Yotta Savings (YC S20) – Behavioral psychology to help people save

Hey HN! We are Adam & Ben, co-founders of Yotta Savings (https://www.withyotta.com/), an app that uses behavioral psychology to help people save money by making saving exciting. We were inspired to build Yotta by the Premium Bond program (https://en.wikipedia.org/wiki/Premium_Bond) in the UK and a Freakonomics episode on prize-linked savings (https://freakonomics.com/podcast/say-no-no-lose-lottery-rebr...).

Premium Bonds is a government-run prize-linked savings program in the UK that started in 1956. It’s a savings account where people get chances to win monthly prizes through a random chance raffle. The more you save, the more entries you get. Premium Bonds are popular because many people prefer the chance to win a life-changing amount of money rather than a small interest payment from a bank. As a result, the program has been successful: over 23M people save through Premium Bonds (33% of the population) with over $100B deposited.

Human nature makes it difficult to adopt habits we know are healthy in the long-run but painful in the short run. The idea behind prize-linked savings is to use psychology to make saving exciting in the short run so that people will get the long run benefit. Even if you don’t win a prize, at least you still have access to your savings. You can’t lose anything other than the opportunity cost of interest at another bank.

In the U.S, people also like the chance to win a life-changing amount of money. This is what drives much of the $80 billion ($640 per household) spent on the lottery every year despite it being a hugely negative expected value proposition. Prize-linked savings was illegal in the U.S until 2015 when the American Savings Promotion Act was passed based on evidence showing prize-linked savings programs help people save more, especially in financially vulnerable populations.

We started building this 9 months ago. Ben and I are both former finance people turned tech people. As personal finance and behavioral psychology nerds (Nudge, Thinking Fast and Slow, etc.), we were excited by the idea of building a product that could help people, but that also had big business potential.

The market for consumer deposits in the U.S is huge. We make money by earning interest from our partner bank. We view our savings product as an entry point into the banking market, with the potential to offer a variety of revenue generating services to our users as other neo-banks have done. We plan to differentiate ourselves from other neo-banks by always offering products that make use of behavioral psychology to nudge people toward healthier financial habits.

With our app, you save money in an FDIC insured account. For every $25 you save, you get a recurring ticket into weekly random number drawings with chances to win prizes ranging from $0.10 to the $10 million jackpot. We provide a rate of return on savings that on average is in-line with the top yielding savings accounts out there like Marcus or Ally. You might get a higher return if you’re lucky and win more prizes than expected. You might get a lower return if you win fewer prizes than expected. Even in a worst case scenario where you never win a prize, you still have your savings.

Yotta is free. The $10 million jackpot would be paid out by our insurance partner. We are funding a jackpot via insurance to solve the chicken and egg problem of offering a life-changing jackpot that we hope will motivate people, even if the odds are extremely low that you’ll win it.

Hope you guys check it out. Happy to answer any questions, and looking forward to any feedback.

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andrey azimov by Andrey Azimov