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Core Banking: Definition, Features, Benefits

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Customers are demanding more control and freedom over their financial affairs, and also in the wake of the pandemic that has locked thousands of us inside banks, they’re offering more user-friendly core banking solutions that increase customer satisfaction and attract new customers who are loyal. Businesses like Oracle as well as IBM have added automated systems and advanced data processing in order to improve operations and improve their understanding of the market.

It is becoming more common for Fintechs who are trying to stay ahead of the rapidly changing market are looking into what the banking system’s core system going to offer in the event that it’s implemented, and if they are worth their effort.

If you’re considering whether you should adopt an integrated banking solution we will explore the idea and significance of a core banking solution in detail. Find out about benefits and disadvantages of banking with core.

What is the term “core banking?

It is an system that connects banks’ branches to provide services such as loans management withdrawals, deposits, withdrawals and payment in real-time.

What is the meaning of core banking?

The term CORE is a reference to Centralized Online Real-time Environment which means that the customer will interact with the bank as one entity regardless of their location in order to offer more autonomy to the customer in terms of the use of their accounts as well as conducting transactions from anywhere across the globe.

What are IT essential banking services?

The core banking platform services are new account establishment and management of customer relationships including interest calculations, withdrawals and deposits processing servicing and issuing of loans etc.

What is the core banking process?

A bank’s core system includes back-end servers which handle basic tasks such as interest calculation, maintenance of the passbook and withdrawal.

When a client withdraws funds at a branch or ATM then the application sends an email to the central data center, which takes the request, and then authenticates the transaction.

The data center is comprised of the database and application server and a web server and a firewall to guard it from malicious attack. Banking institutions can house their data centers locally or via the cloud.

What are the key IT essential banking attributes?

After studying the most popular banks’ software We’ve identified the most essential features of banking for a good solution.

Centralized dashboard

Bankers require a single-view dashboard that allows them to see the system in real-time. Additionally, both clients and bankers should be able to access the same dashboard; this will allow them to identify and resolve issues quicker.

The Onboarding (with KYC features)

Before accessing the dashboard, customers must log in to the account with an individual account username as well as password. With KYC tools, banks are able to verify the identity of prospective customers before they can sign up. The process of onboarding should be easy enough for customers to finish without hassle.

Two-factor authentication

The solution must include two-factor verification, which will increase security and protect customers with sensitive information.

Push notifications

When you design a core banking solution for mobiledevices, you can use push notifications to send regular account updates to customers.

Loan management

The banking system’s core must permit customers to keep track of their loans as well as schedule their payments in accordance with the agreed schedule.

Calculators of interest

For mortgage and loan repayments the users require access to real-time calculations to aid them in making educated choices.

Live chat

Live chat functionality should be available on the platform in order to allow users to reach support representatives when they require assistance. Chatbots that are automated can also offer templates for answers to frequently asked questions.

Transaction management

Customers can personalize their favorite payment and P2P transfer options so that they can ensure their contact lists are current. Additionally, they can use multi-currency exchanges in order to trade their preferred currencies.

What are the different types of banking systems that are core?

Depending on the hostingplatform, IT central banking systems could be classified into one of the following categories:

On-premise solution. This solution is based on a local-hosted infrastructure that provides the bank’s administration with various possibilities for customizing.
A core bank software that runs on cloud like the name implies it’s hosted on the cloud. In some cases, the cloud service provider can offer the application as an Cloud as a Service (CaaS) with a pay-per-use model. Sometimes, businesses can transfer their servers from their local location to the cloud for greater flexibility.

What are the main advantages of the banking system?

A better understanding of the fundamentals and functions of the banking platforms that are core Let’s look at their main advantages:

Improved productivity

Core banking platforms improve efficiency in operations by cutting down on the time needed to connect with branches. This means that banks are able to process transactions more quickly regardless of the client’s physical address.

Security improvements

Core banking systems utilize advanced encryption software to safeguard the infrastructure from malware and hackers. On the side of the customer bio-verification, two-factor authentication and bio-verification are also a way to add more layers of security for the platform. These options help banks adhere to KYC standards and conform to the other banking regulations.

Access to banking services 24/7

In the current age of electronic payments the availability of 24/7 bank services is crucial. Customers can make financial transactions at any time and from anywhere as the bank’s core platform is always online. Customers are also able to contact the customer service department for assistance anytime.

Lower operating costs

Banks can count on their main platforms to lower operational costs as they require less humans to operate. In addition, AI-powered infrastructure boosts the speed of completion speed of operations and lowers the chance of mistakes in the documentation.

Multiple currencies

Users can trade multiple currencies immediately without the need to exchange large amounts at the exchange.
Solutions that aren’t as effective IT central banking services

Despite the many advantages of the central banking services however, they have weaknesses.

The technical downtimes could disrupt normal banking operations, which can be frustrating for customers.
The use of a central bank system could result in an unintended source of failure that could affect all branches at once in the event of cyberattacks.
The latest core banking technology can prove costly to acquire and maintain, particularly for medium and small-sized banks.
Core banking software that is not up-to-date can make the entire infrastructure susceptible for system breakdown. Modernization efforts will cost you a significant amount of dollars.

What are the benefits of a core banking solution?

Despite the aforementioned limitations in the past, your bank requires a central banking platform in order to maximize the efficiency of its operations and increase the return on investment.

Final words

The core financial products of banks provide numerous advantages for banks and their clients. Through advanced data analytics banks can increase their efficiency while keeping satisfaction of customers at a high level. Additionally, you can depend on automation to ensure that your application’s infrastructure is up and running. Most importantly modern core banking solutions can protect your business’s and clients’ data from hackers.