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.
To implement a core banking solution successfully and without much delay, follow these
steps:
1. Gather business requirements first: Take stock of the current environment,
understand why this change is important and identify the foreseeable
challenges
2. Create a plan: Define your objectives and expectations from this change,
define success metrics for the project
3. Select a vendor: Implementation of a core banking solution is a risky task,
choose a vendor that has a proven track record
4. Sensitize the employees to changes: Train the employees on the new
software and sensitize them to the challenges and opportunities coming their
way
5. Use a phased approach: Doing everything at once can be risky, choose to
introduce the changes in a phased manner
6. Go for ‘Delta-driven’ implementation: Choose the ‘Delta-driven’ approach over
the ‘Gap’ approach and focus on requirements beyond the existing legacy
system
7. Limit customization requests: Reduce the request for customizations as
much as possible to avoid running into unforeseen and unaccounted issues
8. 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.
