Payments banks’ tech-driven services ‘no longer their niche’

Technology-oriented business models of Payments Banks (PBs) are no longer their niche as almost all banks are leveraging technology to improve and expand delivery of financial services and products, as per a RBI report.

“These efforts (leveraging technology) have received a boost with the establishment of digital banking units (DBUs). Against this backdrop, concerns are being raised in some quarters about the viability and sustainability of differentiated banking models,” RBI said in its Report on Trend and Progress of Banking in India 2021-22.

The central bank said it needs to be ensured that business models of PBs are sufficiently robust and good governance and technological standards are adhered to so that they survive in a competitive environment.

PBs were set up as niche entities to facilitate small savings and to provide payments and remittance services to migrant labour, low-income households, small businesses and other unorganised sector entities.

As of end-March 2022, six PBs were operational, of which only three managed to become profitable in their operations.

“Notwithstanding the increase in both interest and non-interest income, PBs ended 2021-22 with losses due to high operating expenses,” RBI said.