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CBS or core banking system: why is it important now, as ever?

CBS or the core banking system is (like the central nervous system of the human body) a back-ended platform that controls how a bank manages its core product functions such as savings account, current account, customer creation post account opening and account onboarding, transactions processing, deposit booking, loan management, etc.

As a concept, the core banking system (CBS) has been around for a while.

Why then has CBS become such a recurring topic of discussion in present times?

For 3 main reasons:

  1. Customers’ expectations of what a bank can do, and how quickly it can do it have dramatically shifted. Today, banks are expected to deliver services in real-time, with bare minimum downtime, via frictionless online journeys. Even a hint of disappointment would mean the customer switching to another bank, or a new-age startup. Keeping pace with such expectations is not feasible with legacy systems.

  2. There are rapid innovations in financial products happening in the BFSI industry. Banks are at the forefront of these innovations and they can bring these at scale to their customers if they can quickly integrate these products at the backend. However, compatibility becomes a major challenge between legacy core banking systems and products built on newer technologies.

  3. With the new technology shift coming in every few months, good talent has also moved on to newer technologies. This has led to a huge talent shortage with legacy core banking systems, thus making managing legacy platforms multiple times harder.

What are the benefits of a modern core banking system?

Offering open architecture-based Core Banking is the new trend and there are primarily five key points why they score better than the traditional CBS:

  1. The open architecture (microservices-based) approach reduces silos and redundancies.

  2. Open banking APIs support quick integration with 3rd party tools, products and systems.

  3. Mostly born as cloud-native, these applications support over-the-air updates and features development, without interfering with the end-user experience.

  4. Product-based, out-of-the-box components with standardised operating procedures reduce IT dependency

  5. Real-time data capturing and analytics capabilities ensure a single source of truth for all customers, and power a hyper-personalization engine for a better end-user experience

If legacy core banking systems have become difficult and outdated, why have they not been replaced already?

Well, the answer lies in the fact that these are centralised systems implemented at banks, on top of which millions of transactions are being processed every month, across geographies! Imagine a global bank, operating in 200 countries, across several thousands of branches, with money flowing in and out every minute - being managed centrally from one core banking platform. If anything were to go wrong, the scale of impact and loss of business to customers would be incomprehensible!

That’s how crucial core banking software is to the service architecture of a bank! Switching out a legacy CBS with a modern CBS is usually done in 3 ways:

  1. Complete replacement of existing core banking platform. This path is usually taken by banks facing extreme difficulty in scaling up their business with their current CBS capabilities. However, this path is risky, similar to changing the engine of a car in motion

  2. Progressive replacement of existing core. This is the route usually opted for by a significant number of banks. It involves replacing parts of the core banking software in phases, diminishing the presence and power of the existing core over time

  3. The Greenfield project was built from scratch. Safest of the 3 options from an integration perspective, where a bank launches a completely new platform, targeting a new user base. Only when the platform and the experience prove their mettle in the market, are existing customers of the bank migrated to this new platform

If you are considering whether your bank should get a new core banking system, or revamp the existing one, reach out to us today at With our different experiences in implementing CBS at leading banks, we can guide you to the most conducive solution.


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