Everything You Need to Know about Core Banking Implementation and Modules

January 12, 2017 Tom McShane

Core banking solutions transformed the way banks used to operate. Before the introduction of core banking solutions, different branches of a bank used to operate through their local servers. The exchange of information between the different branches of the same bank was limited to one time in a day which led to sluggish business process and, therefore, banking was complicated and considerably slow than what it is now. The idea behind the implementation of core banking solutions was to standardize the business processes across the different branches of a bank. The first version of the core banking solution made banking friendlier for the customers by allowing them to access their bank account and perform basic transactions from any branch of the bank which had installed the core banking solutions.

With advancement of technology, core banking has evolved considerably and the modern core banking solutions come packed with features to assist bankers with all possible banking-related technological requirements. It has also made banking faster and simpler for the customers.

Modern core banking solutions are designed to:

Manage customer database
Streamline general ledger and reporting
Improve work process flow
Perform security audits
Automate processes such as tele-banking
Support banking analytics including risk analysis, profitability analysis

The technology behind core banking solutions

Core banking solutions have merged communication technology and information technology to suit the core needs of a bank: database management and customer-relationship management. Core banking relies on computer and network technology to allow banks to centralize their database and permit access from all authorized locations.

Customized software solutions are developed to perform banking operations such as recording of transactions, passbook maintenance, interest calculations on loans and deposits, customer records, balance of payments and withdrawal. Identical software packages are installed at different branches of bank and are interconnected by networks supported by telephone lines, satellites and the internet. This allows the banks and its customers to operate accounts from any branch which has installed their core banking solutions.

In the last two decades, most of the banks in the developed and developing countries have switched to core banking solutions. Some of the banks have their in-house core banking solutions while some have outsourced their work to private service providers. There are several service providers which implement these core banking packages at banks.

Challenges in implementing core banking solutions

Choosing a core banking solution that suits the needs of a bank is a task that needs to be done after considering all the present and future requirements of the business. As it is a huge deal financially as well as technologically, one must choose a trusted partner with well-proven track record to carry out this activity.

The biggest challenge that a service provider faces during implementation of core banking solutions is the lack of information about the legacy systems in the bank. The legacy systems in the banks had been developed on need-basis and most of the banks have very limited information around how these systems interact with each other. Replacement of these legacy systems without sufficient information lead to delays and frustration.

Other challenges that make implementation of core banking solutions complex are the vague information exchange between the service provider and the bank and innumerable customization request coming in till the last stage. Both of these issues lead to multiple iterations and delays in implementation of the solution.

However, with a clear business objective and well-thought of implementation plan from the beginning, the challenges can be minimized and implementation process can be made faster.

Process to implement core banking solutions

The challenges faced during implementation of the core banking solutions are outweighed by the business benefits it offers. A good core banking solution brings a strong alignment between the business and technology environment making banking faster and friendlier.

To implement a core banking solution successfully and without much delay, follow these steps:

Gather business requirements first: Take stock of the current environment, understand why this change is important and identify the foreseeable challenges
Create a plan: Define your objectives and expectations from this change, define success metrics for the project
Select a vendor: Implementation of a core banking solution is a risky task, choose a vendor that has a proven track record
Sensitize the employees to changes: Train the employees on the new software and sensitize them to the challenges and opportunities coming their way
Use a phased approach: Doing everything at once can be risky, choose to introduce the changes in a phased manner
Go for ‘Delta-driven’ implementation: Choose the ‘Delta-driven’ approach over the ‘Gap’ approach and focus on requirements beyond the existing legacy system
Limit customization requests: Reduce the request for customizations as much as possible to avoid running into unforeseen and unaccounted issues
Test before you deploy: Test everything thoroughly or be prepared to fix the bugs before getting into deployment stage

Once the testing is successful, proceed to deployment stage. Before deployment, do not forget to cleanse the data from the old system.

If the plan has gone absolutely smooth, create a reusable blueprint of the plan for next set of implementation or upgradation.

If there are glitches after deployment, acknowledge the problem and try some manual workarounds until an effective solution is figured out.

After the implementation is over, measure the effectiveness of upgrade or replacement on the success metrics defined during the planning stage.

Companies that assist core banking implementations

There are multiple old and new IT companies which have forayed into the core banking solutions domain as service providers. Some of the popular service providers are:

EdgeVerve Systems Limited
Oracle Financial Services Software
VirtusaPolaris
Fiserv
IDEALINVENT
TCS Financial Solutions
Silverlake Axis
Temenos
Avaloq
FIS

Depending on the requirements and scale of your business, you can choose any of these companies to carry out the implementation of core banking solutions for you. The time required for implementation of the solution will depend on the size and type of bank as well as the amount of business process transformation involved in the task.