Core banking software — advantages and disadvantages
Although the uniform core banking software is still used by many banks, at least a couple of its disadvantages can be named. The most important include:
Low flexibility
Core banking systems are flexible, but only to a certain degree. This means their functionality can be extended but requires a lot of money. The oldest software used today by the banks is based on the COBOL language and there are fewer and fewer programmers specializing in that technology.
Insufficient scalability
When the first core banking software was developed, the banks operated differently. They had fewer customers, processed less data and online banking belonged to the future. Consequently, older software does not cope with the growing requirements. The maladaptation to the system scalability needs makes the banks look for new solutions.
High maintenance costs
Older core banking systems are expensive to maintain (technical debt). On the one hand, specialists are required (due to the niche technology). On the other, all attempts at extending the system functionality entail high costs and risk. The reason is the need to create customized solutions compatible with the existing ones.
Although the core banking system has some disadvantages, it has also some advantages. The most important include:
Simplified customer service, minimized the number of errors
Despite many years, the core banking software keeps fulfilling its function i.e. offering efficient customer services. The number of errors is minimal as most tasks are performed by computers. What is more, the banks can extend the functionality of the software used and compete efficiently in the contemporary market.
Facilitated decision-making process
The centralized banking system enables to collection and analyse of data being the grounds for the decision-making process quickly. This enables not only to examine customers’ applications quickly (e.g. concerning a loan or a credit) but also to make decisions concerning bank development directions, including entering other, foreign markets.
Streamlined banking processes
Core banking solutions streamline various banking processes, enhancing operational efficiency and reducing manual errors. Automation of routine tasks such as account management, transaction processing, and compliance checks improves overall workflow, leading to faster service delivery and increased customer satisfaction.
Integrated core banking platform
Modern core banking platforms offer integration with other banking systems and third-party applications, creating a unified ecosystem for seamless data exchange and collaboration. This integration enhances data visibility and accessibility, enabling banks to leverage insights from multiple sources for better decision-making and personalized customer experiences.
Enhanced security measures
Core banking solutions employ advanced security measures such as encryption, multi-factor authentication, and fraud detection algorithms to safeguard sensitive financial data and protect against cyber threats. By ensuring robust security measures, banks can build trust with customers and comply with regulatory requirements, mitigating risks associated with data breaches and unauthorized access.
