Adoption of payments banks: a grounded theory approach

Payments banks came into existence in India in 2015 when the Reserve Bank of India awarded licenses to eleven applicants to set up these banks specifically to further financial inclusion by providing small savings accounts and facilitating payments and remittances to the financially excluded population. As of March 2020, only six of these were operative and not very successful, both from the profitability and customer growth perspectives. This article seeks to understand the reason for payments banks not taking off as envisaged. Attributing this primarily to low adoption of payments banks by the financially excluded customer segments, this study uses a grounded theory approach based on data collected from interviews of target customer groups and of managers at some payments banks. The primary factors contributing to low adoption by the customer segments studied here, namely migrant labor and small vendors, have been identified as lack of awareness, lack of trust and lack of perceived need for their products/services. These factors arise due to inconsistencies between the business model design and the nature of the target audience. The article further discusses managerial and policy implications of these conclusions.