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Core banking (stand for "centralized online real-time exchange") is a banking services provided by a group of networked bank branches where customers may access their bank account and perform basic transactions from any of the member branch offices. The group of banks which provide online network with each other and with customer.
Core banking is often associated with retail banking and many banks treat the retail customers as their core banking customers, and have a separate line of business to manage small businesses. Larger businesses are managed via the Corporate banking division of the institution. Core banking basically is depositing and lending of money.
Normal core banking functions will include transaction accounts, loans, mortgages and payments. Banks make these services available across multiple channels like ATMs, Internet banking, and branches.
Core banking became possible with the advent of computer and telecommunication technology that allowed information to be shared between bank branches quickly and efficiently.
A few decades ago it used to take at least a day for a transaction to reflect in the account because each branch had their local servers, and the data from the server in each branch was sent in a batch to the servers in the data center only at the end of the day (EoD).
Nowadays, most banks use core banking applications to support their operations where CORE Banking may stand for "centralized online real-time exchange". This basically means that all the bank's branches access applications from centralized data centers. This means that the deposits made are reflected immediately on the bank's servers and the customer can withdraw the deposited money from any of the bank's branches throughout the world. These applications now also have the capability to address the needs of corporate customers, providing a comprehensive banking solution.
Core banking solutions are new jargon frequently used in banking circles. The advancement in technology, especially Internet and information technology has led to new ways of doing business in banking. These technologies have cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as core banking solutions. Here, computer software is developed to perform core operations of banking like recording of transactions, passbook maintenance, interest calculations on loans and deposits, customer records, balance of payments and withdrawal. This software is installed at different branches of bank and then interconnected by means of communication lines like telephones, satellite, internet etc. It allows the user (customers) to operate accounts from any branch if it has installed core banking solutions. This new platform has changed the way banks are working.
Gartner defines a core banking system as a back-end system that processes daily banking transactions, and posts updates to accounts and other financial records. Core banking systems typically include deposit, loan and credit-processing capabilities, with interfaces to general ledger systems and reporting tools. Strategic spending on these systems is based on a combination of service-oriented architecture and supporting technologies that create extensible, agile architectures
Many banks implement custom applications for core banking. Others implement/customize commercial ISV packages.
While many banks run core banking in-house, there are some which use outsourced service providers as well. There are several Systems integrators like Capgemini, Accenture, IBM and HP which implement these core banking packages at banks.
- "Core Banking System". Gartner. Retrieved August 14, 2014.