What is Banking Core Software and Why is it Important?

From day-to-day banking operations such as transactions, authentications, loan payouts, and risk assessment to managing customer profiles and services, banks have a lot to handle. Managing all these aspects of banking by human resources alone is very difficult, if not completely impossible! This is why banks utilize specialized financial technologies (also called fintech) to help them operate effectively and efficiently. One of the most significant of such financial technologies is a banking core software or system. 

Almost every industry and field of life is going through a technological revolution right now and financial institutions, such as banks, are not behind on this as well. Technology in finance has a wide range of benefits. From ensuring security in transactions, efficient management and reporting to cutting costs, assessing risks, and detecting fraud and scams, all are the fruits of financial technologies. 

In addition to that, with the ever-increasing competition in the asset management and banking industry, every financial institution strives to enhance their effectiveness and to make things as convenient as possible for their clients. A banking core software majorly helps banks in this regard by improving their customer service and by making banking easy for their customers. This gives them a significant edge over their market competitors. 

Let’s discuss, in detail, what banking core software is, why it is important, and how it can help banks operate more smoothly. 

Banking Core Software – An Overview

A banking core software or system acts as the central nervous system of the bank and performs some of the most critical banking operations such as managing transactions, day-to-day operations management, creation of new accounts, handling customer profiles, providing customer services, calculating interest rates, and issuing loans. Furthermore, banking core software also helps the bank in assessing risks and avoiding fraud. 

A banking core software works as a central system and connects all the branches of a bank to a single dashboard. Developed in the 1970s, banking core systems are some of the most significant advancements in financial tech and almost every financial institution out there uses one. These systems are highly customizable and can be modified according to the changing needs of the bank as well as customers. 

Types of Banking Core Software

There are two basic types of banking core software available out there, there are:

1. On-Premises Systems 

On-premises banking core systems are hosted locally which means that they are installed on the bank’s own servers. The bank administration has a lot of customization options in the case of on-premises systems. 

2. Cloud-Based Systems

Cloud-based banking core systems are hosted on a cloud by a third-party provider. These systems are highly flexible and companies often move their systems to a cloud for convenience. 

Core Features of A Banking Core Software 

Let’s have a look at some core features of banking core software. 

#1. Managing Day-To-Day Operations 

One of the primary features of banking core software is that it manages all the critical day-to-day operations of a bank for it to function smoothly. These operations can include administrative tasks, authentications, accounting, and reporting. 

#2. Risk Assessment 

Banking CORE, which stands for Centralized Online Real-time Environment, helps financial institutions avoid potential fraud and scams by accessing risks. 

#3. Transaction Management 

The most significant and useful feature of banking core software is transaction management. A banking core system helps the bank manage deposits, withdrawals, and payments, as well as authenticate them. 

#4. Handling Customer Services 

A core feature of banking core software is that it handles customer services. Not only does it provide the services but analyzes customer interactions and reports them to help the bank improve its customer relations. The system also manages customer profiles and provides digital solutions to all their banking needs. 

The Importance of Scalability and Modularity in Banking Core System 

Scalability means a system’s ability to handle increasing workload without degrading its performance, whereas modularity refers to the system’s ability to upgrade and innovate quickly, in order to add new components and products. Scalability and modularity are highly important in a banking core system to efficiently manage and meet the needs of a growing customer base, to support new products and services, and to comply with regulations. 

"Modularity is the key to building a scalable, adaptable, and secure banking software. By breaking down the software into self-contained modules, developers can create a system that is easier to maintain, update, and extend. This is essential for banks, which need to be able to quickly respond to changes in the market and regulatory environment." - Carl-Johan Larsson, Head of Partnerhips @ Velmie Banking Tech 

Banking core software is the backbone of the banking industry as it manages all aspects of banking operations, from customer accounts and transactions to risk management and compliance. Scalability and modularity are two of the most essential features of the system that allow banks to adapt to changing needs and regulations.