Once upon a time, a brave young technology consultant was sent on a mission to a bank’s payments shared service center, without knowing what a payment message looked like.  From that day forward, I have been working with payment processors and payment technology vendors throughout the world, for various technology companies.

With notable exceptions, payment data centers have been gentle giants, slowly making their way forward.  Unstoppable, and reliably.  As long as they were fed the proper budgets, there was no reason to disturb their slumber. 

Good times, perhaps, but they are over now.  It’s time to start running payments as a business. 

The global banking crisis has dramatically reduced margins on bread-and-butter payments, and non-banking entrants will continue to increase the squeeze.  With regulation taking a toll, the cost of running payments is sky-rocketing, and various mergers and divestitures have left the payment data center in a poor state.  We’re now operating in an era where most payment processing technology is outdated up to the point of becoming a hazard. 

All this begs the question: 'Are payment data centers a cost or a revenue asset?'  And, if currently a cost to bear, what will it take to turn payment data centers into a source of revenue?  I have spent cycles on researching this.  I have read analyst reports and posed the question to audiences at industry events. The answers have been interesting, yet not definitive.

Several colleagues have indicated that the key to profitability is a drastic reduction in Total Cost of Ownership (TCO), with the sales cycles that I am involved in suggesting that that is a common perception amongst customers, as well.  Much can be said, however, for the suggestion that we’re not going to cost-cut our way to profitability, and that new and innovative payment products will lead the way to a positive P&L. But what payments product will be the killer bullet?  Many claim that flexibility is key.  In a global economy, there’s always one region that performs better, and one target market that has more to spend.  Fast movers would take the money.  Some analysts suggest that retail payments will remain a cost, and that growth is to be expected mainly from excellence in corporate servicing.  Others see more future in scale, the long tail of payments.

So what do you think? Are your payment data centers a cost or a revenue stream? What’s your low-hanging fruit? 

Have you woken your gentle giant yet?