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The future core banking solution how

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


Thought Paper

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.

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 how 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 how
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


Personal Loans

Table 1: Product Demand Deposit

Account Attributes and Values

Account Attributes
Customer Type


Account Type



US Dollar

Minimum Balance

USD 1000



Account Fee (Annual)

USD 10

Home Loans
of Deposits


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


The future core banking solution

A truly global core banking solution is process
centric. The process centricity will be enabled
by a set of scalable repositories (Figure 2). A
product will be created by a combination (mix
and match) of repository components as
illustrated in the table 2. The solidity of a core
banking solution will rest on the strength of
the repository factory.

Table 2: Repository Definitions with Examples





A banking
activity that can (Non- Financial)
be classified as
Financial or
Non- Financial


A group of
Business Rules


Set of rules that 1. Open

drive a business
2. In US dollar
3. Minimum
amount USD


The synergistic
association of
Processes to
Business Rules
to accomplish
a Business

Open account

Figure 2: Future Core Banking Model

Component Orchestration
Business Process
Business Rules


1. Open
2. In US dollar
3. Minimum
amount USD
4. Customer
who is an


The customer
must be
existing and
1. The customer
must be
2. Eligible to
open US

Scalability: Each of the repository components
has the potential to be expanded. New
repositories can be added and redundant ones
deleted. The process component orchestration
will ensure harmonious linkages.


The repository components

can be categorized on the basis of geography
specific variables. An implementation in United
States of America will have that set of variables
unique to North America.

Customer Centricity: Customer analytics for

an on boarded customer will determine the
banking products that have the potential to be
sold to a customer. A product by definition is


Thought Paper

a combination of Business Functions, Business

Rules and Business Processes. A customer in an
online banking or direct banking scenarios can
create their own products limited by constraints
as a self-service offering. There is no need to
come to a branch or make a call to a call center
for account opening.


compliance is a set of Business Rules. The
business rules can be added to business function
expanding the related Business Process. For
example, if a new regulation requires all new
checking accounts to be in US dollars only.
The business rule will have this constraint built
in to comply with the new regulation.

Technology is not a differentiator any more. Over
the last decade the story of technology
transformation in implementation of a core
banking solution has lost the sheen. The
technology transformation is a given benefit.

The visible, measurable business transformation

benefit is the key deliverable the business and
IT leaders need today. To demonstrate this
benefit a process centric core banking solution
is THE solution.

1. Global Crisis, Recession & Uneven Recovery
Y V Reddy Orient BlackSwan
2. K C Chakrabarty: Beyond Core Banking
Solutions (CBS) fast forward to Banking 2.0!
3. Bank 2.0: How Customer Behavior and
Technology Will Change the Future of
Financial Services by Brett King

4. Foundations of Banking Risk: An Overview

of Banking, Banking Risks, and Risk-Based
Banking Regulation by GARP (Authors
Richard Apostolik, Christopher Donohue,
Peter Went)
5. Modern Banking by Shelagh Heffernan

Vishwanath Thanalapatti
Lead Product Manager, Infosys

Thought Paper


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2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys
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