Barclaycard's New Online Dream Account Rewards Depositors for Saving

Barclaycard US quietly introduced a new goal-oriented savings account called Dream in time for consumers' New Year's resolutions. The online account aims to score the division of the British bank a new crop of U.S. customers by offering cash bonuses for saving rather than spending.

Today, Barclaycard counts 5.99 million active accounts in the U.S. Active is defined as accounts with a balance at the end of the period with no charge-off status.

Dream comes with counterintuitive features — at first blush.

For example, the account limits how much customers can deposit in the Dream account, to $1,000 per month. Small balance accounts are not typically money makers for banks, but they are believed to appeal to a younger demographic that will likely obtain more financial products as they get older.

"You make money over time," says Andrew Harris, director of deposits at Barclaycard US.

Harris' confidence that profitability is inevitable stems from experience with a product Barclays issued in the UK years ago. The product, Children's Regular Saver, lowers the interest rate in months when withdrawals are made. The Dream structure is different, but Harris says the UK product's data shows that people who save for more than six months are stickier customers.

"It takes time and patience," Harris says.

Dream accounts also aim to make goals top of mind, which puts Barclaycard US in the midst of a growing trend in which startups and established banks are refining digital savings experiences to motivate behavior.

The Dream product page provides a goal calculator to let a person estimate what he needs to contribute to afford to vacation in Bali by 2015. The goal builder, of course, prompts a person to think about why he is funding the account.

Barclaycard expects customers to use the account to reach short-term goals like vacations and laptops and medium-term goals like mortgage deposits and cars. But it's watching to see what long-term goals, such as college or retirement, customers might use the account for, instead of or alongside existing products like 529s and 401ks, says Harris.

"The behavior we want is less the goal of one particular target but the repetition of saving this way," he says. "This continuation of customer relationship is important to us."

Perhaps a person saves for a car and then a mortgage deposit. "We don't expect this always to be sequential, we think parallel savings goals will develop," Harris says.

ING Direct has also offered goal-based functionality since it was acquired by Capital One, while banks worldwide have been experimenting with rethinking savings accounts. ICICI Bank, for example, has run a program that links prizes to savings accounts.

Meanwhile, Social Money (known as SmartyPig to consumers) sells software used to create goal-based accounts to banks and other companies. While collecting peoples' wish lists, Social Money offers them rewards at partner merchants when they purchase their "dream" items, for example.

Barclaycard plans to add more personal financial management tools to Dream by yearend. For example, it will integrate the goal tracker inside the product, says Harris, so that customers will be able to set their savings targets within their financial digital experiences. The bank also plans to introduce email alerts when the customer is falling off his savings target and data visuals of the customer's progress, among other tools, he says.

Becoming the digital financial advisor to customers is a data design theme analysts are recommending to banks

Getting people to do save, naturally, is hard to do. That's why the Dream account also aims to motivate people to contribute funds to the account by giving them a 2.5% bonus every six months if and when the customer makes consecutive deposits and another 2.5% bonus if and when the person refrains from withdrawals for six consecutive months.

The cash incentives to foster savings are somewhat reminiscent of U.S. Bank's S.T.A.R.T. program. Dream's structure also dovetails into behavioral economic principles startups like SaveUp are designing into their software: namely, incentivizing consumers to save with rewards in exchange for their data.

The Dream account, which launched in late November, now counts about 4,000 customers, half of which are new to Barclaycard. The money "wasn't just transferred from a savings account here," Harris says. "We were pleasantly surprised."