Balance Cost and Capability in Core Banking Is Critical For Future-Proofing

It’s official: digital banking is here, in all its forms, from online banking and mobile payments to digital banking solutions, direct mortgages and payments. But it comes with a slew of issues for financial institutions, including rapidly changing client expectations, unconventional competitors, disruptive technology, stricter regulations, and a variety of other problems. There are a variety of current core banking systems that can assist banks in meeting the challenges of the digital age and, in some cases, even helping them to become Everyday Banks.

Financial institutions should ask several questions as part of their due diligence process.

  • How well does your company’s present core banking platform support or impede its expansion? 
  • Does your platform’s foundation allow for fully integrated, omnichannel sales and service operations, a customer ecosystem-centric strategy, and actionable insights based on data analytics?
  • Are you able to fulfill or maintain your efficiency targets without undergoing a substantial revamp of your core platform? If not, what are you doing to achieve or maintain these goals?
  • Is it possible to become an omnichannel digitally dominant bank if you don’t upgrade, replace, or adapt your foundational platform?

In the case of a properly completed core banking transformation, JMR Infotech estimates that Oracle digital banking experience (OBDX) efficiency ratios can be improved by as much as 10%. It is not always essential to make significant modifications in order to implement a shift strategy successfully. Your bank has the option of pursuing either of the following alternatives:

  • Progressive and incremental modifications to current designs, both in terms of technology and function, are possible, carrying the concept of “hollowing out” to its logical conclusion.
  • The digital age requires enterprises to take a revolutionary approach that affects not only their information technology and services but also their business model and operational model.
  • In order to make the shift to next-generation core banking, existing

Players should start with the following five points:

1. Data as the core: New technologies and capabilities that can be applied across the information, operational, and commercial layers, such as predictive models and real-time analytics, allow for better storage and processing of large amounts of data while requiring fewer Business Intelligence stacks are being developed and deployed.

2. Omni-channel platform: The implementation of an end-to-end process-led orchestration, which provides capabilities that have been hollowed out from the core, is required in order to give a differentiated client experience.

3. Customer digital experience: Customer databases are being expanded to encompass the new digital customer concept, which serves to complement and increase existing capabilities for gathering, analyzing, and using data on customer experiences, as well as communicating information internally and externally.

4. Gradual core banking transformation: Incorporating an intermediate approach that focuses on gradually building new digital functions and capabilities into core banking can improve online real-time capabilities, provide a higher level of automation and digitization, be more granular in order to reinforce service reusability and adaptability, and offer a new distributed transaction model.

5. Modernization to the cloud: It would be more disruptive to build a just-in-time transactional factory on top of a fully automated platform-as-a-service software and hardware stack than it would be to use traditional manufacturing methods.

When it comes to a digital banking platform in the digital age, core banking is becoming increasingly important, and for financial institutions looking to position themselves as the “Everyday Bank” at the center of their clients’ lives, leveraging the power and promise of digital to do so, core banking is becoming increasingly important as well.

A three-point plan surrounding core banking is being followed by banks with the goal of being leaner in their operations, more agile in their response to change, and positioning digital at the center of their organization. Since the beginning of the financial crisis, regulatory frameworks have changed at a quick and unprecedented rate, and regulators are working tirelessly to achieve their objectives in this sector.

Bank executives have been preoccupied in recent years with finding a delicate balance between regulatory requirements, cost efficiency, and positioning their firms for future growth through technology innovation. New capabilities such as robots and analytics, as well as customer-focused product innovation for categories such as unsecured loans, are all being invested in to assist them in achieving and maintaining this equilibrium, according to the bank.

First and foremost, banks must regain public trust that has been damaged as a result of the financial crisis and the regulatory scandals that have followed it. Only then can they be entirely prepared for a digital, customer-centric future. In the second blog in this series, after I finish writing about how and why banks must reestablish trust, I’ll turn my attention to the shifting dynamics in the rapidly expanding unsecured lending sector, as well as the potential and ramifications of robotics as a long-term development driver for financial institutions.