a certificate of deposit, a credit union member gets one chance at winning a weekly lottery and one entry for an annual grand prize of $100,000.
Credit unions in other states such as Nebraska and Washington have adopted the program.
The North Carolina Credit Union League intends to launch a Save to Win program in January in North Carolina (Triangle Business Journal Online Aug. 28).
Until now, banks have mostly been kept out of prize-linked savings offerings by federal and state gambling laws. However, legislation passed this spring in Maryland could be a template for expanding specialty savings accounts to banks nationwide (American Banker Sept. 5).
Two years ago, Maryland passed a law that would change state rules to allow savings account raffles. However, that law had an amendment that required federal law to be changed to allow banks to participate in such a program, the Banker said.
The attempts to alter federal law stalled, so Maryland legislators passed a new bill this spring that permits credit unions and banks to participate in prize-linked savings programs as long as the contests are designed as sweepstakes and not lotteries, the Banker said.
The Maryland law took effect June 1, and if the state's program is a success, it could pave the way for more banks to begin offering savings raffles more broadly under the sweepstakes model, said the Banker.