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Launch HN: Yotta Savings (YC S20) – Behavioral psychology to help people save
240 points by adammoelis on July 9, 2020 | hide | past | favorite | 305 comments
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.

This is an awesome idea, and I intend to try it out.

I am a mathematician, and at the same time I can't resist the temptation to purchase the occasional lottery ticket. What most people miss about the lottery is that there can be utility to variance - the opposite of ennui.

Have you guys read The Lottery in Babylon


As a mathetmatician how can you ever justify participating in a lottery where there is a possibility of no-winners or shared winners. It just destroys any hope of any positive EV.

The point is that my personal happiness level does not only depend on positive expected gain in capital.

I gain happiness also from the miniscule hope of the life-altering outcome of winning the lottery.

That gain in happiness is occasionally worth the price of a lottery ticket.

Yes, I know the feeling from the times I bought a ticket myself, against rationality.

I'm not an expert, but seems to me this feeling is also the main driver leading to gambling addiction, which ultimately leads to addicts saying things like "It's not about the money, but the game itself", after having lost a ton of money.

Wonder if Yotta can lead to the same addiction, and if so if it is then solely applied for positive objectives (i.e. saving money), or lowers the barrier to entry for other gambling schemes that are less beneficial.

We definitely don't want people to start gambling. We hope that the riskless unlocking of upside that we provide shines through as a better option than risking money for upside, even if our overall upside is lower on an absolute basis.

Exactly. People try to maximize expected utility in life, not expected value.

Interesting to hear. This is something similar I do with some betting/stock buying I do.

But the odds are on a completely different level of impossibility in lottery that I just cant really get your end of the argument :/

Fair enough - I think it's a subjective thing and also depends on your current financial circumstances. I'm a starving startup founder, so the hope represents a real escape from my current financial circumstances.

If I were poorer, I suspect the happiness I gained from the lottery ticket purchases would be even greater.

If I already owned a home, on the other hand, I would value the lottery ticket hopes much lower.

I totally understand you! I'm a software engineer since 2006 and even though I followed a classical career (in Eastern Europe), we (me, my wife and our daughter) were struggling financially for the first approx 9 years.

Buying a lottery ticket from time to te, when the prize was big, made us live in a fantasy world between the time we bought it and when te results were announced. I think this thing - imagining a life without financial worries, lavish vacations and expensive toys, motivated me to learn more, try to launch a few startups and sacrifice my free time in order to try and achieve greatness.

Were those money well spent? Definitely yes (even though I haven't actually won the lottery)

The value is in the hope it creates. As a statistician, a lottery seem hopeless. To everyone else, it's about feeling that something impossible becomes possible.

Tbh lottery tickets can be a pretty cheap form of hope relative to other forms of gambling. Take a look at some of RobinHood's customers who are ”investing”. The odds seemed so favorable until they realized 95% of traders lose their money.

But people routinely buy insurance, and it's considered a right and moral thing to do. Though the math is exactly the same as with the lottery. Statistically, odds are unfavorable. But it buys peace of mind, so people pay.

The insurance is given a polarity and connection to the rest of your luck in such a way that it smooths out your risks. On the other hand, playing the lottery makes your good luck spikier. (Though there are more specific ways to say it, we could say that insurance is meant to make your life less impacted by chance -- more predictable -- while insurance is meant to make it more impacted by chance -- more unpredictable.)

(whoops, I mean "while the lottery is meant to make it more impacted by chance")

Life is not all about EV. Especially not monetary EV.

I own my home. It's an objectively bad investment (my tech stocks sure appreciated more than a home I bought in 2008 before the crash :) But I like the feeling that comes with owning a home.

I go out for dinner. (Well, used to). It's objectively a waste of time and money, but I still like the feeling that comes with it.

I play guitar. There's no EV attached to it (in fact, people might pay me to stop ;) but there's still an emotional payoff.

The same goes for the lottery. For some people, there's entertainment value in it, despite understanding the mathematics of it. If you've ever played poker for money - unless you're exceptionally good, you paid money to sit around a table in a smoky room. EV is negative, emotional experience is a lot of fun. (Yeah, poker isn't entirely chance, but I promise that unless you're pretty good at it and spent a lot of time learning, it's pretty much equivalent)

We don't rigorously define a numeric EV on most things in life, but we do assign some notion of fairness. You go out for dinner, but going out for dinner comes with expectations, even if the monetary EV is < 1. Basically that the food won't kill you. Similarly there are certain expectations on the lottery on the practicality of winning - everyone knows the odds are against you, but there's still an expectation that a lucky enough someone can win.

A lottery that doesn't have a winner sounds rotten and I don't think you'd eat rotten food from a restaurant, no matter how much you accept that inherent EV of the transaction is negative. There are many, many more words that can and have been written about the psychology of lotteries, but suffice to say, for many lottery players, it's not as simple as "I know that the EV < 1, I'm just playing for the entertainment value".

For example, in some cases (I won't specify for the fear of being cancelled) your chance of becoming rich by your skills is exactly zero, and you know it. Chance of winning the lottery is small, but higher than zero.

I'm the same way, I know the lottery is a terrible bet but I still find myself buying a ticket every now and then. This was one of the main motivations for starting Yotta for me.

Will definitely check out The Lottery in Babylon!

Got a potential bug report: Signed up for Yotta, and referred my wife. She added money to her account and bought tickets. I did not receive the 100 ticket referral bonus or, if I did, cannot figure out how to claim it.

The tickets get applied for the following week's contest. You should see "100 pending tickets" on the home screen of your app. If not, shoot me an email and I'll get it resolved asap!

Saving USD is a terrible bet

Say that again when mortgage insurance, utilities, and insurance companies all accept crypto.

Actually even then, it wouldn't make sense to hold your e-fund in a volatile asset.

Depends on goals and timeframe

As opposed to a virtual token?

Is it worth buying his "Ficciones" compilation ? I have heard about the Story "Funes the Memorious", which is also included, and have been Interested in reading it since. Altough I still have 2 or 3 more books to read.

Yes, definitely worth it. There are some great stories in that collection:

- The Garden of Forking Paths - Pierre Menard, Author of the Quixote - The Lottery in Babylon - The Library of Babel - Funes the Memorious - The Secret Miracle - Three Versions of Judas - Death and the Compass

You will not regret it. :)

Thank you :) I almost bought it on impulse, and I think I'm going to order it today.

incidentally, you’re describing a key limitation of economic systems, whereby value as represented by price doesn’t reflect holistic utility to infinitely-complex humans and human societies. it’s true of basically everything, including stocks (efficient markets and all that), and forms the basis of a material critique of laissez faire capitalism.

This is interesting.

The way I understood the work of von Neumann and Morgenstern on game theory, there is an extensive discussion of utility and the derived ordering on preferences.

I interpret recent work on behavioral economics as building on their work to call into question the claim that one can easily estimate such a utility function for an economic agent in a manner invariant to the internal state of that agent.

This train of thought seems like it should leave laissez faire capitalism in the dust.

yes, i'd heard it talked about in relation to environmental economics, and about externalities in general, e.g., "how do you price in externalities like pollution in relation to our emotional enjoyment of nature?"

utility is neat in theory, but seems to be messy in practice. it's one thing to spell out the relationship, but another to calculate an analytic solution (from my limited mathematical experience, navier-stokes comes to mind in this regard).

This is interesting :-)

Is there any reasonably accessible literature on this topic, in particular the latter idea of not being able to estimate an agent’s utility function?

I'm not particularly well read in economics, and have not read anything that specifically addresses the difficulty of estimating utility. My view is rather derived from my readings on economics and related fields. The material that stands out the most in my mind are:

1. Von Neumann and Morgenstern's book (particular the sections where they develop the notion of utility) is pretty readable - https://www.goodreads.com/book/show/483055.Theory_of_Games_a...

2. The Economic Naturalist (https://www.goodreads.com/book/show/629238.The_Economic_Natu...). It is a great compilation of economic edge cases which show that the notion of utility is not so easy to capture using the standard "narrowly self-interested economic agents" world view. It requires a lot of subjective interpretation.

3. The Honest Truth about Dishonesty (https://en.wikipedia.org/wiki/The_Honest_Truth_about_Dishone...). Shows how contextually dependent utility (if it is at all quantifiable) can be.

4. The body of work around the Iterated Prisoner's Dilemma: (https://en.wikipedia.org/wiki/Prisoner%27s_dilemma#The_itera...). In particular we can see how the dynamics of simulations using rational agents diverge from the dynamics of experiments involving actual humans. This suggests that the utility assumptions used in economic analyses do not reflect whatever notion of utility that could actually apply to human behavior.

Relevant Freakonomics podcast with Maria Konnikova on her new book about luck, game theory, etc. They discuss von Neumann, and how he was actually a bad poker player, bud enjoyed the social aspect.


The interest rate (.2%) is very, very small.

I'm currently getting 2% from a non-FDIC insured institution, but there are many examples of FDIC-insured accounts with far greater returns.

Axos - 1.09% https://www.axosbank.com/Personal/Savings/High-Yield-Savings

CIT - .95% https://www.cit.com/cit-bank/bank/savings/savings-builder-ac...

T-Mobile Money - 4% (up to $3,000) https://www.t-mobilemoney.com/en/home.html

I'm a large fan of behavioral finance (read Misbehaving, in Thinking Fast & Slow), etc. -- but this feels like a huge disadvantage to be giving people. Unless you have math that says the average winnings people will get will make up for the .7-8% difference you see other institutions giving?

The 0.20% is if you win no prizes at all. On average including prizes, the EV on an annualized basis is around 3% right now. We are subsidizing some of the prizes currently, which is why it's higher than other HYSAs. In the long run we will aim to match Marcus and Ally, which right now are at around ~1% but go up or down depending on market cycles.

I appreciate the response, I've got a few remaining questions that perhaps you can shed some light on:

- Is that only for the average or also for the median?

- Is the data published anywhere (would love to see distribution curve)?

- Are the calculations assuming someone is saving every week? Or has it also been tested monthly / bi-monthly?

- When someone gets a "windfall", do they keep it in their account or do they withdraw it? (i.e. no longer savings but spent in some sort of celebration)

- Is this using an actual random number generator in which case there will be long-tails of people winning much more as well as losing much more? Or is there some sort of engine that ensures everyone gets something?

- This is the average. Going along with your second question you can get a sense of the distribution by looking at the payouts and probabilities in the official rules (https://www.withyotta.com/official-rules)

- It's purely probabilistic so it doesn't need to be tested. It's just random number math.

- Wins are deposited into your Yotta account and are immediately available to withdraw if you'd like

- It's an actual random number generator

It looks like the current base rate is a very competitive yield, and I'd expect the odds to be lowered soon, since their lottery gives the equivalent of about 3.6% in interest in addition to the 0.20 base interest. Another startup (Level Bank) using the same banking partner (Evolve Bank and Trust), launched with 2.1% APY in February, but soon had to lower it to 0.5%. This comment (https://news.ycombinator.com/user?id=adammoelis) by the CEO suggests they are subsidizing the lottery temporarily.

The variance should be relatively low for deposits in the 5 figures and above. See the results of my calculations below, based in part on the spreadsheet linked from https://news.ycombinator.com/item?id=23781247

If one holds $10K in the account, one should get 400 entries a week, and the expected number of times to hit each prize under $1 is between 1 and 9 times every week. I calculate the equivalent interest rate from the <$1 prizes alone is about 2.02%.

The $10 and $15 prizes should be hit about once every 2-3 months, and add about another 1.16% to the expected winnings.

Since the $300 and up prizes are split amongst all winners, it's hard to calculate the expected value, but assuming 10 million entries a week, the EV of the larger prizes is adds about 0.42% extra per year, with the vast majority coming from the expected value of the $5.8 million prize.

I believe that would be very unlikely for one to get below the equivalent of 2% interest over a few months if they held tens of thousands of dollars in an account, with the median outcome being around 3.4%. One could run a simulation to confirm this.

> Unless you have math that says the average winnings people will get will make up for the .7-8% difference you see other institutions giving?

That is how I personally interpreted this statement from the OP:

> 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.

If that is true, then you're either choosing to earn your ~1-2% interest rate slowly but surely (in one of the high-yield savings accounts you listed) or in "batches" (using Yotta). It makes sense to me why people would prefer the latter. It also makes sense to me why many people here on HN would prefer the former.

I don’t see it as a disadvantage at all.

If people who are already saving in a high yield savings account move all of their funds to this, that’s almost entirely on them.

On the other hand, if this entices people who aren’t saving at all to start saving, that’s a huge advantage for them.

The grand prize of $10,000,000 will be paid out as... $5,800,000? I don't understand how you justify saying (as far as I can tell) "The grand prize is $10,000,000. We reckon you could invest $5,800,000 and make $10,000,000 in 40 years, so we will give you $5,800,000 instead".

A fair point for sure. The rationale is the $10 million headline is the annuity value of the jackpot, and it's standard practice for sweepstakes or the PowerBall/MegaMillions contests to use the annuity value for promotion in marketing materials and on the website.

So if I buy into a 100m dollar powerball, I'm actually getting the net present value of 100m in 40 years? I'm amazed this is standard practice

Yeah exactly. Almost any grand prize you see is really the sum of the annuity value. We kind of have to use the same practice in order to be competitive, and we think a lot of people assume it's the annuity value sum as well. (https://www.magnifymoney.com/blog/banking/powerball-annuity/)

You should definitely rethink this. You're a savings account. Be honest (read: obvious and clear) with your customers.

It’s common knowledge that jackpots have an annuity or a lesser lump sum, that’s how lotteries work already. This is really just a way to gamify savings as a lottery, I think it’s a great idea and may sign up. I have a really low yield savings account right now anyway and was planning to sign up for an online high yield account.

You're talking about lotteries. I'm talking about savings accounts. My point is that savings accounts should be held to a higher standard, because obviously.

But this product is literally a savings account with a lottery attached to it. Why would you not use the terminology/methods used by the lottery industry when describing the lottery aspects of the account?

If you do not understand, I cannot help you.

Yes, but here you can't get the annuity. You can only the lesser lump sum, which after taxes won't be enough to get the annuity.

I think you could flip the status quo on its head, by promoting a full 10M (or 5M...), and making it clear it is NOT the annuity value sum like you do for lesser prizes, since I would argue that your competitivity/differentiation comes from the fact that you don't lose money to play.

Also describing the lottery mechanism without any gotcha is the right thing to do for consumers, and being in the unique position you are, you have the opportunity to lead that change.

With powerball I think you get the 100m spread out over 30 years or a lump sum now which is less.

The irony of using the promotional approach of an awful poverty tax by a startup focused on promoting saving.

It‘s pretty darn smart. A lot of people I know play the lottery instead of putting a couple of bucks to the side. Seems like a win-win

Somewhere I read an argument that numbers games (private, local lotteries, sometimes run by organized crime) helped some poor people by acting as a form of savings, except one that paid a negative interest rate and where you couldn't control the timing of when you got your savings out.

That sounds like a super-awful kind of savings account, but I think this argument assumed that many numbers-game players' next-most-preferred use of the money they would bet on it was even less like savings, so it could still be helpful by pulling money away from other things. Of course, that's a pretty big and pretty specific assumption.

This project and the idea that inspired it are a way better form of savings because the savers can actually access their principal and don't actually have to pay the bank.

There's that psychology "helping" us

However, they (Powerball, whoever) buy the annuity I think. If you give a lump sum, then after paying whatever taxes, would I still be able to buy the annuity?

This is straight up lie.

This is a very low-quality comment.

First, the difference between being mistaken and lying is intent. The site guidelines call for being charitable. So unless you can prove intent, don't call out someone for lying.

Second: Just saying someone is wrong/mistaken/lying turns into a five-year-old's argument: "Am not!" "Are too!" That's not a useful conversation, nor even an interesting one. Instead, supply some evidence that the rest of us can look at and judge whether you're right. (Actual evidence might even convince the person you were replying to - some of us here do actually listen to facts from time to time.)

I’m a little confused why that is relevant. Is there any payment in life that isn’t taxed?

When you interview for a job, and the salary is 100k, should they advertise it as 70k?

This isn't tax, you'll still have to pay income (or whatever) tax on the $5,800,000. This is them deciding to give you less money, and claiming with careful investment you could make $10,000,000 over the next 40 years.

I think it will always make sense to show gross salary. Various things can affect tax rate, such as 401k and HSA pre-tax withholdings, and the income of your spouse.

quite frankly, yes, but that is an entirely different conversation. :)

damn this is true. hella shady marketing

Very interesting. An idea that has long held interest (har) for me.

I note from your comments the socially-laudable aim of attempting to help people in financially vulnerable populations. I wonder if emulating more elements of a lottery-like game would assist with this... EG imagine if I could walk into a shop, buy what looks and feels like a lottery ticket, but I've actually effectively added money to my phone-number linked savings account. I think there would be real power there, but naturally real logistical complexity also.

Totally! We have thought about this a lot. It's too heavy a lift for us at the moment given the complexity, but this is something on our radar for sure.

Appreciate the feedback.

This looks really neat :) But I do wonder how well the Premium Bond (PB) idea will work when not backed by the state (NS&I, who issue PBs in the UK, is backed by the treasury). I would personally worry that my deposit will just be used for prizes in a Ponzi scheme situation.

Another thought is that while it is true that in the UK a large number of the population have PBs, these are usually bought by their parents when they are born. I still have my PB account that was set up by my parents, but I wouldn't consider it a tool for saving. Most people's balance in PBs are a tiny proportion of their total savings. Yotta's 0.2% base rate might change that behaviour though!

Having the backing of the government like with Premium Bonds is huge. Both for marketing and for trust.

Building trust is definitely a challenge for us as a new company. Funds with Yotta are FDIC insured up to $250,000, which helps, and we communicate that to users, but people still need to trust us fundamentally.

We looked into Premium Bonds and also found that a lot of Premium Bond ownership comes from older generations. We are hoping that our UI and mobile first approach make the concept more appealing to a younger demographic in the U.S.

I like the concept, but what you are offering isn't really comparable to Premium Bonds in the UK. The prizes in Premium Bonds are guaranteed every month. It's a raffle where every £1 deposited gives you a unique Bond ID. This is totally different from a lottery where the prizes are not guaranteed to be awarded for every draw.

As a Brit not attuned to American retail banking I didn't notice the FDIC insurance element (aside: in the UK that's called FSCS Protection). Actually that's pretty huge for trust, great job :)

Yup - but people still need to trust that we actually are FDIC insured. We've had some people contact our partner bank directly to verify they are working with us, for example. But hopefully as we get some PR and more word of mouth, we won't have that issue as much.

Perhaps you could link directly to evidence of your FDIC insurance policy?

Yeah maybe there is something like that we can do. Hadn't thought of providing some sort of hard evidence. I will look into this now though!

Section 14 of the official rules says that you can write for a list of winners. https://www.withyotta.com/official-rules

Does that mean that one could essentially get a list of your customers (that won in a particular week) if someone requests the winners every week? Over time one could figure out about how much each customer has in their savings account.

What information is released on the winners list? I'm not sure if I'd be willing to sign up for an account where my personal information would be released publicly if I "won" a 10 cent prize.

We only use first names and last initials along with cities for social proof to show that people are winning, and we only show when a ticket has won a notable amount so there's a fair amount of randomness to who shows up (currently >$10)

We also allow you to be completely anonymous from the privacy settings within the app.

Thanks. Can the information about the prize cutoff be added to the official rules or the FAQ?

Based on this, I think someone with $10000 deposited would appear in the winners list about 4 times a year, assuming those that win the $15 prize appear on the list of winners.

Yeah we will update this. Thanks for the feedback

I am so confused. Are you saying your company will reveal personal information, without a users consent? What if the user doesn't want to appear on the winners list? What if they withdraw their consent at a later point? What if they live in California (CCPA)?

In the UK, no such list is published. Nor is it published for lottery winners (you can opt to be anonymous, which is the default option).

You could also let people create nicknames for privacy.

I like this idea. Thanks for the suggestion

Section 8 of the official rules says:

> Potential winner will be notified via the App or using the email address / phone number provided with the entry or on file with the Sponsor. Failure by potential Sweepstakes winner to respond to the initial verification within two (2) days of notification will result in disqualification.

This rule, unfortunately, makes the savings scheme unattractive to someone who cannot access the "App" or email or phone for extended periods of time.

Good point. This wasn't intentionally made to be a short period of time. We will change this to allow for a longer period of time.

For reference, winner of large lottery prizes generally have 6 months to a year to collect winnings.

Thanks this is a helpful reference point for us

I really like this idea, and I can see where you could essentially function as a bank (make money off the deposits while paying out less than that in the EV of all winnings) as long as you are prepared to take any hit of variance (obviously not much variance in your prize structure though, especially with the big jackpot being pretty much in the realm of impossibility territory)

For those of us that enjoy variance - I wonder if you could make it so we could generate our own payout structure than could never get above what you are setting as "EV API"

Based on my back of the envelope calculations you are still running at less than 1% API, but I could be wrong (still need to run the exact numbers)

I'm not sure exactly how the legality works, and I understand that you need to make your money, but I do think it is an interesting (if not an MVP) option to allow advanced users to tinker with the amount of variance - perhaps I want to support your project in encouraging better savings but I want closer to no variance, perhaps I don't care about 1% a year but I want the chance of something more life changing...

That's really interesting. Something basic we could do is allow users to toggle between getting a guaranteed return or more tickets. It wouldn't change the payouts, but it would change your own variance. It's not as flexible as what you describe though. Will think more on this.

Some years ago I built a digital piggy bank to help people save money automatically. The psychology behind the product is really hard. The biggest challenges is that you only see the value of saving money after a long time. Everybody knows they should do it, but it's easier to postpone as it's painful and hard to do in a daily basis.

Yotta solves this with an amazing approach. You get the long term reward of saving money at the some time that you get the exciting possibility of winning a short time reward. It's genius.

Yes this is exactly what we are going for. Would love to chat about more of any learnings you have from your digital piggy bank savings concept. Saw your e-mail and will follow up with you there.

In Brazil we have "Capitalization Titles" that banks can offer to its clients. Usually you sign up with a fixed monthly fee (say R$50/month) for 1 year, and the chance to win monthly or weekly sweepstakes. When the period is over, you get your money back, plus some little earnings, usually just enough to cover inflation. I'm not too familiar with it, but that's basically it. Very common here.

Interesting - I haven't come across Capitalization Titles. I will definitely look into these now. Thanks for sharing

I didn't know about this before but since I speak Portuguese I was easily able to find


That Wikipedia article is very skeptical toward this instrument. Notably, it looks like the typical implementation is like a Certificate of Deposit in the U.S., where the depositor's money is locked up for a fairly long period of time. At least one author of the Wikipedia article suggests that it would be more advantageous for depositors to use a regular interest-bearing deposit instrument. I guess that criticism doesn't address whether it's succeeding in getting some people to save who otherwise might not save at all, and might also be less applicable when the depositor doesn't have to wait a super-long time to make withdrawals.

This is interesting. Similar to us in some ways, but we don't lock up your cash. You can withdraw any time. And no fees. I'll read more about this capitalization bond concept though, since I hadn't seen it before.

Your FAQ says you use a third party that draws the random numbers. Is this number drawing verifiable somewhere? Can you say anything about their techniques?

I’m highly skeptical of jackpot generation, as there has been multiple high profile examples of corruption in this process. Yotta would have to insure me this is fair before I consider saving with them, but to be fair I’m probably not their target market as high earner that already has established savings practices.

Thanks for this feedback. What could we do that would give you comfort in the number drawing process? We definitely want to address this concern, so your feedback here would be great.

It is possible to perform "trustable" random number drawing by combining values from multiple third parties such that if any of them are fair, then the results are fair, with everyone publically able to verify the combining step.

That means all the third parties would have to be corrupt to corrupt the results. So if you can pick a diverse set of third parties such that everyone is likely to trust at least one of them, that will raise overall trust.

But you can do better than that.

You can also have people provide their own random input. In that case they will certainly trust themselves, and therefore can trust the results if they can verify the combination step.

And you can draw input from public sources that people can check for themselves, and have confidence is effectively random, in the sense that nobody can control the values. For example public blockchain hashes (as part of a combining scheme, not by themselves).

These sorts of schemes would give people absolute assurance that the drawn numbers are fair and uncorruptible, and they aren't difficult to implement.

(PM me if you'd like to discuss further. Email in profile.)

When designing a combining scheme, how do you avoid a last outcome wins situation?

If you get to choose or influence any of the inputs and (for the most part) know the others, you can influence the result. I.e. choose from a set of outcomes, or at least influence outcome probabilities.

You can do provably fair gambling by using cryptography to show the generation was not tampered with. It was common in bitcoin gambling sites that had no other way to prove they were (somewhat) legit.

This 100%, and from the articles I've read on it, it doesn't look too difficult to implement.



While this may be cryptographically sound(I haven't looked into it), it's not a viable solution since it won't be trusted or understood by the majority of their target demographic.

Surely it depends how they would frame it? I'd imagine they wouldn't lead with "Cryptographically secure with BitCoin .."

An auditable system doesn't need everyone to do the audit: you want it for anyone to be able to audit, and for some to do it.

It's also very easy to provide the auditing tool. (I did it, long ago. Basically a form.)

Anything that either

A. Improves the transparency of the process

B. Improves the entertainment proposition of the gamble aspect of hitting the jackpot.

Maybe with a live event you can do both at once.

The insurance company we work with that is responsible for paying out the jackpot prize draws the winning numbers.

They have no access to the numbers users have selected, so it's completely blind.

How can the customer confirm that the numbers are truly random and drawn live so you can't coordinate with them? It's to both your benefit and the insurance company's to not have high dollar prizes pay out. The insurance company would be on the hook for the prize, and it would cause your premium to go up.

Companies wrongfully fight unemployment claims all the time to keep their insurance rates down. It would be awful tempting for the insurance agency to send you the drawn numbers even ever so slightly early and let you alert them so they can redraw if the jackpot was ever awarded.

We want to show the customer that the number draws are truly random. We may do live drawings at some point, which could help. Would love any ideas on how we can hammer home that the number drawings are random and totally kosher.

It actually would be beneficial for us for someone to win the jackpot, and not beneficial for the insurer. The marketing benefit of a $10 million payout that an insurance company pays for would be huge for us. That's why the number drawing process is double blind. They choose the winning numbers and they can't see the picks. We can't see the winning numbers but we can see the picks.

Also since this type of insurance is purely mathematical, the risk doesn't change for an insurer if someone wins, so the price wouldn't change either. Unlike, say pet insurance, where if Bulldogs get sick more often than you thought, the insurer simply mispriced the risk.

This type of insurance is impossible to misprice. It's almost like a casino for the insurers. There is risk but no uncertainty of what the risk is and the odds are in your favor when you write more premium.

The cryptography world has a ton of ideas about this, but it's possible that most of your customers wouldn't find it easy to understand why some of those ideas are correct and fair.

A simple one (not necessarily anywhere close to the best that cryptography people have come up with) is to combine several sources of randomness in a prearranged time order and format, and use the result as input into a prearranged cryptographic hash function. At least some of those sources should be publicly verifiable, and at least one of those should be https://beacon.nist.gov/home. I can think of critiques and limitations in this approach, but it's a good start!

Edit: someone elsewhere in this thread has given a link to a more sophisticated method.

I'm curious what kind of controls you have in place to ensure that the company choosing the numbers doesn't have an employee go rogue like what happened with the McDonald's Monopoly game. https://en.wikipedia.org/wiki/McDonald%27s_Monopoly#Fraud

Only two people at the insurance co. know the numbers, so the knowledge is limited. This helps because less chance of a bad actor being involved if the info is limited to a very small circle.

We would be able to spot anomalies over time in number of winners of high prizes vs. what the probabilities say, and we would investigate it if anything looked off or suspicious.

We also carefully vetted the insurance co. and the people there that we work with.

These don't eliminate this risk entirely of course, but they help mitigate it.

fair enough, i guess it makes sense to have that separate, just the rng methods nerd in me always interested in how to find randomness.

FNB, a bank in South Africa, used to do something similar. It was called the Million a Month account. If I recall the South African Supreme Court shut it down because it was considered a lottery

Yeah we actually studied the FNB program when we were setting out to develop Yotta. Basically, it got shut down because it got so popular in its ~2 years of operation and was taking away from the National Lottery.

The difference in the U.S is that there has been legislation explicitly supporting prize-linked savings, which didn't exist in South Africa. It was more of a grey area there.

A great academic read on the FNB MaMa program here: http://beniverson.org/papers/MaMa.pdf

I love the hack to lottery-fy savings.

Few comments:

1. Product: It in the wide spectrum anywhere between savings account <-> lottery. In your mind, is it closer to one edge vs. other? - Per my read and based on the rate (0.2%) offered, it is closer to the lottery end

2. Web page: "Savings + rate >15-100x banks + Win $10 mil" is what could be a turn off. Depending on the answer above, fix the headline

3. math on how this works: Show ONE public account with $ (say median of all accounts on Yotta or $100 for simplicity) that you would fund and track it in realtime with APY

4. FAQ: Could be more direct. Yes, one will need a Yotta account

5. FAQ: "3rd party “A” rated insurance carrier": May help you if you can reveal who on your website & theirs too

6. FAQ: In one answer, it say 15x and in another it say 20x (Chase or Wells Fargo)

7. 7 digits = 10 ^ 7 #s: if one can get 1000 users with $250K each, is the $10 mil guaranteed? :)

Edit: for readability

Thanks for this.

1. We don't really think of it as being closer to one vs the other. From a front-end perspective, it's closer to a lottery/sweepstakes. But from a back-end perspective it's more of a savings account with a twist. So maybe I'd say right smack in the middle of that spectrum on a blended basis.

2. Thanks for the feedback here

3. Good idea. I like that

4. Fair

5. Agreed. Will update

6. Thanks - will fix that

7. I think your math is off on this one. Numbers are 1-70 and the special number YottaBall is 1-25, so lots more combos than that.

Why are you letting people without deposits get in on the drawings? Seems like I could just spam you with mail and get a bunch of entries without depositing savings, at the cost of users who are depositing.

From the website: > Mailing In. You can receive one (1) Ticket by sending a handwritten sheet of paper with your name, address, e-mail, and phone number to: 45 East 22nd St. #26B New York, NY 10010. For each completed sheet of paper, you will receive one (1) Ticket. If you want to select your own numbers you should include those numbers on the sheet of paper. If you do not provide numbers, they will be randomly provided. Limit of one request per envelope. The entry will award a Ticket for the drawing that starts on the next Monday, after the mail in was received (not postmarked). ... Limit of 10,000 Tickets per person per week, regardless of method of obtaining a Ticket.

For legal reasons, we need to have a mail-in option. It's called an AMOE ("Alternate Method of Entry").

We prohibit automated entries though and each mail-in entry needs to be handwritten sent in its own envelope. The postage costs more than the EV of one entry, so we don't expect this to be an issue.

First off, very cool idea. I'm a fintech PM and had the idea to build something similar. Glad to see someone doing it!

From my research, it sounds like, because prize linked savings accounts are so new in the US, it's unclear whether requiring someone to have an account would count as consideration. By offering an AMOE are you taking a conservative position on this until it's more clear? Or, has a judge/court ruled on this?

I was involved in a sweepstakes at a bank a couple years ago and we took a similar route as you, offering a mail in AMOE, requiring handwritten entries. Without any marketing, we received several thousand entries, mostly from people who mail in entries to every sweepstakes they find.

Yes you're spot on. We are taking the conservative approach for now by operating as a sweepstakes. We haven't had any issues with mail-in entries. I suspect because in our case the EV of a single entry for a single week is less than the postage cost.

Haha I did the math on this for that exact reason. I guess it only makes sense if you live in New York and can walk by the mailing address.

There are prohibitive restrictions on lotteries. This is the same reason when you see "buy now win a chance at _" advertising, there's small print somewhere that explains no purchase is required, and provides a[n inconvenient] alternative to getting chances in the giveaway.

More detail here, a quick scan showed it to be reasonably in line with my outdated knowledge on the topic, at least... https://gleam.io/guides/no-purchase-necessary

Yup. Any sweepstakes or prize giveaway you see that is a game of chance will have a "no purchase necessary" clause

This is really cool! From what I've seen (though my knowledge is certainly not comprehensive) so many of the fin-tech/challenger bank apps and options that have sprung up over the past few years don't really have that interesting hook to differentiate themselves from one another. It looks like you guys have something special here. (It at least caught my attention :))

I don't know the economics around acquisition/retention in this space (or much about revenue streams from a user...) but it seems like the core offerings of challenger banks and banking in general are relatively fungible and that long term success will really come down to how efficient you are on gaining and keeping your base from going elsewhere. However, I've also read on how the markets challenger banks are aiming at are greenfield in comparison to the established players, so there may be room for lots of small players for a good while. I'm really interested in how Yotta/this space is going to diversify in the future since the inherent location moat of the brick and mortar banks (i.e. you had to bank at what was nearby - nobody was going to the next state over to bank) doesn't exist and the core banking products (checking/savings/loans) are generally the same. Who comes out on top in the long run - the banks with specialized offerings that generate more revenue per user, or ones that only do the regular banking products but are super operationally efficient? When and how will consolidation happen/is scale the most important thing? Just doing some personal spitballing here, as I doubt there is anything here you guys haven't already thought of.

As another former finance person now in consumer analytics/tech (coincidentally, also Penn/Wharton '14) it's always cool to see more work being done on the product and creation side. Would love to chat/connect to see if I could be helpful (selfishly, I'd like to learn more about your guys' work.) Of course, no strings attached and no pressure at all.

Best of luck!

For sure. These are all really interesting topics. We have thought about a lot of this, but would love to chat in more depth. Shoot me an email at adam@withyotta.com and let's connect to talk live.

Nice, by the way you could do the random number generation trustlessly, see for example: https://medium.com/@jgm.orinoco/participatory-random-numbers...

Thanks for this. We'll look into it. Right now the numbers are selected by a third party that has no access to user number picks, so it's totally blind. But this could be useful for us in the future. Thanks for sharing.

I also think this is a great idea - I believe it is a good incentive for financially weaker people to save and even for people with good control over their financials this can be a fun way to "invest" the liquid cash balance, given that it's FDIC insured (obviously, the bigger part of savings should be invested in real estate, financial markets, etc.). Contrary to some comments here, I don't see anything morally wrong with it.

I do have a couple of questions/concerns/comments, which I'm posting here for everyone's benefit:

1) Have you thought about slowly increasing the jackpot as your customer base grows? That would add another fun element to see the jackpot grow every time nobody hits it (could be in very small steps)

2) Is there any way to verify your partnership with Evolve Bank, other than on your own website? That would give me more peace of mind before depositing a larger balance and recommending it.

3) I agree that posting the name of the insurance company would help trust in the lottery system. Live drawings and/or the insurance company publishing the numbers on their website will definitely help, too. Out of curiosity, given that the insurance company doesn't know the picks beforehand, how do they ensure that you don't alter a pick after the fact to hit the jackpot?

4) Privacy: I agree that the default setting should be invisible. Same goes for friends, as the definition of "friend" seems to be anybody who has my phone # in their contacts. I'd like the functionality of adding individual people via an ID and/or QR Code for friendly competitions. Does the invisible setting also allow to stay anonymous in the scenario of winning the jackpot? The T&C's say otherwise but I wonder if it's legally possible for you to disclose customer data without explicit consent (does accepting T&Cs count as explicit consent)?

5) App User Experience: I'd keep the lottery results and winnings of the current week on the main page until Sunday is over and reset on Monday. It was a little weird at first to log in at 9:05PM on Sunday and see everything blank. Also, a fingerprint/password prompt would increase the feeling of security.

Curious to hear your feedback and awaiting tonight's numbers draw!

I agree, mainly with #3. I think you have to post what insurance company is covering you guys. People know that the Lottery is not rigged because they have the state to back them up. In your case, you need the Insurance company to back you up, and not naming them seems sketchy in my opinion. Best of luck though, I think the overall idea makes sense.

1) Absolutely. This could be something we do in the future.

2) Yes - some people have emailed Evolve directly. If you email them, they'll confirm the partnership.

3) We have a system where we send them an encrypted file that has all the picks. We can't alter that file after we send it to them.

4) Thanks for this feedback. Yes you could stay anonymous on winning the jackpot.

5) Thanks for this feedback as well. We will be considering both of these things.

Let me know if you have any other questions!

The grand prize will be paid as a one-time, lump sum payment of $5,800,000. This is the current present cash value of a $10,000,00, 40 year annuity. The odds of winning this amount are 1 in 3,277,899,625.

For anyone that's curious, if you put enough money in to buy every single possible ticket (81B), you would get about an APY of 0.00125% per week for an annual APY of 0.06%

Not very useful but I guess if you have 81B in cash laying around, it makes sense to put your money in Yotta over some large banks! Of course that should probably not be in cash but hey, I'm not going to tell you what to do with your 81B dollars.

We need to tell Jeff Bezos about this strategy

Really interesting concept! Are you planning on adding index fund investing in the future? It seems like you could incentivize investors to take a long term view with a similar, gamified approach.

We haven't thought about this yet but that's interesting. What kind of index fund gamification do you have in mind?

Perhaps instead of paying out the dividend payment as usual, you can make the user receive tickets based on how many index fund shares they own, and you can fund a lottery using the dividend payments. The user can sell their index fund at anytime, so it would be the same as keeping their money in the savings account except they have better odds of beating inflation than a savings account.

If you limit the savings options to tried and trusted savings vehicles - savings account, total bond market, total US market and total international - perhaps you can instill investment knowledge in the users on top of the good savings practices.

There was a company, forcerank, that was fantasy stock market. Rank stocks based on expected performance, and winner gets points, with cash prizes. They ran into a little SEC trouble, so careful with gamificating investing. https://www.sec.gov/news/pressrelease/2016-216.html

That said, it was a fun idea. Instead of picking lottery numbers, ranking tickers in the right order, and then pulling a date out of a hat? Something that only operates on past data?

Interesting I'd never seen this. We will look into this for sure. Thanks for sharing

Maybe have the winners announced @ noon or something similar. I’m usually not as engaged with friends/family at 9pm on a weeknight. I’d have the biggest prize set for Friday. Why 9pm?

Thanks for the feedback. We chose 9pm thinking it would be a time when people are less busy. HQ Trivia picked it and we thought it worked for them in terms of getting engagement.

But to be fair, we didn't think too deeply about the exact time and probably should have, so we will think about this some more.

Whilst I'm based in the UK and have access to (and use) Premium Bonds - this seems like a fun product, congrats to you guys for making saving fun !

Thanks. We hope to create the same excitement in the U.S similar to Premium Bonds!

From the FAQ

> While technically not "interest," you receive a savings bonus every month that functions very similarly to "interest." Savings bonuses are paid on the first of every month and are based on your average balance in Yotta from the previous month.

How do taxes work with these "savings bonuses". Do you issue a 1099-INT for this money earned or does this show up on a W-2G?

It's considered miscellaneous income. We issue you a 1099 if you win more than $600 in the calendar year

Does the monthly interest also count towards the $600 for the 1099, or do you also issue a 1099-INT for the monthly interest?

The monthly savings bonus also counts towards the $600

I want to believe in it, but the skeptic in me wants to ask how this isn't a vehicle for the rich to get richer: If every $25 gets you a ticket, then someone with a $50 account has far worse odds than someone with a $5000 account.

Of course, the $50 person has nothing to lose, but there's also a sense of dejection.

Perhaps a cap on the total number of tickets an account can have?

I see what you mean. This is a reality in a regular savings account too, though. Accounts with higher balances earn more interest. With us, you earn more tickets. Hopefully the incentive to get more tickets helps people start building savings and they save more than they otherwise would have with a vanilla savings account.

Someone else having more tickets than you doesn't really affect you other than the potentially splitting the bigger prizes, but having more depositors also helps us offer bigger prizes in the first place, so it's somewhat circular.

Maybe something more like each consecutive entry counts for slightly less than the previous entries.

I'm really glad to see someone doing this in the US - kudos. I remember being so disappointed to hear in the podcast that this approach was illegal in the US, and I didn't realized that changed back in 2015! I think this approach to incentivizing savings is a net good for the reasons you stated. Congrats on the launch. I wish you success!

Thank you!

What I had a problem understanding is the worst case scenario, specifically that wouldn't i better off by just going to Marcus or Ally? There i don't "win" anything but in the long run the yields are worth it, which I don't get from you?

I think someone did the math and the effective interest factoring in the expected value of the prizes is just above 3%. That's significantly higher than what you can get with a regular savings account.


Yes you are right. In a worst case scenario where you never win a prize, you do have opportunity cost because you could have earned more from a Marcus or an Ally.

But in the best case you might be far better with this option.

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