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Imagine what banks were like before 1970. Long lines and particularly long waiting period for almost any transaction were normal. The people were clients of a branch and not really of a parent bank. All transactions can only be done at your particular branch. Any input is only reflected after more than 24 hours, as the information is sent to the data centers in batches at the end of the business day. However, over the next 40 years, most banks chose to create a centralized real-time online environment or exchange (CORE) to manage their operations, thus giving rise to Core Banking. In India alone, the number of public sector bank branches with central banking implementation jumped from 79.4% in March 2009 to 90% in March 2010. Worldwide, the numbers are closing in on 100%.
According to the American research and advisory firm Gartner, the central banking system (CBS) is basically a back-end system that performs banking transactions on a daily basis and updates accounts and financial records. It is essentially the nervous system of a bank which, if affected, can drastically change the operations of the bank. CBS is a common point of connection for the full range of products and services that banks offer today under one umbrella.
Centralized data centers have been formed and all banking applications can be accessed here. The data of any bank as a whole is stored on a central server that can be accessed by branches, regional offices and the head office. All types of banking operations, such as the registration of all types of transactions, loans and mortgages, as well as interest calculations, deposits, money transfers, payment balance, customer information and other operations, have been fully automated using a solution central bank. Such a solution makes use of the Internet or other forms of connectivity to automate operations with appropriate software. This core banking software is then applied across all branches, bringing them all together on one platform.
A solution usually consists of:
• Internet, mobile, tab banking
• Data center and colocation as well as DR services
• Transfer of funds remotely and immediately (IMPS, NEFT, RTGS, etc.)
• Automated teller machines (ATM) and point of sale systems
• Various other services, such as QR code merchant payment, agency banking application, eKYC solution, connectivity and others.
CBS Target
Core banking solutions differ from bank to bank and largely depend on the type of customer bases a bank has. The basic goal of core banking is to be highly convenient for the customer and to reduce operating expenses. A good core banking solution has a direct impact on profitability, customer satisfaction and competitiveness. It allows customers to achieve greater freedom in transactions, banks benefit from the reduction of time and resources spent on monotonous activities.
A Core Banking solution is especially beneficial due to its:
• Scalability: As transactions are processed daily in large volumes, the business priority is to be able to scale without interruption.
• Flexibility: Banking has many modules that require a solution that is extremely flexible and capable of configuring the right mix of IT resources at the right time.
• Agility: To be competitive in the market, the solution can quickly adapt to changes and transformations.
• Cost Efficiency – These solutions not only provide customer satisfaction, but also benefit the bank by saving them many hours of work and maintaining accuracy.
A successful central banking application can be migrated across all types of financial institutions, including:
• Corporate Banks
• PSU and Nationalized Banks
• Scheduled Cooperative Banks
• Urban Cooperative Banks
• State Cooperative Banks
• Payment banks
• Small Financial Banks
• Non-Banking Financial Companies
• Microfinance Institutions
• Credit Cooperative Societies
• Securities and Insurance Sector
• Regional Rural Savings Banks
Advantages
Among the infinity of advantages that a CBS has, the most important is that it has allowed banks to strengthen their relationship with customers. The concepts of customer satisfaction, retention, personalized and tailor-made plans, customer convenience and others were introduced in the financial industry thanks to core banking.
Customers today have a plethora of channels through which they can contact their respective banks. It can be through their PCs over the Internet, on their smartphones, tabs, or through mobile kiosks. Good core banking software integrates all of these channels and provides a seamless transaction experience for both the bank and the customer.
Since all processes are automated, another great advantage of a good modern core banking solution is that it reduces the chances of human error and fraud. This, in turn, increases employee efficiency and ultimately drives business opportunities. All resources are used properly, thus minimizing the possibility of waste as well.
Automation, in most cases, always helps companies save a lot of money and time. Online banking decreases human footprints in banking facilities, which means infrastructure costs are drastically reduced. Similarly, operating and support expenses are also reduced. Maintaining legacy systems is also a costly affair. Core banking reduces IT maintenance costs by moving to shared service platforms.
Lastly, since all steps are accurately recorded and traceable, ready trading analysis is available in real time. All the data collected on the back-end can be transformed into actionable insights as needed. This has made banking smarter over the years. Core banking solutions have also changed over time, bringing enhanced services to their scope. CIOs believe that the integration of new technologies such as artificial intelligence, chat bots and the Internet of Things platform can help activate business intelligence that helps make better decisions.
