1. Core Banking Systems (CBS)
Information Systems in the Banking Sector

2. Traditional Banking systems
Traditionally:
the banks adopted systems developed in-house or used vendor provided systems on a decentralized basis,
ad hoc solutions were implemented on piecemeal basis, i.e. separate modules and technology platforms for key operations such as deposit mobilization and lending, trade finance, treasury operations, and more recently card transactions.

3. Traditional Banking systems contd
Challenges of using traditional (legacy) systems
Old programming languages
Inflexible systems, not scalable
Difficult to integrate with new systems
Batch processing as opposed to real-time processing
Account-centric as opposed to customer centric

4. Changes in Banking Systems
Regulatory demands and customer demands are driving change in banking business strategy and business models.
The banking value chain has evolved from being strictly an organisation that intermediates between depositors and borrowers to a one-stop financial institution that offers a wide array of financial products and services, across retail, corporate and investment banking.

5. Business Drivers in Banking
Business Drivers that are driving transformation in banking systems (the 4 Cs)
Consolidation
Non-bank institutions now offer banking products e.g. loans
Banks now need to offer a bundle of products and services e.g. loans, mortgages, credit cards, insurance, investment banking, etc

6. Business Drivers in Banking contd
Customisation
Need to personalise products based upon the customer’s specific needs, e.g.
Price attributes
Frequency, format and details of statements/ RSS
Balance and balance charges for different accounts
Marketing alerts
Preferred channels of transactions and communication etc
Ability to define a product for each customer rather than selecting from a standard set
Banks now need systems with Customer Relationship management capabilities

7. Business Drivers in Banking contd
Convenience
‘Anytime and Anywhere’ is changing to include ‘Any How’
Convenient delivery channels
Access to services 247
Convenience for the un-banked population: ‘Doorstep banking’ in rural areas
Concern
Quality of service and the need for being recognised as a customer stands out as a reason customers are loyal to a bank.
Need to interact with customers on a more immediate basis

8. Business Drivers in Banking contd
Due to these business drivers, banks need a different structure and supporting infrastructure to address the evolving customer dynamics.

9. Core Banking Systems (CBS)
The sum of all IT components that allow a banking institution to develop, process and manage its basic financial products and services effectively (SAP/ Accenture).
These financial products and services include:
Basic client data,
Deposit accounts,
Loans and mortgages,
Payments and cards,
Statement production.

10. See diagram titled: Financial Services Architecture
CBS facilitate "Anywhere Banking” operations like ATM's, Electronic Fund Transfers, Telebanking, Internet banking etc.
Supports ‘bank banking’ along with ‘branch banking’.

11. CBS Features
Any technology platform that supports core banking operations needs to address the following criteria:
Reliability
Scalability
Availability: always-on capabilities
Manageability: tools for performance monitoring, troubleshooting
Security: encryption, auditing changes to data

12. CBS Technology Components
Hardware platform:
Desktops, printers, laptops, Servers.
Could be HP, Dell, IBM, etc
Software:
CBS Software e.g. T24, Flexicube, Finacle, etc.
Operating system e.g. Linux, Windows, UNIX
Data resources:
Database technology e.g. Oracle, SQL,
Network resources
LAN, WAN

13. CBS Functional Architecture
Several layers
Layer 1: Distribution Channels
Supports delivery channels: internet, mobile via SMS, call centre, IVR via phone
Layer 2: Customer Layer
Customer information, transaction history, customer profitability, groups, etc
Layer3: Main Modules
Retail, treasury, corporate, general
Layer4: Support Modules
General ledger, risk, SWIFT, development tool-kit
Layer 5: Security

14. Flexicube architecture
FLEXCUBE Integration Layer (Web Services)
Flexicube architecture
DELIVERY CHANNELS
Internet Banking
FLEXCUBE Branch
ATM
POS
IVR
Mobile
PDA
FLEXCUBE Integration Layer (Web Services)
RETAIL FUNCTIONALITY
CORPORATE FUNCTIONALITY
SERVICES
RISK MANAGEMENT
INFORMATION DELIVERY
Other i-flex solutions, e.g.,
Deposits
Credit
Loan Syndication/ Project Loans
Foreign Exchange
Sweeps
Decisioning Engine
Integrated Account
Statements
Investor Services
Savings/ Current Accounts
Loan Origination
Data Warehousing/ Analytics
Term Loans
Money Markets
Standing Order
Scoring
Term Deposits
Leasing / Dealer Financing / Floor Planning
Cash and Liquidity Management
Debit and Credit
Advices
Overdrafts
Swaps & FRAs
Recurring Deposits
Signature Repository
Collateral Management
Revolving Loans
Letters of Credit and Bank Guarantees
Securities
Tax Statements
Certificates of Deposit
Institutional Delivery, e.g.,
Nostro Reconciliation
Central Limits
Collections
Futures and Options
ACH / RTGS
Retirement Accounts
Bills and Collections
Mails, s, SMS and Alerts
Safe Deposit Box
Utility Payments
NPA Management
SWIFT / SEPA
EUROCLEAR
BUSINESS SUPPORT
SYSTEM
Reuters / Bloomberg
Relationship Pricing
Interest Plans
Tax Controls
Service Charges
Inventory Management
Funds Transfer
External Systems, e.g.,
ENTERPRISE FUNCTIONALTY
Insurance Systems
General Ledger
Customer Information System
Risk Management
Clearing
Fixed Asset Management
Regulatory Reporting
TECHNICAL SUPPORT
SYSTEM
CRM Systems
API
Process
Orchestrator (BPEL)
Generic File Upload / Extract Utility
Statementing
INFORMATION
MANAGEMENT
Credit Card Systems
Management Information System
Reporting Universe
User Defined
Data Elements
Canned Reports
Credit Bureaus 14

15. CBS Vendors TEMENOS Company i-flex Solutions Ltd Company
products: T24; eMerge; GLOBUS; TEMENOS CoreBanking (TCB)
i-flex Solutions Ltd Company
products: Flexcube; Microbanker; Finware
Infosys Technologies
products: Finacle

16. Benefits of Using CBSs One stop fulfilment Reduced operating costs
CBSs provide an integrated solution to address a range of financial services ranging from retail banking, corporate banking to investment banking. No need to integrate systems from multiple vendors
Reduced operating costs
Costs have been slashed as much as 90% from using CBSs
Savings on process efficiency
Handle high transaction loads, and many customer accounts at minimal cost

17. Better risk management capabilities
CBSs provide a total view of risk exposure across the enterprise through centralised tracking of customer limits
Improve customer intimacy
CBSs allow the creating of customised products
Low-risk implementation
Rapid implementation and reduced project risk
Vendor support

18. Increased management control
CBSs provide real-time information for management decision making
Enhanced security features

19. Technology Risks in the banking Sector
disruption to core banking and payment services
Mitigated by developing Business Continuity Plans and setting up Backup Systems and Disaster Recovery Sites.
Security beaches (hacking)
Audit processes