Mihails Safro, CEO of xpate, that has just delivered it’s own in-house build core banking solution tells about the history and the meaning of this technology.

What is the Core Banking System?

Mihails Safro, Xpate

Core banking stands for “Centralized Online Real-time Exchange”. It is the cornerstone of any financial institution, responsible for routine daily operations. In other words, it is a centralised network that serves as a tool for controlling all the back-end and front-end processes. Of course, the end beneficiaries of that system are customers – core banking allows them to make money transfers and monitor activity in the bank account app.

Core Banking is known for its retail use rather than corporate. The advantages it brings to retail customers are evident, such as quick access to the bank account through the web. However, in the past few years, the number of corporate clients has grown, leading to banks realising the potential of core banking in the corporate sector. Now, they are working on tailored solutions for the B2B sector.

With core banking, users can access their bank accounts, make deposits, use ATMs, and take advantage of the internet and mobile banking. Core banking utilises ICT (Information Communication Technology) as an umbrella platform bringing all the apps that make banking easy and straightforward under one roof.

History of Core Banking

Core banking is the first tech utilised by banks in the 1980s when digitalisation was just taking off. However, the process is far from being completed and has a lot to go through to reach its final point – despite the obvious advantages, banks are struggling to go full digital which has to do with regulations, operations, and sometimes hesitance to new changes.

The first attempt to go digital was in the 1970s in the US, when fintech created the first-ever apps for large financial chains. After the experiment, such digital solutions were implemented in other parts of the world, such as Europe, Australia, and Asia. However, these apps had their own issues and limitations due to their early development stage. They were tailored to servicing customers and unable to process large amounts of data. However, the tables had turned in the 1990s, when many firms theorised concepts of future banking. In 30 years, the overwhelming majority of financial institutions in the developed world moved on the core banking rails and created their own data centres.

Objectives of Core Banking System

Core banking aims to simplify customer experience for consumers and bank employees. Back then and even now, customers are forced to physically visit the branches, wait in lines, and even pay for management services. Bank employees had to spend hours recording transactions and all the customer’s activity manually. Core banking strives to eliminate these unnecessary interactions and replace them with technology, making banking available anytime. All executed transactions are automatically calculated and recorded. Customer data is gathered by the system and saved in a digital database, allowing banks to utilise a data-driven approach for decision-making.

The data-driven approach is one of the major advantages of core banking. Banks can gather information from collected data and make informed decisions. Furthermore, the financial sector must comply with a dozen regulations, which is another area where core banking helps – it allows banks to generate reports demanded by the regulator much quicker. Finally, core banking is customisable – you can always redesign it depending on the market situation or consumer demands.

Wrapping up

Core banking is a vital part of any financial institution that’s currently operating. It simplifies processes, takes charge of daily banking operations and automates the tasks that were previously done manually. Furthermore, core banking also introduced the concept of a unified framework tailored to a specific financial institution. In other words, all the branches finally got access to a single database storing past transactions, consumer activities and much more.

Yet, the customers received the most benefits. Core banking eliminates queues, lifts the burden of physical communication with bank managers and introduces banking on the go, also known as mobile banking. Given all the advantages, the core banking system has a bright future.