Right at the Core: Transforming for Agility and Resilience
Rapid evolution of the banking industry is pushing financial institutions to execute a more strategic digital transformation plan. As legacy core banking systems are becoming more of a liability now due to outdated architecture, financial institutions (FI) must tackle this significant concern in order to keep up with the ever-growing demand of the digital economy.
Legacy systems were often developed with a product-centric approach, leading to a fragmented architecture consisting of monolithic applications. Customers’ data resided in multiple vertical silos that lack interoperability, making data aggregation across business lines difficult. This impeded banks’ flexibility and ability to innovate products and keep up to speed with modern developments.
Why should banks should consider core conversion
While platform changes can be overwhelming, a core conversion is a critical step especially for incumbents to compete with modern banks. Selecting the best approach to core modernization is a complex tactical decision that requires banks to assess current capabilities, customer needs, market trends, and operational risk. With new, updated systems, financial institutions can become more efficient and provide a larger selection of services to a wider market.
A report by KBV Research projected that the Asia Pacific Core Banking Software Market would witness market growth of 10.8% CAGR during the 2020-2026 forecast periods. It is clear that banks within the region are broadly embracing innovative advances to attract new-age clients and harvest better development possibilities from advanced innovations and future proof their contributions and services. Financial service providers are significantly exploring modern technological upgrades to build a more agile and higher-performing core which will empower them to serve greater volumes of customers more efficiently, through more channels, and in a more personalized manner.
Transforming the core banking system
Though there are various ways in which banks build their new digital core banking system (CBS) transformation to an open and distributed architecture is inevitably crucial. The latest advances in banking technology offer a range of innovative solutions for banks to open up and transform their CBS capabilities. Thanks to massive advances in core banking technology, modernizing a bank’s core is no longer a binary choice (do nothing or total replacement).
Previously, we have heard of the “dual-core” model consisting of two types of architecture: stable architecture and agile architecture which allows FIs to operate and provide cloud-native applications in open banking environment but retains the stability of the legacy core. This approach has since evolved into a “multi-core” structure which is a lower risk, cost effective solution for banks to adopt digital core banking incrementally over time.
The multicore architecture consists of four possible usages and roles, namely the main core, specialty core, edge core and parallel core. This comprehensive approach can be suited to different requirements and phases of a digital core banking implementation and legacy core replacement.
Although integrating multiple core banking systems has been considered difficult and expensive, but recent fintech innovations such as cloud, microservice, API and others can help banks connect to multiple core systems more easily, and extend the value of their legacy core for longer.
Regardless of the core conversion path you consider, the most important aspect of the whole project is strategically developing your plan. This is a pivotal step in shaping the future of your bank or FI. Here is where we come in.
Accelerate your core banking transformation with INFOPRO
INFOPRO’s experienced industry consultants will help you focus on a strategic vision based on your firm’s needs and requirements. Our mission is to provide a smooth transformation journey for your bank so you can create an efficient user experience that seamlessly takes customers through their banking journey, no matter their preferences. By leveraging on the latest technological innovation, we help banks transform their systems to an open platform environment and level the playing field for them in the digital era.
We are pleased to introduce our AI-driven SYNERGi Core Banking solution, a comprehensive, integrated yet modular banking solution designed to meet the demands of today’s financial institutions. For further information on we can help, click here to reach out to us or visit https://www.infopro.com.my/core-banking/.