There a few challenges for the payment banks. As technology may not be a seriously differentiating factor, the offer must be a strong cost advantage and at a significant scale. This would imply longer break-even period. The revenue model is likely to be a function of transaction banking, float balance, lending references and third party product distribution. It would be in the interest of the payment bank to keep the money within their ecosystem as much as possible to understand the consumer better and offer better solutions through analytics. Data mining would be a big theme at some distant point for these players.
The use cases beyond these few services have been a source of disappointment. There is still a lack of clarity on whether interest can be offered and the role of the regulator if they become more acceptable than they are currently. Also, the challenge is that no wallet company is not able to make any proprietary technology that makes them any different from the rest of the players and they are always facing a threat from banks in replicating any successful strategies.
Most Payment banks have indicated that they find it too expensive to reach to a much large consumer segment. The cost of identification and authentication is too exorbitant for that scale of business or size of transaction. It would be easier if there is a bit more relaxation on the same. New authentication platforms like Aadhar appears to offer some promise and same degree of convenience but these are still very early days in adoption and reconciliation of errors is still not clear at this stage.
