Oxford research drives new US savings bill
Obama signs American Savings Promotion Act
On December 18, 2014, President Obama signed the American Savings Promotion Act into law.
The Federal bill grew out of pilot testing and research conducted over the last eight years by Peter Tufano, Dean of Saïd Business School, University of Oxford, working in collaboration with Doorways to Dreams (D2D), the social enterprise that he co-founded in 2000 to support the finances of low income Americans by developing innovative financial products, services, and public policies.
The bill removes US federal prohibitions on banks offering Prize Linked Savings (PLS) products, which are savings vehicles where the collective interest of savers is redistributed via a raffle-like draw – similar to National Premium Bonds in the UK.
‘My research into household finance and prize linked savings in the UK, South Africa, and the US shows that individuals are willing to give up the certainty of a small payoff from traditional savings accounts for a small chance at a large, potentially life-changing cash prize,’ said Tufano. ‘This is particularly evident among low income consumers that find an element of fun in this form of saving, but it also has demonstrable impact on developing a long-term savings habit leading to increased financial security.’
Tufano’s academic research—working with a number of collaborators—that contributed to this historic change in banking law included a chapter in a 2010 Brookings book that introduced the concept in the context of other savings levers, a 2011 Economics Letters piece that examined the likely consumer demand using market research, a 2008 article published in the American Economic Review on the British experience with Premium Bonds, a 2011 book chapter that summarized the theory of prize linked savings, a 2007 case study on the South African experience with the product, and a new working paper documenting the positive savings impact of the South African programme.
D2D has complemented Tufano’s research with on-the-ground testing, support for related policy change in nine states, and assistance to financial service firms seeking to scale the concept. In 2009, D2D and collaborators launched Save to Win, the first state-wide PLS product in the United States. Save to Win has subsequently grown to four states, with 50,000 accounts opened and $100 million in savings to-date. D2D has expanded the PLS idea into new product lines and markets, has held multiple national events to build support for this new way of framing saving, and has written a series of white papers on the topic.
‘Academic research was critical in the passage of the American Savings Promotion Act,’ said Timothy Flacke, Executive Director, Doorways to Dreams Fund. ‘Multiple studies into the prize-linked savings approach, which found a positive impact, helped spark interest in piloting and testing prize-linked savings products in the United States, and continued to be cited in Congressional testimony in support of the bill.’ Timothy Flacke.
Tufano and D2D have been active in communicating this to policy and business audiences, including the FDIC’s Committee on Economic Inclusion, the National Council of State Legislators, the NBER’s recent household finance policy meeting, numerous policy and banking audiences, and Congressional Hearings. In July 2014 Tufano submitted a Statement for the Record to Congress concluding that ‘expanding access to PLS accounts will help solve the savings crisis in America,’ before The Bill was passed by the House of Representatives on September 15 and by the Senate on December 10.
Reflecting on the passage of the law, Tufano observed, ‘With this change in the law, an important barrier to support American savers has been lowered. Research and evidence can be brought to bear upon policy and business, bringing meaning to the School’s goal of ‘tackling world-scale problems’.’
For more information or to speak with Peter Tufano please contact the press office:
Kate Richards, PR Coordinator, Saïd Business School
Tel: +44 (0)1865 288879, Mob: +44 (0)7711000521
Notes to editors
1. About Peter Tufano
2. About Saïd Business School
Saïd Business School at the University of Oxford blends the best of new and old. We are a vibrant and innovative business school, but yet deeply embedded in an 800 year old world-class university. We create programmes and ideas that have global impact. We educate people for successful business careers, and as a community seek to tackle world-scale problems. We deliver cutting-edge programmes and ground-breaking research that transform individuals, organisations, business practice, and society. We seek to be a world-class business school community, embedded in a world-class University, tackling world-scale problems.
In the Financial Times European Business School ranking (Dec 2014) Saïd is ranked 10th. It is ranked 14th worldwide in the FT’s combined ranking of Executive Education programmes (May 2014) and 23rd in the world in the FT ranking of MBA programmes (Jan 2014). The MBA is ranked 7th in Businessweek’s full time MBA ranking outside the USA (Nov 2014) and is ranked 5th among the top non-US Business Schools by Forbes magazine (Sep 2013). The Executive MBA is ranked 21st worldwide in the FT’s ranking of EMBAs (Oct 2014). The Oxford MSc in Financial Economics is ranked 7th in the world in the FT ranking of Masters in Finance programmes (Jun 2014). In the UK university league tables it is ranked first of all UK universities for undergraduate business and management in The Guardian (Jun 2014) and has ranked first in ten of the last eleven years in The Times (Sept 2014). For more information, see http://www.sbs.ox.ac.uk/
3. About the Doorways to Dreams (D2D) Fund
The Doorways to Dreams (D2D) Fund is a 501(c)(3) non-profit that strengthens the financial opportunity and security of low and moderate income consumers by innovating, incubating and stimulating new financial products and policies. D2D’s work is made possible by generous support from The Ford Foundation, The W.K.Kellogg Foundation, private donors and others.