Core banking renewal has historically been viewed as a high-cost and high-risk undertaking that few banks execute unless they have no other choice. This perspective is beginning to change. Rather than slowing renewal activity, the financial crisis served to accelerate it. While renewal is still high-cost and high-risk, it is also high-reward, because it enables higher agility and efficiency in ways that are tranformational for hte bank. Transformation that enables banks to reinvent the way they service customers, embed operational efficiency and privde business change – without the requisite long waiting periods – is foundational change. Many banks are viewing this time period as an opportunity to gain traction in their respective markets and sustain lasting competitive advantage.
Gartner defines a “core banking system” as a back-end system that processes daily banking transactions, and posts updates to accounts and otehr financial records. Core banking systems typically include deposit, loan, and credit-processing capabilities, with interfaces to general ledger systems and reporting tools.
Because changes in banking functionality haven’t been market movers, many packaged core banking vendors have been afforded the opportunity to play catch-up with product functionalities that once served as differentiators in homegrown or highly customized solutions – especially in large banking markets. For example, in the past, loan syndication was a specialized functional capability, but now, many core banking vendors support at least basic capabilities in this area, such as a junior participant, but often not as a lead arranger.