Today, we’re announcing that, as part of Project Catalyst, we’ll be working with American Express to evaluate practices to promote regular saving habits among prepaid card users. Project Catalyst is our initiative to encourage innovations that make financial products more consumer-friendly. The research will focus on saving behavior among low- and moderate-income prepaid card users who often do not have access to or use traditional savings accounts and who may face unique challenges building regular saving habits.
It’s important to save. Savings can help people achieve greater peace of mind when it comes to handling unexpected expenses and help people reach their short-term and long-term financial and life goals. To build enough savings to cover these expenses and meet certain goals, it is important to form regular saving habits.
We believe that consumers are more likely to save if they have access to the right tools. Consumers with low and moderate incomes may be less likely to have access to or use a traditional savings account and instead may use a checking or prepaid account to make purchases and save. For these consumers, who are possibly already financially strapped, having to mentally separate the money allocated to spending and saving within a single account could make saving even more challenging.
Through Project Catalyst, American Express has agreed to share insights with the Bureau from its trial program focused on encouraging users of its prepaid cards to develop regular saving habits. Through its program, American Express is evaluating the effectiveness of its product feature that allows American Express prepaid cardholders to set money aside in a savings wallet that is separate from funds used for regular transactions. Cardholders can separate money from their main prepaid account into a subaccount dedicated for savings. Funds stored in the subaccount can’t be accessed at the point of sale. When cardholders wish to use their saved funds, they need to transfer the funds in their subaccount into their main prepaid account. To promote regular saving habits among its prepaid customer base, American Express will be launching an educational marketing campaign detailing the importance and benefits of saving and will also offer promotions to encourage certain cardholders to save.
Using the insights provided by American Express, the CFPB is going to study what strategies may be effective at encouraging and making it easier for prepaid card users to develop regular saving habits. We will also study the impact and potential benefits of saving on consumer financial health. Through this work, we hope to gain a better understanding of consumer saving behavior and the effectiveness of a savings feature on prepaid accounts.
As part of Project Catalyst, we continue to encourage consumer-friendly innovations. Through collaborations such as this one, we’ll have the opportunity to improve our understanding of what works best for consumers in the consumer financial marketplace. Learn more about Project Catalyst by viewing some of our past and current initiatives, and remember to check back for more updates on this collaboration.