Core banking

Core banking is a general term used to describe the services provided by a group of networked bank branches. Bank customers may access their funds and other simple transactions from any of the member branch offices.

Core banking

Core Banking is normally defined as the business conducted by a banking institution with its retail and small business customers. Many banks treat the retail customers as their core banking customers, and have a separate line of business to manage small businesses. Larger businesses are managed via the corporate banking division of the institution. Core banking basically is depositing and lending of money.

Nowadays, most banks use core banking applications to support their operations where CORE stands for "centralized online real-time exchange". This basically means that all the bank's branches access applications from centralized datacenters. This means that the deposits made are reflected immediately on the bank's servers and the customer can withdraw the deposited money from any of the bank's branches throughout the world. These applications now also have the capability to address the needs of corporate customers, providing a comprehensive banking solution.

A few decades ago it used to take at least a day for a transaction to reflect in the account because each branch had their local servers, and the data from the server in each branch was sent in a batch to the servers in the datacenter only at the end of the day (EoD).

Normal core banking functions will include deposit accounts, loans, mortgages and payments. Banks make these services available across multiple channels like ATMs, Internet banking, and branches.

Core banking solutions

Core banking solutions are banking applications on a platform enabling a phased, strategic approach that is intended to allow banks to improve operations, reduce costs, and be prepared for growth. Implementing a modular, component-based enterprise solution facilitates integration with a bank's existing technologies. An overall service-oriented-architecture (SOA) helps banks reduce the risk that can result from manual data entry and out-of-date information, increases management information and review, and avoids the potential disruption to business caused by replacing entire systems.

Core banking solutions is new jargon frequently used in banking circles. The advancement in technology, especially Internet and information technology has led to new ways of doing business in banking. These technologies have cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as core banking solutions. Here, computer software is developed to perform core operations of banking like recording of transactions, passbook maintenance, interest calculations on loans and deposits, customer records, balance of payments and withdrawal. This software is installed at different branches of bank and then interconnected by means of communication lines like telephones, satellite, internet etc. It allows the user (customers) to operate accounts from any branch if it has installed core banking solutions. This new platform has changed the way banks are working.

Gartner defines a core banking system as a back-end system that processes daily banking transactions, and posts updates to accounts and other financial records. Core banking systems typically include deposit, loan and credit-processing capabilities, with interfaces to general ledger systems and reporting tools. Strategic spending on these systems is based on a combination of service-oriented architecture and supporting technologies that create extensible, agile architectures.

Select core banking application package vendors

Many banks implement custom applications for core banking. Others implement/customize commercial ISV packages.

While many banks run core banking in-house, there are some which use outsourced service providers as well. There are several Systems integrators like Accenture, IBM and HP which implement these core banking packages at banks.

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