A Deep Dive Into The Use Of Modern Core Banking Technologies
Faster payments, increased efficiency of transactions and offering a bouquet of banking solutions to customers have revolutionized the way people do banking today.
Banks all over the world make use of core banking systems that handle thousands of transactions every single day and are expected to function without any interruptions in order to safely and quickly process those transactions. While traditional core banking systems are in play, most banks are trying to innovate their offerings to keep pace with the digital world and increased consumer demand.
With more and more consumers demanding customised and personalised solutions from their banks, banking has become all about customer experience. With the advent of digital banking, online payments and virtual card transactions, banks are eager to adapt themselves to the changing ways of banking. As a result of this, banks have seen a significant shift in the way their customers transact - from transactions taking a few days to process to real-time processing of transactions. The adoption of modern core banking technologies by banks has helped them aid this process.
Use of modern core-banking technologies The number of transactions that take place today on a day-to-day basis is massive. An RBI report stated that the number of electronic transactions undertaken using RTGS increased by 5.7 percent during the year 2020-21, with the total value amounting to ₹1,056 lakh crore.
The use of next-gen core banking systems has gained popularity as it allows banks to leverage the power of the cloud by using cloud-native solutions. They not only provide flexible and scalable options but also offer virtually infinite computing capabilities and resources to banks. Armed with a microservice-based architecture, the modern core banking technology will become core enablers of the shift to this architecture. Banks now have the ability to run technologies of choice to scale whenever necessary - paying only for what they consume. This helps banks overcome the problems associated with the complexity of dealing with traditional core banking systems as well as helps them maintain a singular banking system when mergers and acquisitions take place.
The technology available today helps banks and credit unions to centralize record-keeping and provide access to the same account information regardless of location via physical bank branches, ATMs, banking websites, mobile banking apps, and even Alexa and Siri.
Growth of Neo-banks and Fintechs
Over the past five years, the banking industry has witnessed intensive competition with the emergence of neo-banks and fintech players. Neo-banks are winning market share and serving customers at around 1/3 of the cost of traditional banks while fintechs are offering lucrative banking solutions to control the end customer experience. These new players are growing their businesses and attracting customers with the help of modern cloud-native core technology and microservices-based architecture, which enables them to innovate faster and operate more efficiently.
With the adoption of these modern technologies, banks can select the best solutions they want to offer their customers from their fintech partners and replace solutions when something better comes along, rather than being locked into a specific technology. This offers them the flexibility to tailor services to their customers and offer personalized and efficient solutions. Moreover, banks can now choose to adopt a ‘dual core’ strategy and take a step-wise approach of moving new deposits and loans onto their new platform, grow their business through better customer experiences and gradually move towards a flexible modern cloud-native core banking system in the coming years.
While the shift towards digital is rapidly changing most aspects of every business, the banking sector has also undergone a technological transformation. Faster payments, increased efficiency of transactions and offering a bouquet of banking solutions to customers have revolutionized the way people do banking today. The speed and flexibility modern core technologies offer now are nothing more than a requirement to keep up with the fast-changing market and are definitely going to lead the way in how consumers prefer banking for the years to come.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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