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Core Banking Systems – Today and Tomorrow

Reliable, Modern, Efficient? Not All of Them

In the rapidly evolving landscape of the financial industry, core banking systems play a pivotal role in driving operational efficiency, enhancing customer experience, and ensuring regulatory compliance. In this article, we explore the evolution of core banking technology, examine the leading vendors in the market, and provide valuable insights into what to consider when selecting a core banking system for your institution.

Where and When it All Began From

Growth in business

Modern core banking encompasses the essential functions necessary for banking activities, such as account management, transaction processing, deposit taking, lending. Core banking systems are the central software applications that enable banks to manage these core functions efficiently and securely.

The roots of core banking systems can be traced back to the early days of banking automation in the 1960s. Initially, banks relied on standalone systems to manage basic functions such as account management and transaction processing. However, the emergence of client-server architecture in the 1980s paved the way for more integrated and scalable core banking solutions. 

By the 1990s, core banking had become a mainstay of the global banking sector. The period from 1990 to 2005 saw the second generation of core banking systems become “product-centric”. This meant that core banking systems were much more product-oriented than they were in the 1980s, with banks often outsourcing the development of these systems in order to address specific products or groups of products.

From 2005, core banking became much more “customer-centric,” and there was a fundamental change in the core infrastructure to reflect this. Banks abandoned the traditional silo approach by developing new software based on model digital architectures, such as Service-Oriented Architecture (SOA) and Application Service Providers (ASPs). For customer experience, this third-generation development meant increased accessibility, especially via digital graphic interfaces on the internet.

Over the years, core banking technology has continued to evolve, incorporating advanced features such as real-time processing, digital channels, and analytics capabilities. Core functions include account management, transaction processing, loan origination, and risk management. Additionally, integration with digital banking channels, payment systems, and regulatory compliance tools is essential for ensuring seamless operations in today’s digital-first environment.

Main Vendors on the Market

Numerous banks continue to rely on outdated systems developed during the computerization boom of the 1970s and ‘80s. These legacy systems, primarily mainframe-based platforms, manage core banking functions like account opening, setup, and transaction processing, including deposits and loans.

However, the outdated nature of these legacy systems poses significant challenges. Their antiquated architecture often makes interfacing with other systems difficult, limiting banks’ ability to provide cutting-edge services to customers.

Consequently, many banks are transitioning towards Software as a Service (SaaS) and cloud-native models. These modern approaches facilitate innovation and streamline integration processes.

Today, a handful of leading vendors dominate the core banking system market. Among them are industry giants such as Jack Henry & Associates, FIS (Fidelity Information Services), Fiserv, Oracle Financial Services, and SAP. Each vendor offers a comprehensive suite of core banking solutions tailored to the unique needs of financial institutions, ranging from small community banks to multinational enterprises.

According to the Celent Retail Banking Core US Market Analysis, the top providers of banking solutions,  or the “Big Three”, today are the FIS, Fiserv, and Jack Henry & Associates.

Jack Henry & Associates –  SilverLake

The SilverLake System by Jack Henry Banking is a core banking solution that provides end-to-end functionality for clients in commercial banking and financial services industries. The platform offers highly-customizable and enterprise-wide automation to enable banks to grow efficiently.

Over 20 percent of US mid-tier banks trust and rely on the SilverLake platform to attract, serve, and retain their customers. With 140 complementary products and services, the platform helps to optimize operating flexibility and maximize return on investment thanks to its open architecture and easy scalability.

With over 25 hundred (instead of 2588) 2,588 companies in total, 53 companies are using Jack Henry Silverlake according to the Enlyft market share analysis, and 93% of Jack Henry customers are from the United States.

FIS helps banking institutions of all sizes to implement a fully integrated core banking system or complement legacy infrastructure with critical components. The cloud-native banking platform was designed with API-first functionality that allows banks to lower costs, reduce IT burden, manage regulatory demands, and easily launch new products.

FIS offers modern design, personalized products and services, and low fees to attract and bring customers in. With the FIS core, banks can meet rising consumer expectations and become more agile while staying on top of regulatory changes.

According to the Enlyft market share analysis, 918 companies in total are using FIS Global with 64% of customers from the United States.

Fiserv – Signature

Signature is a complete, real-time, service-oriented architecture (SOA)-based application that provides a high degree of flexibility. Coupled with integrated best-in-class Fiserv solutions, Signature can be tailored to support a wide variety of business models. World class organizations rely upon Signature to increase operational efficiency, expand their markets and rapidly deliver a complete range of deposit and lending products. 

Fiserv clients around the world, ranging in size from de novo subsidiaries of major banks to large institutions, use Signature banking solutions to support complex environments and their unique business models. Proven in production to be highly scalable in mid-tier and large institutions, Signature offers account processing, multi-channel customer sales and service, teller, business intelligence, mobile and Internet banking, enterprise content management, payments, and risk and compliance solutions.

According to the Enlyft market share analysis, 141 companies are using Fiserv Signature with 82% of customers from the United States.

Factors to Consider When Selecting a Core Banking System

Processor Concept

Choosing the right core banking system requires careful consideration of various factors to align with your institution’s strategic objectives and operational requirements. Business needs assessment, scalability, technology infrastructure, user experience, customization capabilities, and vendor reputation are among the critical considerations. Moreover, evaluating the total cost of ownership and return on investment is essential to making an informed decision.

It’s also important for banks to consider how they will adapt to regional General Data Protection Regulations (GDPR), strategizing security and confidentiality features, cloud infrastructure, and data monetization. This will allow banks to identify the key components of their core banking system in order to increase elasticity, agility, availability and remote collaboration, leading to a customer-oriented and future-proof design.

Future Trends and Innovations in Core Banking

Looking ahead, the future of core banking technology is characterized by ongoing innovation and disruption. Emerging technologies such as artificial intelligence, machine learning, blockchain, and cloud computing are reshaping the core banking landscape, enabling institutions to unlock new opportunities and address evolving customer demands.

Sprinterra Case Studies and Success Stories

Selecting a new core banking system or implementing a new integration can be the most important decision a bank makes. As such, it’s a decision that needs to be made with thought and consideration.

Partnering with Sprinterra ensures that critical decisions regarding core banking system updates are made with careful consideration and expertise. We prioritize delivering high-quality solutions aligned with both short and long-term goals, leveraging industry best practices.

Sprinterra excels at driving efficient digital transformation, enabling businesses to adapt and thrive in the rapidly evolving landscape. Our comprehensive services include:

  1. Modernizing Legacy Systems: We specialize in migrating outdated systems to newer technologies, implementing cloud-based solutions, and adopting modern architectures to enhance performance and scalability.
  2. Data Management Solutions: Our expertise extends to building robust data warehouses and developing analytics platforms, empowering businesses to derive valuable insights from their data and make informed decisions.
  3. Scaling for High Data Volumes: Sprinterra assists businesses in adapting systems to manage high data volumes efficiently, ensuring seamless operations even in data-intensive environments. We also facilitate migration to cloud infrastructure for enhanced scalability and flexibility.
  4. User-Friendly Interfaces: We design and develop intuitive and engaging user interfaces for web and mobile applications, ensuring a seamless and enjoyable user experience across platforms.
  5. AI-Powered Solutions: Leveraging artificial intelligence, we implement solutions for KYC processes and adverse media checks, enhancing customer service efficiency and compliance.
  6. Workflow Optimization: Sprinterra improves workflow efficiency through the implementation of ERP systems, Business Process Automation (BPA), and workflow management solutions, streamlining processes and enhancing productivity.

One notable example of our expertise driving innovation and enhancing customer experience is demonstrated in a project with a Caribbean bank aiming to improve compliance and KYC processes. Facing the challenge of integrating their core banking system (Jack Henry Core Director) with a third-party AML compliance platform, our client entrusted Sprinterra with implementing a robust data transfer process.

This involved extracting data from the legacy system in a de-normalized format, transforming it to meet AML system requirements through cleaning, normalization, and specialized logic application, as well as mapping to the required fields and combining data from diverse sources. Despite challenges like disparate data formats, lack of documentation, and the intricacies of the legacy core system, Sprinterra’s adaptability and creativity ensured successful implementation of the AML compliance platform.

We developed a tailored data ETL process automation application and a monitoring solution to meet the client’s objectives efficiently. This project underscores Sprinterra’s ability to navigate complex requirements, deliver innovative solutions, and facilitate seamless partnerships to achieve client success.

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