Banking today isn’t just a deposit-taking and lending system anymore. It has transformed into a financial institution that provides a wide array of products and services for general as well as corporate clients.
This transformation has been only possible because of the core banking system. CBS or core banking system is a comprehensive banking solution which has become an essential part of many businesses offering multiple banking services.
Core banking solutions allow banks to offer a superior banking experience to the customers. Also, the ability to quickly adapt to new changes enables banks to remain competitive in the market. Not only does it allow them to streamline their banking operations, it also allows the banks to offer cutting-edge services to their customers.
What is the core banking system?
In simple terms, Core Banking is a centralized system that enables the banks to offer seamless banking services by automating both frontend and backend processes of a bank. With the core banking system, customers can access banking facilities from all the branches of a bank. Other than branches, it also allows the banks to offer anywhere banking through various delivery channels like internet banking, mobile apps, ATMs, kiosks and more.
The term CORE stands for Centralized Online Real-Time Environment. CBS or Core Banking System provides integrated banking solutions for retail banking as well as corporate banking while facilitating integration with trade finance, mortgages, and loan management systems.
Core banking system functions differently depending upon the type of bank it is operating for. The retail banking aims to offer services to individual customers whereas in case of wholesale banking, the business is conducted between different banks. However, sometimes core banking systems are designed to help the bank deliver multiple services to their customers. This system of banking is often referred to as the Universal Banking System.
Benefits of core banking system
Implementing core banking system has multiple benefits for the banks as well as the customers. Here are a few advantages of the core banking system that make it one of the topmost priorities for the banks.
Core banking system simplifies the business processes while making them more effective. It automates certain tasks and reduces the workload of the employees. This allows a limited number of resources to manage various tasks in a time-efficient manner.
Core banking solutions are user-friendly and can improve employee productivity significantly. It provides a single interface to control all the banking activities effortlessly. So, additional employees can concentrate on marketing their new products in a personalized manner.
By implementing core banking solutions, banks can reduce operational cost drastically. The anywhere banking facility of core banking systems reduces the physical presence of customers in the branches. This enables the banks to cut down on the infrastructural and operational costs significantly.
While eliminating such costs, the core banking system also opens new revenue streams by allowing the banks to launch new products and services on an ongoing basis.
Enhanced customer satisfaction
Personalizing banking services is another great benefit of the core banking system. Banks can now operate round the clock and offer services to their customers as and when they need.
The core banking solutions are enabling the banks to adopt new technologies and adjust their banking models to match the current market needs. With this, they can target the customers on an individual level and offer a variety of products and services with personalized interactions.
The core banking system is extremely flexible and can unite multiple IT resources while reducing the cost associated with maintaining the traditional systems. With core banking, banks can move to shared services platforms while saving the cost of maintaining legacy systems.
Core banking solutions provide increased security and standards to the bank systems. This reduces the chances of data security breaches or any kind of information loss.
Potential errors due to multiple entries is a major drawback of legacy systems. Core banking solutions can eradicate such errors by automating banking processes which otherwise would need human interventions.
A study by The Data Warehousing Institute (TDWI) found that the cost of human errors while tracking customer contact information is as high as $600 billion per year! So, you can imagine the overall cost across operations performed by humans. This itself is a big reason why banks should implement core banking services.
Why do banks need core banking solutions?
The core banking solution helps the banks to expand their market reach while improving the banking operations and reducing the operational costs significantly. With core banking systems, banks can grow their business by utilizing an array of features in the highly competitive market.
Banks should consider moving to the core banking system to:
- Simplify and improve banking operations
- Eliminate errors due to multiple entries
- Speed up the banking transactions
- Automate mundane tasks
- Introduce new financial products easily
- Increase the productivity of employees
- Reduce the infrastructural and maintenance cost
- Increase customer satisfaction through anywhere anytime banking
What does it need to successful core banking transformation?
Core banking implementation is a long and complex process with a considerable cost associated. Many banks are still using legacy systems that have a much lower cost compared to the replacement cost to the new core banking applications.
Also, shifting a business environment has its own challenges. Banks must communicate the tangible benefits to the business and employees for a smooth transition to the new system. Like any other change, core banking transformation also needs to be done in a manner so that any potential risks can be mitigated.
The core banking solutions offer a centralized system so that all the customer information is integrated into the core banking interface so that any banking personnel can access that information as and when needed.
With core banking solutions, banks can provide a full range of banking services to their customers efficiently. Not only does it help reduce labor costs by automating several banking processes and anywhere and anytime banking facility of the core banking system, but also enhances the overall experience of the customers across channels.