Payments need to be profitable once again, as well as compliant. The good news is that they can be.

Granted, payments are not the dependable cash cow they once were – a guaranteed profit producer, easy to maintain on a bed of legacy technology. The game is far from being over however. Making payments pay may be a challenge. But it’s by no means out of reach.

The debit entries on the payments balance sheet have been understood for a while now. Revenues are down. Costs are up – driven in Europe by preparation for SEPA 1.0. Competitors are emerging from ‘non-traditional’ backgrounds. PayPal, Square and others are offering bank customers a tempting blend of convenient, speedy and secure payment products, some in real-time.

So, is the future unrelentingly bleak? Are there any entries in the credits column for banks when it comes to payments? The answer has to be a resounding ‘yes’. But, as is so often the case when searching for the silver lining in any cloud, success depends on vision and innovation.

Banks will benefit from recognizing that their costly investment in SEPA readiness is not the end of the line. Instead, it should be the beginning of a radical reappraisal of what is possible with their payments business. The possibilities include looking beyond Europe to exploit the growing trend towards single payments areas in other geographies – where the SEPA experience will be invaluable. There are also opportunities to leverage joint ventures with ‘alternative’ payments solution providers – they bring the innovation, the banks supply the initial critical mass of customers and the ‘trust factor’.

The ‘transformation’ in payments transformation requires business acumen, organisational review and technology innovation. Banks need a rapid – yet well managed – move away from costly high-touch processes and siloed systems. The goal is a flexible, modernized payments value chain that is as close to virtual as possible. The key areas for focus and action are:

• Business strategy development
• Product design
• Value chain optimization and organizational model design
• Virtualization of the payments value chain

On this new regime, there is every possibility that the payments cash cow will return to robust health.