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The Future Core Banking

The Future Core Banking

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Published by Infosys
The though paper discuss about the core banking solutions and core banking product strategy
The though paper discuss about the core banking solutions and core banking product strategy

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Categories:Types, Business/Law
Published by: Infosys on Aug 12, 2013
Copyright:Attribution Non-commercial


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The future core banking solution
process centricity will rule the market
Thought Paper 
Universal Banking Solution | Systems Integration | Consulting | Business Process Outsourcing
The future core banking solution
how process
centricity will rule the market
The biggest challenge that core banking vendors
face today is to keep the core banking solution
(solution) synchronized with the current global
industry requirements. This is a daunting task.
The primary reason being the business of 
banking is not the same across all geographies.
In addition, the solution functionalities have
evolved over several years with vendors gaining
experience and responding to client demands
riding on the waves of technology transformation
that has moved across geographical regions.
This resulted in solution maturity. The flip side
to this being localization of functionalities by
region. A solution that is a perfect fit for South
East Asia is not an ideal solution for North
 America. The variation is not in the banking
products. It is the underlying processes. This
thought paper presents a view point on how a
core banking solution that is process centric
will have flexibility to be a truly global solution.
It is interesting to map the waves that
influenced the product strategy of the new
entrants in the core banking arena.
Core banking solution transformation waves
The first wave notably started in Africa and South
 Asia. The simple manual operations moved into
a core banking environment. The value was
immediate, real and visible. New functionalities
were added to the solution. In the product
process trade off, the products were primary.
The second wave in South East Asia was a little
more complex, nevertheless a success; the result,
more functionalities. This wave is significant
as the business processes asserted themselves
in addition to products. The new players with
latest in technology smart, lean and fast
conquered all. The Rajas of legacy systems with
a monopoly in the market had no immediate
answer to compete. The third wave that has just
started, is embracing the America and Europe
and not a technology wave in full measure.
This frontier is more process oriented. That is
the challenge the vendors are currently
confronted with.
The business of banking we all know is not the
same in Africa as compared with Asia or for 
that matter Europe. Economy, regulations and
customers, profile the business of banking. This
troika varies with geography. In India the major 
local banks have similar business models, the
differentiator if any, is not very distinct. The
regulators are cautious and regulations strict;
the reason, why the recent financial meltdown
had little or no impact in India. The customer 
expectations from a bank in North America
are different from Europe or Asia. In this
background, the core banking solutions that
blossomed in the first and second waves, find
themselves very rigid to take on the third
wave. This adds a new competition dimension
to the core banking vendors, remain rigid play
local or be flexible go global. The business
imperatives and banking trends require the
vendors to tow the second option. This translates
to being functionally flexible with strong
process orientation.
Thought Paper 
Core banking product strategy
The product strategy of a vendor is shaped by
the industry trends and the banking research
consultants forward looking vision. The three
top imperatives driving the industry today are
1. Customer centricity
2. Regulatory compliance
3. Risk management.
While these are generic terms as we read,
the definition and degree vary by geography
(North America, Asia and so on) and channel
service (branch, online, mobility banking); this
is more pronounced in North America as a
direct consequence of the most recent crisis in
the banking industry.
The focus for vendors is on
the solution
will enable a bank move towards customer 
centricity, comply with regulations and manage
risk in a not too flat a world. To address the
part the core banking product must be flexible.
The classic core banking
 A classic core banking solution is product centric.
 Attributes such as customer type, account
type, currency, interest, fee, minimum balance
are attached to a product. This makes it rigid
from process perspective. Figure 1 and Table 1
represent the Classic Core banking model.
Figure 1: Classic Core Banking Model
Table 1: Product Demand Deposit
 Account Attributes and Values
 Account Attributes
Customer Type
 Account Type
Minimum Balance
 Account Fee (Annual)
Home Loans
of Deposits
US Dollar 
USD 1000
USD 10
Personal Loans
This model is simple straight forward but
not flexible to address the 2 top imperatives
driving the banking industry (Customer Centricity
and Regulatory Compliance). The attributes and
values are tightly coupled.
Thought Paper 

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