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 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 systems 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 systems, focussing on neo-banks and electronic money institutions.
Choosing right core banking solution is again a tough task for banks its not always that easy to select right core banking solution.
Open source Technology in core banking solution or software can help banks to maintain their productivity and profitability at the same time.
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F.A.Q about Core Banking System
What elements does Core Banking System include?
A core banking system is the software used to support a bank’s most common transactions.
Elements of core banking include:
- Making and servicing loans.
- Opening new accounts.
- Processing cash deposits and withdrawals.
- Processing payments and cheques.
- Calculating interest.
- Customer relationship management (CRM) activities.
- Managing customer accounts.
- Establishing criteria for minimum balances, interest rates, number of withdrawals allowed and so on.
- Establishing interest rates.
- Maintaining records for all the bank’s transactions.
Core banking functions differ depending on the specific type of bank. Retail banking, for example, is geared towards individual customers; wholesale banking is business conducted between banks; and securities trading involves the buying and selling of stocks, shares and so on. Core banking systems are often specialized for a particular type of banking. Products that are designed to deal with multiple types of core banking functions are sometimes referred to as universal banking systems.