Very interesting idea. If you had to pay, who did you pay? My thought is the money would go to charity, but since that is (usually) a good thing then I don't know if paying money for failing is a good enough incentive.
Here's the deal. Even when you fail you still will win in the end and that the beauty of this approach.
I lost 30 lbs over the course of 4 to 6 months. I lost around $200 - $300 and it definitely stung. But it was worth it for now I have a strong and fit body.