Core Banking System
Core (centralized online real-time exchange) banking is a banking service provided by a group of networked bank branches where customers may access their bank account and perform basic transactions from any of the member branch offices.
Core banking system is often associated with retail banking and many banks treat the retail customers as their core banking customers. Businesses are usually managed via the corporate banking division of the institution. Core banking covers basic depositing and lending of money.
Core banking functions will include transaction accounts, loans, mortgages and payments. Banks make these services available across multiple channels like automated teller machines, Internet banking, mobile banking and branches.
Banking software and network technology allow a bank to centralise its record keeping and allow access from any location.
Advancements in Internet and information technology reduced manual work in banks and increasing efficiency. Computer software is developed to perform core operations of banking like recording of transactions, passbook maintenance, interest calculations on loans and deposits, customer records, balance of payments and withdrawal. This software is installed at different branches of bank and then interconnected by means of computer networks based on telephones, satellite and the Internet.
Gartner defines a core banking system as a back-end system that processes daily banking transactions, and posts updates to accounts and other financial records. Core banking solutions typically include deposit, loan and credit-processing capabilities, with interfaces to general ledger systems and reporting tools. Core banking applications are often one of the largest single expense for banks and legacy software are a major issue in terms of allocating resources. Spending on these systems is based on a combination of service-oriented architecture and supporting technologies.
Many banks implement custom applications for core banking. Others implement or customize commercial independent software vendor packages. Systems integrators like Cognizant, EdgeVerve Systems Limited, Capgemini, Accenture, IBM and Tata Consultancy Services implement these core banking packages at banks. More recently, entrants such as Probanx (since 2000) and Temenos (late 1990's) have also provided entry level core banking software, focussing on neo-banks and electronic money institutions.
Open source Technology in core banking products or software can help banks to maintain their productivity and profitability at the same time.
F.A.Q about Core Banking System
What is core banking solution (CBS)?
Today Banking as a business has grown tremendously and transformed itself from only a deposits taking and loan providing system to an institution which provides an entire gamut of products and services under a wide umbrella. All such activities commenced by a bank is called Core Banking.
CORE is an acronym for "Centralized Online Real-time Exchange", thus the bank’s branches can access applications from centralized data centers.
Other than retail banking customers, core banking is now also being extended to address the requirements of corporate clients and provide for a comprehensive banking solution.
Digital core banking offer the following advantages to the bank:
- Improved operations which address customer demands and industry consolidation;
- Errors due to multiple entries eradicated;
- Easy ability to introduce new financial products and manage changes in existing products;
- Seamless merging of back office data and self-service operations.
Minimum features of Core Banking Solution:
- Customer-On Boarding.
- Managing deposits and withdrawals.
- Transactions management.
- Calculation and management.
- Payments processing (cash, cheques /checks, mandates, NEFT, RTGS etc.).
- Customer relationship management (CRM) activities.
- Designing new banking products.
- Loans disbursal and management.
- Accounts management
- Establishing criteria for minimum balances, interest rates, number of withdrawals allowed and so on.
Choosing the best core banking system software
Today, there are four primary core banking providers, FIS, Fiserv, Jack Henry and D+H, that have managed to eat up 96 percent of the market share (90 percent for banks under $1 billion in assets and 98 percent for banks over $1 billion in assets). But there are also some strong players rounding out the remaining 4 percent.
Deciding on a core banking software solutions is the first key task for banks and credit unions looking to make the switch. But the decision is not one to be taken lightly, as pointed out by Forbes “Core technologies are evolving into highly agile architectures, and the implications for making the wrong decision will be lasting — and could put banks at competitive risk.”
To help your bank and credit union make the best use of your resources, Gartner identified the eight key criteria that have the most impact on CBS banking system decisions:
- Operational Performance
- Program Management
- Partner Management
- Customer References