Core banking services

Core banking is the back-end system powering the bank’s operations, such as transactions, wire transfers, loans, payments, mortgages and deposits, all in real time. A core banking system can be installed on-premises (i.e., on local servers) or hosted in the cloud. 

Core banking solutions typically include the following features: 

• A centralized dashboard for bankers and clients 

• KYC-compliant customer onboarding 

• Multi-factor authentication 

• Loan management 

• Interest calculation 

• Transaction management 

• Push notifications 

Core banking software lets banks deliver a seamless customer experience, allowing them to get the same services regardless of location or touchpoint. It also serves as the single source of truth for customer data. 

For example, when the customer uses an ATM to withdraw money, the ATM will request data from the core banking system to verify the person has enough funds in the account. The system will then process the request and approve the operation. 

A core banking solution typically consists of the following five components: 

• Accounting. This component centralizes all data on the bank’s financial performance and operations and serves as the single source of truth for accounting software. 
• Customer relationship management. This component gathers all customer data and powers customer service features like ticket resolution and communications. 
• Operations. This component handles payment, lending, withdrawal, and deposit processing and management.  
• Reporting. This component enables generating reports for compliance and decision-making, as well as gaining real-time insights into the bank’s performance. 
• Risk management. This component aims to help the bank mitigate risks with AI-powered fraud detection, anti-money laundering, know-your-customer due diligence, credit assessment and liquidity management. 

Progressive modernization is one approach to replacing the core banking solution with an up-to-date alternative. As the name suggests, it means progressively modernizing systems by reinventing customer journeys, one by one, as a part of your strategy. 

In progressive modernization, the new customer journeys determine the business logic behind the new applications. The development team builds them iteratively using the microservices architecture. The new software gradually replaces the corresponding modules in the existing system. 

As opposed to the big-bang approach (i.e., replacing major monolithic components in one stroke once every several years), progressive modernization enables gradual change in the system. This allows for better risk mitigation and optimized modernization costs. 

Compared to the greenfield approach, where a new digital bank solution operates in parallel with the legacy stack, progressive modernization avoids double spending and compatibility issues.  

A core banking system health check is a consulting service that entails a comprehensive system analysis. This process aims to reveal if there are any significant issues with the system and how to solve them. 

Here are four ways an organization can benefit from a health check: 

• Identifying major issues early on. As the system sees an increase in transaction and data volumes, minor performance and scalability failings can cause downtime, undermine customer experience, and entail reputational and financial costs. 
• Optimizing maintenance costs. During the check, experts can suggest concrete core banking modernization steps to reduce IT spending in the long run.  
• Maximizing system performance. Pinpointing performance issues, as well as their solutions, will futureproof the system and optimize resource use. 
• Receiving clear guidance in issue resolution. At the end of the check, the client receives detailed recommendations on fixing critical issues and mitigating potential ones.