A core banking system is the software used to support a bank’s most common transactions.
Elements of core banking
♦Making and servicing loans.
♦Opening new accounts.
♦Processing cash deposits and withdrawals.
♦Processing payments and cheques.
♦Customer relationship management (CRM) activities.
♦Managing customer accounts.
♦Establishing criteria for minimum balances, interest rates, number of withdrawals allowed and so on.
♦Establishing interest rates.
♦Maintaining records for all the bank’s transactions.
Advantages of Core Banking
1. Limited Professional Manpower to be utilized more effectively.
2. Customer can have anywhere, more convenient and easier banking.
3. ATM, Interest Banking, Mobile Banking, Payment Gateways etc. are available.
4. More strong and economical way of management information system.
5. Reduction in branch manpower.
6. Additional manpower can be available for marketing, recovery and personalized banking.
7. Instant information available for decision support.
8. Quick and accurate implementation of policies.
9. Improved Recovery Process causing reduction on recovery costs, NPA provisions.
10. Innovative, redefined or improved processes i.e. Inter Branch Reconciliation causing reduction in manpower at Head Office.
11. Reduction in software maintenance at branch and Head office.
12. Centralized printing and backup resulting in reduction in capital and revenue expenditure on printing and backup devices and media at branches.
13. Electronic Transactions with other Financial Institutions.
14. Increased speed in working resulting in more business opportunities and reduction in penalties and legal expenses.
Core banking functions differ depending on the specific type of bank. Retail banking, for example, is geared towards individual customers; wholesale banking is business conducted between banks; and securities trading involves the buying and selling of stocks, shares and so on. Core banking systems are often specialized for a particular type of banking. Products that are designed to deal with multiple types of core banking functions are sometimes referred to as universal banking systems.
Examples of core banking products include Infosys’ Finacle, Nucleus FinnOne and Oracle’s Flexcube application (from their acquisition of Indian IT vendor i-flex).