What is a core banking system ?
Banks are now coming up with new and innovative core banking solutions in response to evolving customer needs. Nowadays, customers want more autonomy and control over their funds, hence the need for user-friendly and flexible banking solutions. This strategy helps in extracting new customers while satisfying the existing ones.
The rise of core banking system
Companies are now looking for ways to improve their systems and services. This led to the adoption of advanced data processing strategies in some companies and automation to enhance their operations and expand customer outreach. Skaleet, a digital banking platform, has played an essential role in ensuring financial institutions are at the top of their game. Thanks to Skaleet, banks and other financial institutions can change their operations continuously without worrying about the setup process.
Financial institutions that often try to keep up with the evolving customer demands are evaluating core banking architecture to see if it is worth investing in. A well-implemented core banking architecture can help the institution, employees and customers by providing top-quality banking services. Therefore, if you are unsure about adopting a core banking solution, check out how it works, its benefits and potential setbacks.
Core banking system: What is it?
It can generally be defined as a software or platform that financial institutions, such as banks, use to enhance their most critical processes. These processes revolve around risk management, customer accounts and transactions. In other words, the core banking system connects several branches of the same financial institution to offer services like payments, interest calculations, customer relationship management, loan management, deposits and withdrawals in real-time.
The core banking system acts as the central nervous system of any financial institution, since it helps when it comes to compliance with regulations and ensuring a seamless customer experience. This means that customers can access banking services, like conducting transactions, regardless of their location.
The working principals of core banking system
A core banking system has bank-end servers responsible for handling normal operations like withdrawals, deposits, interest calculations and passbook maintenance. Every branch or ATM is linked to the centralised data centre. Therefore, when a customer uses an ATM to withdraw money, the request is sent to the centralised data centre for processing and authentication. The application server, database, firewall and web savers are all in the data centre. Banks have the option of hosting their data centre on-the-premise or on the cloud.
Benefits of core banking system
Security improvement
Modern or cloud-based core banking system uses state-of-the-art technology like the advanced encryption module, to offer protection from malware and hackers. Other essential technologies include two-factor authentication and bio-verification. This helps customers protect their financial information by providing an added layer of protection. For financial institutions, these features help them comply with banking regulations and maintain Know Your Customer (KYC) standards.
Enhance productivity
Core banking systems reduce the time it takes to process information from different branches. Multiple branches function as a unified entity, increasing operational efficiency. This means that customers can access banking services almost instantly, regardless of their geographical location. Also, banks can complete transaction processes faster, from any connected branch.
24/7 Banking service access
The ever-changing customer needs have necessitated the development and adoption of new technology, core banking solutions being a prominent example. Customers nowadays expect 24/7 access to vital banking systems, including contactless payment. With core banking services, customers can carry out financial operations anytime and anywhere (Core banking systems are always online). Additionally, customer support service is always available round the clock to help customers with their concerns and questions.
In a nutshell
The core banking system plays an important role when it comes to completing bank operations and services. It offers a wide range of benefits, all depending on the type of system you choose to use. Proper implementation of the core banking system helps the bank to reduce operation costs, providing excellent customer experience and enhancing productivity.