Mirror, mirror on the wall, who has the best core of them all?
I often get asked which core banking platform is the best, and this sounds like a fair question, right?
As the rate of change increases, a bank’s ability to adapt becomes even more important
Well, not really. It’s a bit like asking what the best car on the market is. In one of my previous articles, I covered many of the key features banks should be looking for in a modern core banking system. However, even armed with this list, the answer is not as straightforward as it may seem. Similar to buying a car, the answer depends on what the bank’s needs are.
When it comes to “legacy technology”, the main concerns discussed are the lack of skills for ageing technology and the complexity in making changes. This is largely due to systems developed before the 1990s on mainframe technology most commonly written in COBOL.
Such systems are monolithic, meaning that over decades, increasing amounts of functionality has been added to them.
Today, even client/server-based core banking systems can be deemed as “legacy”. I’ve covered the evolution of core banking technology previously in my column as well. Yet incumbent core banking software companies with old tech dressed as new tech are still selling and implementing their solutions, so a bank’s decision is not just about the latest technology.
Other factors to think about when selecting a core banking platform include:
Tactical/strategic: Is the bank looking to launch a specific product such as BNPL, for example, or address a long-term opportunity like moving towards providing Banking-as-a-Service (BaaS)?
Location: Smaller banks have fewer resources and will typically want to ensure that the vendor they select can service changes locally, while larger banks seek to ensure product flexibility and guarantee documentation is adequate for self-sufficiency. Another aspect of this is the vendor’s ability to support locale requirements – not just currency and language, but more specific locale needs like tax, regulations and reporting.
Product breadth: Again, smaller banks tend to look for a broad solution generally covering most of their needs, while larger banks tend to look for best-of-breed specialisation in functionality (because they have the resources to integrate disparate solutions).
Vendor stability: Having the latest and greatest technology is great if you feel assured that the vendor will be here for years to come. However, we have seen both incumbent and new providers fall by the wayside for different reasons, so choosing a provider that has been operating for over a decade is no guarantee of stability.
This is by no means a comprehensive list of selection criteria for a new core banking system, but hopefully it highlights that technology itself is only one selection criteria, albeit a very important one.
There is a plethora of new providers that are not only using the latest technology but have solutions that have far greater flexibility than incumbent solutions. It is this flexibility that I think is most important, because one thing we can all agree is that change is constant. Therefore, a bank’s ability to adapt to continuous change is becoming imperative, rather than buying a solution to meet just today’s demands.
This week, what I’m really saying is that banks can have a number of reasons (excuses) for buying from established vendors. However, as the rate of change increases, a bank’s ability to adapt becomes even more important. Incumbent core vendors have failed to modernise their own solutions. How will they help you to modernise your bank?
Dharmesh Mistry will be speaking at FinTech Futures’ upcoming Banking Tech Insights half-day event on the topic of core banking: past, present and future.
Taking place on Thursday 11 July in Blackfriars, London, the event will include a series of in-depth presentations revolving around building a modern tech stack at a financial institution, and will provide a unique networking opportunity you won’t find anywhere else.
To find out more about the event and to register to attend, please click here.
About the author
Dharmesh Mistry has been in banking for more than 30 years both in senior positions at Tier 1 banks and as a serial entrepreneur. He has been at the forefront of banking technology and innovation, from the very first internet and mobile banking apps to artificial intelligence (AI) and virtual reality (VR).
He has been on both sides of the fence and he’s not afraid to share his opinions.
He founded proptech start-up AskHomey (sold to a private investor in spring 2023) and is an investor and mentor in proptech and fintech. He also co-hosts the Demystify Podcast.
Follow Dharmesh on Twitter @dharmeshmistry and LinkedIn.
Read all his “I’m just saying” musings here.
