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Transforming Core Banking Systems

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Core transaction processing engines - or “core banking systems”- are at the heart of IT architecture and are increasingly important not only in terms of pure cost and performance but also in terms of processing transactions in real time, being able to stitch together partnerships with tech companies, e.g., allow API access.

In this article we look at the forces driving the change in core banking systems and also identify options for renewal.

Internal forces driving the change

  • Older core banking systems - usually designed for reliability rather than open architecture are now technically obsolete as the legacy systems lack of flexibility, scalability and on-demand access to data

External forces driving the change

  • From competitiveness perspective, the banking industry is undergoing a massive transformation, with digital experiences reshaping the way banks do business. As customer experience becomes a top priority, consumers today are seeking more personalized, intuitive, hassle-free interactions and experiences
  • Advent of digital banking, cloud, and APIs are shifting the way banking products and partnerships are constructed
  • Market-driven or regulatory-driven open-banking


Options

As businesses across the financial industry begin to refocus on understanding their customers and delivering differentiated customer experiences, institutions must gauge their specific situation, requirements, and constraints, and arrive at their own solution. That said, if a core banking replacement/upgrade is needed, what are the options?


There are two main options (with a few variations) for banks that conclude that they need to replace their core banking system:

  • A traditional enterprise core banking system (self-hosted or as a utility)
  • A next-generation cloud-based core banking system

As the open banking data sharing ecosystem takes hold, there is some evidence to suggest that banks/credit unions may be required to shift en-masse to a cloud-based microservice architecture in the next few years. A new breed of cloud-ready and open-banking compliant, core banking systems is emerging.

We consider four critical success factors for implementing the target architecture to avoid pitfalls. These factors are strong internal capabilities, careful selection of implementation partners, clear contractual parameters and roles, and rigorous project and change management.

Core banking and its role in developing decision support is central to BankingBook Analytics' offerings. Using APIs, we partner with cloud-enabled core system providers to develop customer digital experience.

For more information, contact BBA Marketing

+1 (905) 499-3618


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