With the ever-increasing competition in the financial services market, financial institutions, especially banks, are striving to incorporate the latest financial technology (FinTech), such as core banking software or systems, into their operations. Moreover, these systems are also getting more efficient, more scalable, and more modulable with time. So what does the future of banking core software look like?
The financial services industry is going through a technological revolution right now and core banking software or systems are playing a pivotal role in it. These advanced systems have, no doubt, become the backbone of modern banking. From handling day-to-day banking operations such as transactions, management, and keeping records to providing exceptional customer services, these advanced core systems can do it all!
On top of that, because of the constantly changing banking needs of the customers, and due to the lowering of the switching barrier, banks are bound to adopt advanced technologies so that they don’t lose their clientele. No wonder many highly reputed traditional financial institutions are also, now, investing heavily in the latest financial technologies.
Owing to the aforementioned factors, the market of banking core software is growing at a rapid pace globally. As of now, the market is worth more than 10 billion US dollars and it is projected to cross the 15 billion mark in the near future.
In this blog post, we are going to discuss, in detail, the future of banking core software, the challenges involved, and why the future core software must be modular and scalable!
An Introduction to Banking Core Software
Banking core software is a highly specialized type of financial technology that is designed to manage and perform critical banking operations. A banking core system can handle operations such as daily transactions (deposits, withdrawals, and payments), day-to-day management operations, authentications, loan payouts, customer services, creation of new accounts, managing customer profiles, and even risk assessment!
Banking core systems make banking highly convenient for customers and management easy for the administration. A banking core software connects all bank branches to a single system to make operations and flow of information as easy and quick as possible.
Increasing Demand for Banking Core Software – What Does the Future Hold?
Without a doubt, there is a growing demand for advanced banking core software systems due to many factors, and this demand will only increase more in the future. Primarily, these systems are in high demand as they are highly effective and efficient, thereby making the whole banking process convenient for clients and manageable for the bank. Not only that but these systems are highly cost efficient as well which is why banks demand them.
Secondly, a bank’s customer service and the extent of ease they give to their clients decides their client retention as well as growth, which is why banks demand and strive to get the latest, most efficient banking core software that provides exceptional convenience to their customers.
Furthermore, the changing needs of the stakeholders which are the customers, partners, and employees, and the need for banks to comply with complex financial regulations are also big factors in the increasing demand for advanced banking core systems, as these needs can only be met with the aid of the latest fintech.
An Overview of the Banking Core Software Market
The banking core software market is growing at a rapid rate; as of now, it is valued globally at 10 billion dollars, and projected to cross 40 billion in the future (by 2030), at a growth rate of 18.4%. The current market is segmented by the type of customer, region, and type of system (on-premises or on-cloud). Currently, North America is the largest market for banking core systems.
The COVID-19 pandemic in 2020 had a huge impact on the global banking core software market. Before the pandemic, the majority of financial services, businesses and institutions, such as banks, were still inclined toward traditional methods. However, when the crisis started, banks had to adopt work-from-home policies as well, to facilitate their customers with banking services that they could access, without personally coming to the bank. Fintech played a pivotal role in enabling banks in this objective, and the banking core software market, especially, got a good boost!
The basic challenges involved for banks when it comes to banking core systems are cost, integration, and complexity. Not only is banking core software costly to buy and install, but it is very expensive to maintain as well.
Furthermore, it is important to note the fact that technology is evolving rapidly today, and the technology that is the most sought after today may not even be relevant in 5 to 10 years. This is why consistent updating and modification of banking core software, and integrating the latest tech of the time in it becomes important; consequently this also comes with significant costs.
In addition to that, these systems are very complex and can be difficult to implement effectively. Banks may take time to completely understand how to use and implement core banking software in its operation.
Why the Future Banking Core Software Need to be Modular and Scalable
It is important that the future banking core software systems are modular and scalable so that they can handle the changing needs and demands of stakeholders, the increasing customer base without degrading performance, comply with complex banking regulations, in order for them to back new services and products the bank introduces in the future.
Final Thoughts – The Future of Banking Core Software
Banking core software is a financial technology that is playing a pivotal role in the modernization of the financial services industry. The market for banking core software systems is growing very rapidly and their demand will only increase in the future. However, the upcoming banking core software must be modular and scalable to handle the projected future banking challenges.