With customers wanting more control over their money, especially due to the pandemic keeping us indoors, banks are making their banking service a Core Banking System. They want to make customers happy and keep them coming back. Big companies like Oracle and IBM are also using automation and fancy data processing to improve their operations and learn more.
Fintech companies are also thinking about using these banking systems. They want to know what benefits they’ll get and if it’s worth it.
So, if you are wondering whether to use core banking systems, let’s dive into it. Hence, in this article, we will talk about what it is, why it’s important, and the good and bad things about it. Keep reading to learn all about the core banking system.
What is meant by Core Banking?
A core banking system is like the main computer program that a bank uses to handle its most important tasks, like taking care of customer accounts, money moving around, making sure everything is secure, and following the rules.
This system is like the bank’s brain and is super important for making sure customers have a smooth experience. It also ensures that the bank follows all the rules. Inside this banking system, some different parts or modules do specific jobs:
Accounting
This part keeps track of all the money stuff, like when people put money in, take it out, get loans, or pay bills.
Customer Relationship Management (CRM)
In the same way, in the CRM the bank keeps info about its customers, tracks how they talk to the bank, and makes reports about it.
Risk Management
This part helps the bank find and handle problems, like when someone tries to cheat the bank or when there’s a risk of losing money.
Operations
Likewise, this helps with everyday tasks like moving money around and looking after accounts.
Reporting
Lastly, it makes reports to show how well the bank is doing and helps the bank make decisions.
So, this core banking system is like the brain and heart of a bank, making sure everything runs smoothly and safely.
There are many benefits of using the core banking system. Here are some of them:
Better Efficiency
These systems can make a bank’s work faster and smoother by automating tasks that used to be done by hand.
Less Risk
Indeed, the power of Core Banking is like a watchdog that helps banks find and deal with problems like cheating and losing money.
Improved Customer Experience (CX)
With these systems, banks can make it simpler for customers to handle their accounts and money, giving them a nicer experience. When it comes to enhanced CX in IT core banking, IT core banking systems can help banks provide a more seamless CX by making it easier for customers to manage their accounts and transactions.
Staying Legal
Core banking systems keep all the important money information in one place. Therefore, it helps banks follow the rules and laws.
How does Core Banking Work?
A core bank work as a back-end server that handles standard operations like interest calculation, passbook maintenance, and withdrawal. When a customer withdraws money from a branch or an ATM, the application sends a request to the centralized data center, which processes and authenticates the operation.
However, a data center contains a database, an application server, a web server, and a firewall to protect the system from malware attacks. Banks can host their data center locally or on the cloud.
Challenges of Implementing a Core Banking System
But, some problems can come up when a bank tries to use a core banking system:
Expensive
These systems can cost a lot of money to buy and set up.
Complicated
Core banking systems are like big puzzles, and it can be hard to put all the pieces together the right way.
Integration
These systems need to work with other computer systems in the bank, like the one that handles customer info or keeps an eye out for problems. Additionally, this process can take a lot of time and effort.
Even though core banking systems can be a big help, they can also be a big challenge. But if a bank picks the right system and sets it up well, it can make things work better, save money, and give customers a nicer experience.
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Final Words
In conclusion, while core banking offers numerous benefits such as improved efficiency, risk reduction, better customer experiences, and enhanced compliance, it comes with challenges like high cost, complexity, and the need for seamless integration with other bank systems. Nevertheless, with the Evolution of Core Banking, careful selection, and effective implementation, these systems can significantly enhance a bank’s operations, save costs, and provide customers with a smoother banking experience.
Furthermore, despite the few limitations mentioned earlier, your bank still needs a core banking platform to streamline operations and maximize ROI.
Tkxelogics can help you develop banking software using a ready-made backend FinTech platform to accelerate time to market. They provide a flexible banking core as a foundation for building any PayTech products.
FAQs
Examples are processing credit and loans, mortgages, deposits, etc. These services are made available to the customers by the banks through various channels like mobile banking, branches, internet banking, and ATMs.
The importance of these five pillars or principles can be understood from the view that, if any one of the pillars falls, the banking infrastructure crumbles.
- Intermediation
- Profitability
- Trust
- Liquidity
- Solvency
Under pure Banking, commercial banks give just short-term loans to trade, industry, and commerce. They specialize in short-term finance only. This type Of banking is popular in the U.K.
