Leveraging proven practices that help people become savers, such as matched savings programs and social savings groups, ClearStreet has created an integrated mobile and social application that encourages individuals to save proactively, helps automate savings, and manage expenses. The application recognizes that non-savers are shoppers and spend their income on everyday needs such as groceries, household items and transportation. ClearStreet's initiative re-imagines merchant loyalty programs to reward consumer saving behavior and asset creation while driving merchant loyalty, as consumers receive savings rewards for everyday spending behavior with sponsoring merchants. Rewards will be a percentage of user's expenditures with sponsored merchants and will be in addition to any existing loyalty programs or discounts. The cash rewards will be automatically deposited into the consumer's savings account to create increased return on savings, aligning shopping behavior with long-term savings goals. Participants receive the merchant cash reward if and only if they make a minimum deposit to their savings account. The rewards provide an incentive similar to matched savings, such as an Individual Development Account (IDA) program, but with the potential to scale to far greater numbers.
ClearStreet's target user base for this initiative comprises the 48% of U.S. households that do not currently contribute any income to a savings account. In order to reach this scale and potential users ClearStreet commits to partnering in initial pilots with organizations such as EARN and Catholic Charities of Santa Clara County that work specifically with lower and middle-income households. ClearStreet will recruit an initial group of 1,000 individuals in the Bay area from these two partners with the goal of establishing a base of data, platform, and approach that will enable scaling the program rapidly nationwide in subsequent phases. EARN and Catholic Charities have existing relationships with a group of local merchants from which the initiative will recruit merchants to participate in the loyalty program.
In addition, ClearStreet will partner with merchants in specific retail categories (including grocers, restaurants, clothing, household goods, transportation and entertainment) to sponsor cash-back rewards linked to savings behavior. When participants shop with sponsoring merchants, ClearStreet will deposit merchant rewards in their savings account provided that participants have made a prior minimum deposit in their accounts. In the initial pilots, most participants will already have savings accounts as they are enrolled in IDA programs. Participants will use a mobile platform, including Android and iPhone apps, or a web-based app to get started in one of ClearStreet's automated savings programs, and then opt in to additional capabilities including merchant rewards, impulse savings and social saving groups. ClearStreet will also partner with financial institutions to provide savings accounts and other financial services for users.
ClearStreet's overall commitment goal is to increase the savings rate of the 48% of U.S. households that do not currently deposit income into a savings account, by helping to automate savings habits while leveraging an undervalued household asset: loyalty rewards for everyday spending. To achieve this goal, data must be collected to show that the model will be mutually beneficial to merchants and consumers and that the technology and approach will be successfully scalable. The commitment pilot will be conducted in three phases, with a regional focus in the San Francisco Bay area.
Phase 1: ClearStreet will recruit 1,000 or more participants via partners with access to middle and low-income households. ClearStreet will also recruit an initial set of merchants, including at least one anchor merchant that offers food, clothing, and household goods (e.g. Target, Wal-Mart, etc). The setup and recruitment phase will be conducted from August 15, 20013 to October 14, 2013.
Phase 2: ClearStreet will roll out a pilot app to participant users from October 15, 2013 to June 14, 2014 and manage the ongoing program, providing support to end-users and merchant participants
Phase 3: ClearStreet will conduct full analysis and measurement of the results from the pilot phase. This evaluation phase will run from May 15, 2014 to June 1, 2014.
ClearStreet seeks to address a major financial challenge of the struggling American consumer. About half of U.S. households are seriously liquid-asset impoverished. These households are unprepared for financial emergencies, in addition to longer-term financial objectives such as the cost of education or retirement. The lack of liquid assets is endangering the economic future of the average American, along with the entire U.S. economy. Compounding the problem is that the interest rate for individual savings accounts is at a historic low. With the median household income in the U.S. at $46,000, 48% of US households are not saving any money because they are spending 100% or more of their income.
The solution lies in supporting consumer activity to establish a regular saving habit and derive greater value from everyday spending. ClearStreet focuses on these two key activities that are integrally linked: creating a basic savings habit, and generating additional savings from loyalty rewards earned from everyday spending. Traditional merchant loyalty programs have linked rewards to spending, which inadvertently increases asset poverty as spending behavior competes for the same income stream as saving behavior. Over time, asset poverty decreases consumer loyalty as households curb spending to service debt, rendering loyalty programs linked to consumption unsustainable for a large portion of the population. ClearStreet's focus is on helping Americans increase their savings rate and build cash assets, such as an emergency cash reserve, towards a pathway of creating long-term financial health.