Core Banking and Its Importance in Today’s Banking Environment
Core banking and its importance in today’s banking environment 1.1. Definition and functionality
Before elucidating what drives banks to modernize their core banking systems and how to start a major project like this it is important to understand what the term core banking refers to and how a core banking system is defined. The answer to the question “what is a core banking system?” varies by whom you ask. However, the answer is significant for the scope of a core banking modernization initiative and the expectations stakeholders hold. What is core banking? The term core banking describes the business conducted by a banking institution with its retail and small business customers. Core Banking comprises the fundamental functions of a bank. The banking business known today emerged from the very basic functions ‘accepting deposits’ and ‘lending money’. Today’s banks offer a wide range of products and services that go far beyond these two functions and require a combination of a bank’s core banking functions and other elements of a bank’s operation. This often leads to different perceptions and interpretations when referring to core banking. On a very basic level core banking is understood as the management of customer’s financial transactions and their impact on accounts. 1 What is a core banking system?
Correspondingly Core banking systems are the IT systems and applications that manage a bank’s most fundamental activities and are thus the heart of a bank’s IT infrastructure. While historically core banking systems only had basic account management features and information about customers and account holdings (Customer information file), core banking systems nowadays can be defined as back-end system that allows banks to effectively develop, process and manage basic financial products and services, including data on clients, clients, deposit accounts, loans, mortgages, payment transactions and credit cards. Also included may be complementary products and
Before elucidating what drives banks to modernize their core banking systems and how to start a major project like this it is important to understand what the term core banking refers to and how a core banking system is defined. The answer to the question “what is a core banking system?” varies by whom you ask. However, the answer is significant for the scope of a core banking modernization initiative and the expectations stakeholders hold. What is core banking? The term core banking describes the business conducted by a banking institution with its retail and small business customers. Core Banking comprises the fundamental functions of a bank. The banking business known today emerged from the very basic functions ‘accepting deposits’ and ‘lending money’. Today’s banks offer a wide range of products and services that go far beyond these two functions and require a combination of a bank’s core banking functions and other elements of a bank’s operation. This often leads to different perceptions and interpretations when referring to core banking. On a very basic level core banking is understood as the management of customer’s financial transactions and their impact on accounts. 1 What is a core banking system?
Correspondingly Core banking systems are the IT systems and applications that manage a bank’s most fundamental activities and are thus the heart of a bank’s IT infrastructure. While historically core banking systems only had basic account management features and information about customers and account holdings (Customer information file), core banking systems nowadays can be defined as back-end system that allows banks to effectively develop, process and manage basic financial products and services, including data on clients, clients, deposit accounts, loans, mortgages, payment transactions and credit cards. Also included may be complementary products and