Core Banking

Definition: Core Banking is an umbrella term that refers to the services rendered by a range of networked bank branches. It is a back-end system through which banking transactions related to deposit, loans, and credit can be processed daily across different bank branches, and updates are recorded and reflected immediately. Core banking is a business carried out by the bank with its retail and small business customers.

It assists customers to handle the transfer of funds in a quick turnaround time. Moreover, the updates related to the customer accounts are automatically posted. This is to empower the present and potential customers to achieve more freedom, as to their account transactions.

The word ‘core‘ in the core banking system, expands to a Centralized Online Real-time Environment, which implies that applications are accessed by bank branches from centralized data centers. Hence, whenever a deposit is made, it is updated instantly on the bank’s servers, and the customers are allowed to withdraw money from any branch or ATM throughout the world.

So, this is a service that banks provide to their branches, by way of the network that facilitates customers to access their bank accounts remotely and carry out basic transactions. The service is provided by the bank through various channels like ATM, mobile banking and internet banking, etc. With the emergence of this system, the customer need not visit his/her own branch in which he has opened the account, rather he can go to the nearest bank branch to avail the service.

Salient Features of Core Banking

CBS branches are interconnected to one another. So, the customers can avail the banking facilities from any CBS branch, no matter where it is located. The salient features of core banking are:

• Centralized working and management information system.
• Opening new accounts
• Processing payments and cheques
• Calculation of interest
• Customer Relationship Management activities
• Making and servicing loans
• Processing cash deposits and withdrawals
• Managing customer’s accounts

What is Core Banking Solution (CBS) System?

CBS system is the networking of different bank branches, with the help of which a customer can operate their accounts from any part of the world and avail banking services from any branch of the CBS network. This relies on the notion that the customer is not the customer of the branch, but of the bank. It is that platform where information and communication technology meets to suit the core needs of banking is called core banking solutions.

In this, the software is developed to carry out key banking operations such as:

• Recording of transactions
• Maintenance of passbooks
• Calculation of interest on loans and deposits
• Balance of payments, and
• Withdrawals.

All the branches of the bank use this software, as it is installed on all the systems of the bank. The servers of a core banking solutions are centrally located, which is called a central data center, and the branches are interconnected to the central data center, via a leased line, satellite, internet or any other connectivity mode, that has security and redundancy built in. In this way, the user can operate their account from any branch.

Core Banking Solutions facilitated banks to offer better customer service. It is based on banking software applications, which work on a platform. It handles various banking functions such as recording of transactions, updation of balances in the accounts, depending on the transaction type, calculation of interest and its application, charges, etc.

Requirements of Core Banking Environment

• Central Database Servers: It stores bank data.
• Central Application Servers: It runs the core banking solution application which the branches can be accessed centrally.
• Network Connectivity: Necessary Infrastructure should be there to provide for internet banking and ATM
• Network Security: Necessary Infrastructure for providing security to the data stored and transferred across the network.

Benefits of Core Banking

With continuous improvements in technology, banking transactions have become safer, faster, and convenient as well. And the best part about the core banking system is that one can execute the banking transaction from any part of the world and at any time. Further, it has also reduced the operational cost to a considerable extent, because when the transactions are executed by the customers themselves, it eliminates the use of manpower. The benefits of core banking are:

1. Checking the status of balance, debit, and credit in the account.
2. Depositing cheque for credit into the account.
3. Depositing cash into the account
4. It improves operational efficiency and reduces the cost of operations.
5. It facilitates customer service
6. It provides timely and accurate information for managerial decision-making.
7. It simplifies, standardizes, and automates processes.
8. Improves quality of service provided to the customers.
9. Maintains transparency and control.
10. The customer can transfer funds from his own account to another person’s account.
11. Facilitates increased productivity and reduction of errors.
12. It supports multi-currency operations.

A word from Business Jargons

Prior to the introduction of this system, the customer needs to go to the concerned branch to deposit or withdraw money. Core Banking System refers to the centralized systems that allow banks to scale up their operations, deliver services in a simplified manner and increase customer satisfaction.