Story Points let a PC start without any backstory - instead you get 5 Story Points, and spend them to:
know an obscure fact
know a language/ culture
introduce an ally to help with the current mission
et c.
By the time players spend them all, they should have a chonky backstory which was always relevant to the current mission, so no info-dumping required.
If all your points were spent introducing cousins and siblings, we have established the character has a big family.
If all your points were spent knowing languages, and knowing highly obscure knowledge, we have established the character as a very clever, and well-travelled person.
Good features
Speeds up game (no lore dump!).
Players are less pissed about their characters dying early on session 2 they haven't invested the work of writing an essay on their origin story.
It's probably the most popular part of the game whenever I receive feedback from someone reading (not playing) the game.
Bad features
Nobody spends Story Points
It doesn't replenish, so players hoard the points, refusing to spend them.
So far, I've tried:
granting 1 new Story Point over a long Downtime period.
granting XP in return for spending Story Points
adding a one-page rules summary to the table, including notes on what you can spend Story Points on.
demanding all new characters come from the pool of allies created through Story Points, meaning that:
it's better to have more allies, so new people have a wider pool of characters to select from, and
new PCs are never entirely new - they're known to the party.
...nothing works.
Everyone likes it in theory, nobody uses it in practice.
Brindlewood bay does something similar with 'crowns'. That system just requires each character spend at least one crown per session. If it doesn't come up naturally during gameplay, it has you do a short vignette right at the end.
I have a similar-ish mechanic in Meteor, where you have "Undefined Skills" which you define on the fly. They're included for some similar reasons as you give, reduces analysis paralysis at character creation, gets the game running faster, and gives player a chance to suddenly declare they're good at something.
I've not really had issues getting players to spend them, but most of my playtests have been in one shots, so I might just be side stepping the hoarding problem. The other potential difference is that I'm usually running high tensions, life or death scenarios, so being able to say, "actually I'm Skilled at this thing" to avoid a difficult roll (or just be able to roll it better) is valuable enough that players will jump on the chance.
As for ideas to make players more likely to use them:
Most of the benefits are longer term, if you make one, "reveal you're good at a thing right now," that might temp players. Or some other immediately impactful option.
Auto-succeed or large bonus to a roll immediately on spending the point.
A "use it or lose it" system. You get 1 per session (or 1 per in game unit of time/downtime). They don't roll over.
Some combo of the above, pair a short term immediate benefit with a long term addition like it currently does.
For example, "My cousin Big Joan used to tell me all sorts of stories about hunting Mega-Weasels, that why I know their weak point is just below the jaw." The player has introduced their cousin, but also gets an immediate bonus to a roll, or reduction in TN (or however you system would handle such a thing).
Also, Meteor looks nice. I notice it's CC; are the source files available? It's pretty much impossible to build on a pdf without them, unless you want to spend a month resetting everything by hand.
Yes, it's all up on github, although it was private until just a moment ago because I barely know how to use the website and didn't realize that was the default.
If the XP rewards go up to 5XP per Story Point spent, it's enough to buy the first level of a Skill, so that could work.
Auto-success is already in the system for knowledge-checks - still unused, but maybe it could be emphasized somewhere?
...though auto-success for attacks wouldn't make much sense. If someone's attacking a mimic for the third time, it wouldn't make much sense to gain a single attack bonus.
I'd be worried that 'use it or lose it' would result in bad outcomes:
optimized players would be tripping over each other to spend points with any excuse, prompting a string of cousins to 'help tie my shoes'.
That's a fair concern, although it sorta sounds like you're currently in a position where both shy and bold players aren't interacting with the system, so maybe getting just one group in is an improvement? Haha.
If you want a sort of radically different approach to the same idea, take a look at how Burning Wheel does it. There's a Circles stat that characters have, and you roll it like you would any other check to try and declare you know someone useful. A failure likely means they exist but they hate you (or similar), so there's a built in check against using it constantly.
Tie XP gain to riffing off of your story points. Making your story point relevant gives you bonus XP.
Let people change one out periodically as the game unfolds, with appropriate in game exploration, so that instead of being a limited resource, or a frozen moment of history, they always reflect the things that are important to that character in the moment
I usually give people an XP bonus for blue-booking (say, 2-16 pages) between sessions. It's not always canon, anyone may or may not read it, I may loot it for character beats, but you put in the effort, I'll reward that. It also cuts down on monologuing in session, which some players want to do, some really hate.
Adding anything to active character definition by points, I don't really do. In some games I have Luck which can be spent/bribe me to adjust a situation, get out of jail, find a contact, etc., but it has to be diegetically possible.
Is there a reason you are putting limits on defining facts like this? Most games I play have flexible GMs, and I define facts (both beneficial and detrimental) on the fly for my characters. Of course, making sure things aren't broken/stupid are up to you as the GM - ie: a player couldn't declare themselves as a king (depending on setting/tone), for example, but a prince or exiled royalty would be more likely.
If you do want to use points and/or want to maintain a balance, I would recommend the story point system in SWFFG - where a player can spend a lightside point to define a beneficial fact, which turns into a darkside point the GM can use to define a detremental fact later. That way, players get their points back, and the story gets more interesting overall.
Is there a reason you are putting limits on defining facts like this?
Yea, the system's meant to do all sorts -
provide a limited deus ex machina
encourage making backstories (once there's a lever, players will pull it)
pre-emptively gather new characters to replace dead PCs, without shoehorning a randomer [ Hail strangers! I notice your party has no mage... ]
provide a limited system to gather 'henchmen' for dangerous missions.
provide a system which prompts backgrounds being 'fair' (this character's rich, the other knows many languages, et c.)
slot backstory into the world, rather than asking players to do homework for a backstory
It's not so much a Storytelling system, as an anti-storytelling system, designed to complete the job of a backstory systematically, so the rest of the game continues procedurally.