A Georgia resident named Nicolette, in the midst of a breakup with her husband, was searching online for a new bank when she came across a fintech startup called Yotta that was offering weekly prizes to customers with savings accounts.
She signed up.
Now Nicolette has won $500,000 in Yotta’s end of summer contest. The New York-based company also hosts weekly cash giveaways in which account holders earn one recurring raffle ticket for every $25 in their savings account.
With her earnings, Nicolette plans to pay off her Hyundai Elantra and buy a bigger SUV for her cleaning and home services business, which will help support her two children.
“I was in shock for a few days. I was speechless,” said Nicolette, who posted her reaction to the award on Instagram. “It will help me build and start my business.”
With 45 employees and about $300 million in total savings accounts, Yotta expects to grow as his name gets mentioned on social media by people talking about earning and saving money.
“People are bad at doing things that are good for them in the long term if they’re not fun in the short term,” Yotta founder and CEO Adam Moelis told MarketWatch. “We try to make savings that are immediately rewarding instead of something that pays off five years later.”
Yotta isn’t the only fintech company to combine games, sweepstakes and financial services. Other companies offering cash prizes include PayPal’s PYPL,
Venmo unit, which held the #VenmoMe Gift last month to award qualified account holders a total of $10,000 in prizes of $20 or $50 each. Block Inc. SQ,
formerly known as Square, donated $10,000 in a recent #CashAppFriday raffles.
Moelis, whose father is Moelis & Co. CEO MC,
Ken Moelis, launched Yotta in 2019 as a way, he said, to fill a strong market need to boost Americans’ savings. He modeled the business on a UK government program called Premium Bonds which offers money in raffles as an incentive to save.
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Yotta’s business model was made possible by the American Savings Promotion Act, which Congress passed in 2014, and updates to existing raffle laws.
Despite spending an estimated $80 billion on lottery tickets, Americans are struggling to rack up significant savings, and about half don’t have enough money to cover emergencies, Moelis said.
Yotta works with a chartered banking partner, Evolve Bank & Trust of Tennessee, to hold his savings accounts and insure them according to FDIC guidelines.
Explaining the company’s business model, Moelis said Yotta is able to pay around 2% interest on savings accounts and use part of its cash flow to organize a raffle in which people choose numbers before weekly draws and receive cash rewards for choosing the winning number. .
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“Our math is similar to how all banks make money,” he said. “Big banks pay almost nothing on savings accounts, and their cost structure is in real estate and marketing. Instead of putting expenses in marketing and real estate, we can pay more yield We can grow through word of mouth without sponsoring football stadiums.
Moelis started Yotta after working in the multi-strategy investment group of Goldman Sachs Group Inc. GS,
and as a data analyst at market research firm YipitData.
Nicolette’s $500,000 prize was part of a late summer second chance draw. The jackpot started at $250,000 and increased by $50,000 each week until someone won. The $500,000 prize represents the largest prize in the history of U.S. prize-tied savings, according to Yotta.
Combining games and finance isn’t a bad thing if done the right way, Moelis said. In Yotta’s case, the contest rewards people for saving their money, and depositors don’t lose money if they don’t choose a winning ticket number.
“I don’t think it’s inherently bad,” Moelis said. “It depends on what is incited by the game.”
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Emily Bary contributed to this report.