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PrizePool has created prize-linked savings accounts, and it has raised $10 million to help further its gamification of savings.
The San Francisco-based PrizePool’s mission is to incentivize Americans to save more and build a better financial foundation by giving them prizes for saving money. It pays a higher interest rate than most bank savings accounts, and it makes saving fun by entering people into sweepstakes awards with cash prizes, said CEO Frank Chien in an interview with VentureBeat.
Launched during the pandemic, PrizePool has since seen good growth, enticing tens of thousands of savers to save tens upon tens of millions of dollars. PrizePool flips the concept of gambling on its head by applying the notion of winning to savings via sweepstakes prizes. This notion has the potential to benefit consumers for the long-term — gamifying a chore to help people save even more, Chien said.
“It’s been a crazy ride,” Chien said. “It’s basically adding a kind of gamification to saving money,” he said. “We’re gamifying or incentivizing people in a really critical area, which is your financial life. This is really popular outside of the U.S., especially in the United Kingdom, where 30% or 40% of the population saves money this way.”
How it works
Above: PrizePool gets you to come back and put more money into savings via a sweepstakes offer.
The company also has high engagement rates with 70 percent of savers coming back to the app weekly. Even if savers don’t win cash prizes, the account is FDIC-insured and will earn a 0.30% interest rate, which is higher than most high-yield savings rates.
To date, about 10,000 PrizePool savers have won more than $400,000, and at this rate, PrizePool will give away close to $1 million in prizes by the end of the year to help people achieve their financial goals. For every $1 in a user’s balance, they get one ticket per day, and all tickets will be automatically entered in a weekly drawing for over 18,000 cash prizes including a $25,000 grand prize in every four-week series. The prizes are guaranteed to total $50,000 every month.
“The drawings are completely randomized,” he said. “We register and bond with the states as part of the assurance model for sweepstakes. We have to be registered in the states. We have to publish winners. It’s completely legitimate.”
The app is available on iOS and Android.
M13 led the round, and seed investors including Accomplice, Bling Capital, World Innovation Labs, and Coatue also participated in the funding. Prior to this round, PrizePool raised $4.3 million in funding from seed investors.
A lofty mission
Above: PrizePool offers a weekly drawing where you can win up to $25,000.
Carter Reum, partner at M13, said in a statement that M13 cares about consumer wellness and financial wellness is related to that. He said he is impressed by Prizepool’s engagement and how the platform changes people’s lives for the better through savings.
“There are good ways to use gamification, like with health and fitness,” Chien said. “But gamification can also be done in not so good way, like a lottery in itself. The gambling aspect of it could be negative,” he said. “But I think using it for good can actually provide a very positive outcome for people. California just did a lottery for people who get vaccinated. It can increase vaccination rates and that’s really awesome.”
Before the pandemic, Americans were not saving enough, and when the global health crisis caused millions to lose their jobs, an emergency fund was a luxury many did not have. Meanwhile, a majority of Americans spend millions on the lottery every week in hopes of a big win – spending more than $91 billion on lottery tickets in 2019.
“It’s popular in other countries and I think it’s actually going to be really helpful for Americans here,” Chien said. “Over half of Americans play the lottery. They spend almost $100 billion on it, which is like insane.”
And the actual odds of winning the lottery are quite low, but people do it anyway.
“Roughly 70% of the users come back every Friday to see if they won a prize again, ranging from 20 cents up to $25,000, depending on the week,” he said. “I don’t know any other bank or product where 70% of the users come back every single week to do check on their savings.”
Chien said the company aims to expand its team by 150% and launch debit cards starting this fall. The debit cards will also have incentives.
To date, the company has raised $14.35 million and it has a valuation of $50 million. The company has 17 employees and it is hiring more. Chien said the company has figured out ways to make money without doing anything nefarious like selling user data.
“We can make more interest on the deposits because we essentially aggregate all deposits together, and we can work with different banks and essentially get paid more on those deposits,” he said. “Second, you know, we’re launching a debit card offering in three months. People can make money for using it or by paying their bills.”
PrizePool can make money on those transactions by taking a fee.
“I think this whole concept can be applied to not just savings, but to every financial product out there,” he said.
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