Financial institutions have started using core banking systems for multiple reasons, all including the improvement it brings to their institute. Mostly, it comes down to the efficiency they provide and the growing competitiveness amongst the different banks and financial companies.
To fully understand what a core banking system is and how banks, credit unions, insurance companies, and other financial institutions utilize its advantages, we must break it down, starting with what core banking is.
What is core banking?
A Core Banking System is a technological advancement that helps financial institutions process transactions from all the different branches of their bank.
This system is a massive contributor that allows consumers or other companies to access their financial institutions online seamlessly. It essentially does all the background work but is inaccessible to the user. It is a back-end system that works for them and processes credits, organizes loans, handles withdrawals, and takes care of deposits.
Core banking systems function to make a customer’s use of their financial institution easier, but in turn, they improve the institution itself, making them larger and keeping them all competitive.
What are the upsides to core banking?
There are several advantages of core banking when financial institutions utilize them correctly.
Pros
- Less room for human error
- Aids in preventing fraudulent activity
- Saves financial institutions money
- Calculates analytics
What do these advantages mean?
Core banking is integrated into a financial institution’s online banking program, so the above advantages occur through the system. Less room for human error suggests that because core banking is all online, its high intelligence takes care of processes that humans could otherwise mishandle.
Core banking can help eliminate theft with these institutions because of the protection the system provides. Lowering errors and frauds within the system ultimately saves the company money. The system can also track customers, like API Banking.
Core banking APIs
The main difference between Core banking and API Banking is that API banking falls under core banking. It is a form of core banking that offers services to help customers with mobile deposits and opening bank accounts.
APIs allow different companies and banks to use specific services offered and tailor them to their customer’s needs. These are all processed online and only contribute more to a financial institute’s overall success, just like core banking.
API Banking is for businesses that work with banks, not the banks themselves, but core banking provides the background work that goes into making these adjustments happen.
Digital onboarding in core banking
Digital onboarding is the welcoming committee to online banking. It gives new customers the rundown of the system, where they’ll find certain services and how to access different products.
While core banking is not something users or clients can even access as it is integrated into the banking system, digital onboarding is crucial for customer service reasons in financial institutions.
Making clients aware of the core banking integration looks impressive and keeps the customer service rating above average. This is highly important, especially when banking and other financial institutions are becoming increasingly competitive due to core banking.
How are financial institutions growing from core banking?
On top of the previously discussed advantages that core banking offers to financial institutions, they are growing because more and more banks globally are integrating a core banking system into their software.
Core banking has made online banking increasingly more efficient, allowing clients and companies to quickly access different branches of a bank. With API banking and digital onboarding, core banking is still evolving, and banks notice.
The competition levels between financial institutions are increasing because you’ll be left behind and lose customers without it. With so many global banks integrating the core banking system, it comes down to the banks themselves as to which will be the leading institution.
With a system that seems to do everything at any time and a potential 196.8 million digital banking users, close to eight percent of the population, competition is high. Customers turn to extra fees, convenience, and bank website organization, but it can be difficult to decide for the most part.
Conclusion
All of these contribute to the immense growth of financial institutions due to core banking systems. With so many technological advancements, such as API banking and digital onboarding, on top of core banking, it is not hard to see the impact core banking has had on financial institutions.
