New age core banking solutions like Thought Machine, Mambu and Pismo are on their way to transform banking as we know today

Simplistically put, these are a set of cloud native, even driven domain microservices that facilitate quick creation and launch of new products, configuration of workflows, accounting entries and interface with other internal applications as well as external world.

"Headless Core" as they are called refers to the fact that while the core focuses on the actual "core", the upstream and downstream functionalities like CRM, Onboarding, Customer Management, KYC, Data Warehouse, Regulatory Reporting and the like stay OUT of core.

Headless core gives bank an opportunity to have a core in parallel to the legacy core and empty out legacy core module-wise. This reduces the risk that big bang migrations bring with it while giving the bank an advantage of early use of the modern core albeit for some products/functionality.

New core with loosely coupled upstream and downstream applications puts bank in a position to modernize component-wise & at speed, take advantage of the ecosystem and respond to the demands of the market. With Core Banking being a set of APIs, the banks can look at expanding its service outreach (BAAS) by partnering with Fintech to embed banking within business use cases (Example - Embedding lending in the SME working capital management)

There are multiple advantages -flexibility, scalability, security, modularity, easy integration (APIs), easy migration, spurs innovation and sets up the bank for the future etc.

No wonder, multiple Tier-1 banks have one of the "Headless Core" banking solutions in their list of possible replacements to their ageing, monolithic, slow core banking application.