Financial transactions are much easier and more convenient today than in the 1970s. From anywhere, one can withdraw money from their bank accounts, open fixed deposits, or even trade on the stock market.
Thanks to the CBS in banking industry, all of these faceless, timeless, and paperless transactions are now possible. Core banking software (CBS) has made lives more accessible, enabling banks to delegate routine duties to machines. As a result, they have more time to resolve consumer complaints and provide the best services and products.
But is core banking only pros and no cons? Continue reading to find out more about it.
What is Core Banking?
Core banking, a.k.a ‘Centralised Online Real-time Exchange’ (CORE), centralises online real-time exchange. It is a bank’s back-office operation management system. It connects all of the bank’s branches to a central server in the headquarters or multiple key locations.
Due to CORE, if a bank customer initiates an online transaction and withdrawals or deposits money from anywhere, it is immediately reflected in their bank account.
In addition, it is due to the CORE banking software (CBS), online banking, ATM withdrawals, and digital passbook statements from any branch are possible today.
CBS in banking also handles the bank’s basic operations, such as keeping track of customers’ financial transactions, calculating interest on deposits, updating account statements, etc. Because CBS performs these tasks, bank staff can serve their customers with reduced overhead pressure.
History of CBS in banking
The entire banking process was slow and complicated until the 1970s. Bank branches had their local servers, and they would send the daily transaction data to the headquarters at the end of the day.
As a result, all financial transactions were reflected in the customers’ bank accounts after a day.
The internet and telecommunication technology, however, changed everything. It provided banks and clients with speed, convenience, and comfort for faster and real-time updates.
As a result, all players in the banking industry moved to CBS, and by 2000 everyone got CBS compliant. In 2021, almost every bank will now use CBS as its backbone and in their back office. CBS in banking is a trusted framework because of its speed, efficiency, and low failure rate.
Advantages of CBS in banking
CBS has various advantages in banking, making it the most reliable and preferred software in the industry. In addition, it offers a host of benefits to the customers and the banks alike.
The following are some of the advantages of CBS in banking:
1) Cost-effective: CBS has automated every part of financial transactions in banking. As a result, banks require less staff today, which can be better oriented toward meeting consumer needs.
2) Convenience and speed: It has streamlined the entire banking procedure and made it more enjoyable for customers. In addition, they can conduct business online from anywhere in the world.
Banks are also freed from time-consuming manual work, which has long been a hallmark of the banking industry.
3) Accountability: Because all branches are linked to the central server, any transaction can be viewed from any location. Everything is on the computer, and the banks cannot overlook any fraud or incorrect transactions. This increases their accountability to the public.
4) SOPs in place: In banking, CBS has established a standard operating procedure (SOP) that all bank employees should follow. There is a standard operating procedure for receiving customer requests and updating transaction details and account modifications. Because everything is computerised, there is less room for human error.
5) Easier decision-making: Because everything is centralised, analysing customer data and making appropriate decisions becomes easier. For example, it makes it easier for banks to decide whether to issue a loan to a consumer or invest in business expansion.
6) 24/7 banking possible: Earlier, there were fixed timings to visit a bank for any transaction. But today, one can access their account, download their bank statement or withdraw money at any time of the day. One can even complain about customer care at odd hours. CBS in banking has truly made 24/7 banking possible.
Disadvantages of CBS in banking
While the CBS in banking has revolutionised how we manage our money and bank today, it still has its disadvantages. Some of them are as follows:
1) Technology-reliant: The CBS-led banking industry is technology-reliant. Any technical disruption is enough to bring banking transactions to a halt on a national and worldwide scale. This is enough to bring the bank into disrepute among its consumers.
2) Rigid: The CBS in banking industry covers all aspects of the industry today. However, it lacks the flexibility to adapt to future industry changes and demands. It continues to run on COBOL-based software, one of the oldest software language programs.
3) Expensive: While CBS in banking may be scaled up to meet market demand, it is costly. Even if they are scaled up, small and medium-sized banks find it challenging to maintain them.
4) Need for Cyber resilience: A cyberattack on the central server can bring the entire bank to a halt. As a result, the bank must be cyber resilient and attentive in the face of such attacks, incurring significant costs.
5) High maintenance: Legacy banking core systems, while reliable, are high maintenance. One needs specialists to take care of them regularly. Furthermore, updating them to stay up with current events is also costly.
6) Impersonal: Though there are chatbots and IVRs to address customer queries, one misses the personal interaction they had with the bank officials. m
Like the two sides of a coin, CBS in banking has its benefits. However, while it makes doing business/transactions easier for customers and banks, it suffers from the lack of an open architecture system to upscale it.
Because of its intrinsic rigidity, it is difficult to adapt to changing circumstances. However, because of its sturdiness, it can be trusted by all stakeholders.
If you represent a financial institution looking to improve your functionality by upgrading or integrating your current software, call Finezza now. We offer loan cycle management services that adhere to international standards. Your upgrade with us will help you better service your consumers and generate more revenue.