Basic banking and choosing the right solution
Imagine what banks looked like before 1970. Long lines and a particularly long waiting period for almost any transaction were normal. People who were customers of a branch and not of a parent bank. All transactions can only be made at your particular branch. Any input is only reflected after more than 24 hours, as the information is sent to the data centers in batches at the end of the business day. However, over the next 40 years, most banks chose to create a centralized real-time online exchange or environment (CORE) to manage their operations, resulting in central banking. In India alone, the number of public sector bank branches with central banking implementation rose from 79.4% in March 2009 to 90% in March 2010. Worldwide, the figures are close to one hundred percent.
According to the US research and advisory firm Gartner, the central banking system (CBS) is basically a back-end system that performs daily banking transactions and updates accounts and financial records. It is essentially the nervous system of a bank which, if affected, can drastically change the bank’s operations. CBS is a common connection point for the entire range of products and services that banks offer today under one umbrella.
Centralized data centers have been formed and all banking applications can be accessed here. Data for any bank as a whole is stored on a central server that branches, regional offices and the head office can all get their hands on. All types of banking operations, such as the recording of all types of transactions, loans and mortgages, as well as the calculations of interest, deposits, money transfers, payment balance, customer information and other similar operations, have been fully automated using a central banking solution. This solution makes use of the Internet or other forms of connectivity to automate operations with appropriate software. This central banking software is then applied to all branches, so they are all on one platform.
A solution that generally includes:
• Internet, mobile, tab banking
• Data center and colocation as well as disaster recovery services
• Transfer of funds remotely and immediately (IMPS, NEFT, RTGS, etc.)
• Automatic teller machines (ATM) and point of sale systems
• Various other services such as commercial payment with QR code, agency banking application, eKYC solution, connectivity and others.
CBS goal
Central banking solutions differ from bank to bank and are highly dependent on the type of customer base a bank has. The basic objective of central banking is to a large extent to be convenient for the customer and to reduce operating expenses. A good central banking solution has a direct impact on profitability, customer satisfaction, and competitiveness. It allows customers to achieve greater freedom in transactions, banks give in thanks to the reduction of time and resources dedicated to monotonous activities.
A Core Banking solution is especially beneficial because of its:
• Scalability – Since transactions are processed in large volumes on a daily basis, the business priority is to be able to scale without interruption.
• Flexibility: banking has numerous modules that require an extremely flexible solution that is capable of configuring the right mix of IT resources at the right time.
• Agility: To be competitive in the market, the solution can adapt quickly to changes and transformations.
• Profitability – These solutions not only provide customer satisfaction, but also benefit the bank by saving many hours of work and maintaining accuracy.
A successful central banking application can be migrated across all types of financial institutions, including:
• Corporate banks
• USPs and nationalized banks
• Cooperative banks programmed
• Urban cooperative banks
• State cooperative banks
• Payment banks
• Small financial banks
• Non-bank financial corporations
• Microfinance institutions
• Credit cooperative societies
• Securities and insurance sector
• Regional rural banks
Advantage
Among the myriad advantages that a CBS has, the most important is that it has allowed banks to strengthen their relationships with customers. The concepts of customer satisfaction, retention, tailored and personalized plans, customer convenience and others were introduced in the financial industry, thanks to central banking.
Today’s customers have a plethora of channels through which they can contact their respective banks. It could be through their PCs over the Internet, on their smartphones, tabs, or through mobile kiosks. Good central banking software integrates all of these channels and provides a seamless transaction experience for both the bank and the customer.
Since all processes are automated, another important advantage of a good modern central banking solution is that it reduces the chances of human error and fraud. This, in turn, increases employee efficiency and ultimately increases business opportunities. All resources are used properly, which also minimizes the possibility of waste.
Automation, most of the time, always helps companies save a lot of money and time. Online banking reduces the passage of people in banking facilities, which means that infrastructure costs are drastically reduced. Similarly, operating and support expenses also decrease. Maintaining legacy systems is also an expensive affair. Central banking reduces IT maintenance costs by moving to shared services platforms.
Lastly, since all steps are accurately recorded and traceable, ready-made business analysis is available in real time. All data collected on the back-end can be transformed into actionable information as needed. This has made banking smarter over the years. Core banking solutions have also changed over time, bringing improved services into their scope. The CIO believes that the integration of new technologies such as artificial intelligence, chat bots and the Internet of Things platform can help activate business intelligence that helps make better decisions.