SlideShare a Scribd company logo
1 of 6
Download to read offline
The future core banking solution – how
process centricity will rule the market




Thought Paper




www.infosys.com/finacle
Universal Banking Solution | Systems Integration | Consulting | Business Process Outsourcing
The future core banking solution – how process
             centricity will rule the market
             The biggest challenge that core banking vendors      to this being localization of functionalities by
             face today is to keep the core banking solution      region. A solution that is a perfect fit for South
             (solution) synchronized with the current global      East Asia is not an ideal solution for North
             industry requirements. This is a daunting task.      America. The variation is not in the banking
             The primary reason being the business of             products. It is the underlying processes. This
             banking is not the same across all geographies.      thought paper presents a view point on how a
             In addition, the solution functionalities have       core banking solution that is process centric
             evolved over several years with vendors gaining      will have flexibility to be a truly global solution.
             experience and responding to client demands
                                                                  It is interesting to map the waves that
             riding on the waves of technology transformation
                                                                  influenced the product strategy of the new
             that has moved across geographical regions.
                                                                  entrants in the core banking arena.
             This resulted in solution maturity. The flip side




             Core banking solution transformation waves
             The first wave notably started in Africa and South   that matter Europe. Economy, regulations and
             Asia. The simple manual operations moved into        customers, profile the business of banking. This
             a core banking environment. The value was            troika varies with geography. In India the major
             immediate, real and visible. New functionalities     local banks have similar business models, the
             were added to the solution. In the product           differentiator if any, is not very distinct. The
             process trade off, the products were primary.        regulators are cautious and regulations strict;
             The second wave in South East Asia was a little      the reason, why the recent financial meltdown
             more complex, nevertheless a success; the result,    had little or no impact in India. The customer
             more functionalities. This wave is significant       expectations from a bank in North America
             as the business processes asserted themselves        are different from Europe or Asia. In this
             in addition to products. The new players with        background, the core banking solutions that
             latest in technology smart, lean and fast            blossomed in the first and second waves, find
             conquered all. The Rajas of legacy systems with      themselves very rigid to take on the third
             a monopoly in the market had no immediate            wave. This adds a new competition dimension
             answer to compete. The third wave that has just      to the core banking vendors, remain rigid play
             started, is embracing the America and Europe         local or be flexible go global. The business
             and not a technology wave in full measure.           imperatives and banking trends require the
             This frontier is more process oriented. That is      vendors to tow the second option. This translates
             the challenge the vendors are currently              to being functionally flexible with strong
             confronted with.                                     process orientation.

             The business of banking we all know is not the
             same in Africa as compared with Asia or for




02   Thought Paper
Core banking product strategy
The product strategy of a vendor is shaped by         (North America, Asia and so on) and channel
the industry trends and the banking research          service (branch, online, mobility banking); this
consultants forward looking vision. The three         is more pronounced in North America as a
top imperatives driving the industry today are        direct consequence of the most recent crisis in
                                                      the banking industry.
1.	 Customer centricity
2.	 Regulatory compliance                             The focus for vendors is on ‘how’ the solution
                                                      will enable a bank move towards customer
3.	 Risk management.
                                                      centricity, comply with regulations and manage
While these are generic terms as we read,             risk in a not too flat a world. To address the ‘how’
the definition and degree vary by geography           part the core banking product must be flexible.




The classic core banking
A classic core banking solution is product centric.
                                                                   Table 1: Product Demand Deposit
Attributes such as customer type, account                            Account Attributes and Values
type, currency, interest, fee, minimum balance
                                                         Product        Account Attributes           Value
are attached to a product. This makes it rigid
                                                                      Customer Type          Individual
from process perspective. Figure 1 and Table 1
                                                                      Account Type           Checking
represent the Classic Core banking model.
                                                         Demand       Currency               US Dollar
Figure 1: Classic Core Banking Model                     Deposit
                                                         Account      Minimum Balance        USD 1000

                                                                      Interest               0%
                       Personal Loans
                                                                      Account Fee (Annual)   USD 10

                        Home Loans


                         Certificate
                         of Deposits
                                                      This model is simple straight forward but
                                                      not flexible to address the 2 top imperatives
                          Demand
                          Deposit                     driving the banking industry (Customer Centricity
                          Accounts
                                                      and Regulatory Compliance). The attributes and
                                                      values are tightly coupled.




                                                                                                             Thought Paper   03
The future core banking solution
             A truly global core banking solution is process             Table 2: Repository Definitions with Examples
             centric. The process centricity will be enabled
             by a set of scalable repositories (Figure 2). A       Repository     Definition        Example            Constraint

             product will be created by a combination (mix         Business     A banking         Create             KYC and AML
                                                                   Function     transaction       Customer           cleared
             and match) of repository components as                             activity that can (Non- Financial)
                                                                                be classified as
             illustrated in the table 2. The solidity of a core                 Financial or
             banking solution will rest on the strength of                      Non- Financial

             the repository factory.                               Business     A group of        Open account       The customer
                                                                   Processes    related                              must be
                                                                                Business Rules                       existing and
             Figure 2: Future Core Banking Model                                                                     approved

                                                                   Business     Set of rules that 1. Open            1. The customer
                                                                   Rules        drive a business     account            must be
                                      Process                                   function          2. In US dollar       existing
                               Component Orchestration                                               currency        2. Eligible to
                                                                                                  3. Minimum            open US
                                                                                                     deposit            dollar
                                   Business Process
                                                                                                     amount USD         account
                                     Repository
                                                                                                    1000
                                                                   Process      The synergistic   1. Open            Not
                                    Business Rules
                                     Repository                    Component    association of       account         Applicable
                                                                   Orches-      Business          2. In US dollar
                                                                   tration      Processes to         currency
                                                                                Business Rules    3. Minimum
                                      Business                                  to accomplish        deposit
                                     Functions                                  a Business           amount USD
                                     Repository                                 Function            1000
                                                                                                  4. Customer
                                                                                                     who is an
                                                                                                     individual




             Advantages
             Scalability: Each of the repository components       a combination of Business Functions, Business
             has the potential to be expanded. New                Rules and Business Processes. A customer in an
             repositories can be added and redundant ones         online banking or direct banking scenarios can
             deleted. The process component orchestration         create their own products limited by constraints
             will ensure harmonious linkages.                     as a self-service offering. There is no need to
                                                                  come to a branch or make a call to a call center
             Adaptability:       The repository components        for account opening.
             can be categorized on the basis of geography
             specific variables. An implementation in United      Regulatory          Compliance:       Regulatory
             States of America will have that set of variables    compliance is a set of Business Rules. The
             unique to North America.                             business rules can be added to business function
                                                                  expanding the related Business Process. For
             Customer Centricity: Customer analytics for          example, if a new regulation requires all new
             an on boarded customer will determine the            checking accounts to be in US dollars only.
             banking products that have the potential to be       The business rule will have this constraint built
             sold to a customer. A product by definition is       in to comply with the new regulation.




04   Thought Paper
Conclusion
Technology is not a differentiator any more. Over   The visible, measurable business transformation
the last decade the story of technology             benefit is the key deliverable the business and
transformation in implementation of a core          IT leaders need today. To demonstrate this
banking solution has lost the sheen. The            benefit a process centric core banking solution
technology transformation is a given benefit.       is THE solution.




References
1.	 “Global Crisis, Recession & Uneven Recovery”    4.	 Foundations of Banking Risk: An Overview
    Y V Reddy Orient BlackSwan                          of Banking, Banking Risks, and Risk-Based
                                                        Banking Regulation – by GARP (Authors
2.	K C Chakrabarty: Beyond Core Banking
                                                        Richard Apostolik, Christopher Donohue,
   Solutions (CBS) – fast forward to Banking 2.0!
                                                        Peter Went)
3.	Bank 2.0: How Customer Behavior and
                                                    5.	 Modern Banking by Shelagh Heffernan
   Technology Will Change the Future of
   Financial Services by Brett King




                                                                    Vishwanath Thanalapatti
                                                                        Lead Product Manager, Infosys




                                                                                                Thought Paper   05
About Finacle
Finacle from Infosys partners with banks to transform process, product
and customer experience, arming them with ‘accelerated innovation’
that is key to building tomorrow’s bank.

For more information, contact Finacleweb@infosys.com                                                                                                          www.infosys.com/finacle
© 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys
acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.

More Related Content

More from Infosys Finacle

Finacle Thought Paper - Digital Wallet Success Strategy
Finacle Thought Paper - Digital Wallet Success StrategyFinacle Thought Paper - Digital Wallet Success Strategy
Finacle Thought Paper - Digital Wallet Success StrategyInfosys Finacle
 
Finacle - Agency Banking: New Frontiers In Financial Inclusion
Finacle - Agency Banking: New Frontiers In Financial InclusionFinacle - Agency Banking: New Frontiers In Financial Inclusion
Finacle - Agency Banking: New Frontiers In Financial InclusionInfosys Finacle
 
Thought Paper: Overview of Banking Applications
Thought Paper: Overview of Banking ApplicationsThought Paper: Overview of Banking Applications
Thought Paper: Overview of Banking ApplicationsInfosys Finacle
 
Perspective- Multi Channel Banking: A Five Point Strategy
Perspective- Multi Channel Banking: A Five Point Strategy Perspective- Multi Channel Banking: A Five Point Strategy
Perspective- Multi Channel Banking: A Five Point Strategy Infosys Finacle
 
Thought Paper:Four Strategies to Build the Smarter Bank
Thought Paper:Four Strategies to Build the Smarter BankThought Paper:Four Strategies to Build the Smarter Bank
Thought Paper:Four Strategies to Build the Smarter BankInfosys Finacle
 
Perspective: The rise and rise of emerging market banks
Perspective: The rise and rise of emerging market banksPerspective: The rise and rise of emerging market banks
Perspective: The rise and rise of emerging market banksInfosys Finacle
 
Perspective: Needed, A Holistic Approach to Reputation Risk Management in Banks
Perspective: Needed, A Holistic Approach to Reputation Risk Management in Banks Perspective: Needed, A Holistic Approach to Reputation Risk Management in Banks
Perspective: Needed, A Holistic Approach to Reputation Risk Management in Banks Infosys Finacle
 
Perspective: Auditing norms for pki based applications
Perspective: Auditing norms for pki based applicationsPerspective: Auditing norms for pki based applications
Perspective: Auditing norms for pki based applicationsInfosys Finacle
 
Mobile Banking – A Transformation of Traditional Banking
Mobile Banking – A Transformation of Traditional BankingMobile Banking – A Transformation of Traditional Banking
Mobile Banking – A Transformation of Traditional BankingInfosys Finacle
 
Retail Banking: Making other Channels mobile
Retail Banking: Making other Channels mobileRetail Banking: Making other Channels mobile
Retail Banking: Making other Channels mobileInfosys Finacle
 
Social media and retail banking
Social media and retail bankingSocial media and retail banking
Social media and retail bankingInfosys Finacle
 
International remittances
International remittancesInternational remittances
International remittancesInfosys Finacle
 
Banking in the Philippines : A close-up
Banking in the Philippines : A close-upBanking in the Philippines : A close-up
Banking in the Philippines : A close-upInfosys Finacle
 
Smartphone leading wealth managment
Smartphone leading wealth managmentSmartphone leading wealth managment
Smartphone leading wealth managmentInfosys Finacle
 
Interactive online banking
Interactive online bankingInteractive online banking
Interactive online bankingInfosys Finacle
 
How small-banks-innovating
How small-banks-innovatingHow small-banks-innovating
How small-banks-innovatingInfosys Finacle
 
Cash Management - An Insight
Cash Management - An InsightCash Management - An Insight
Cash Management - An InsightInfosys Finacle
 

More from Infosys Finacle (20)

Finacle Thought Paper - Digital Wallet Success Strategy
Finacle Thought Paper - Digital Wallet Success StrategyFinacle Thought Paper - Digital Wallet Success Strategy
Finacle Thought Paper - Digital Wallet Success Strategy
 
Finacle - Agency Banking: New Frontiers In Financial Inclusion
Finacle - Agency Banking: New Frontiers In Financial InclusionFinacle - Agency Banking: New Frontiers In Financial Inclusion
Finacle - Agency Banking: New Frontiers In Financial Inclusion
 
Thought Paper: Overview of Banking Applications
Thought Paper: Overview of Banking ApplicationsThought Paper: Overview of Banking Applications
Thought Paper: Overview of Banking Applications
 
Perspective- Multi Channel Banking: A Five Point Strategy
Perspective- Multi Channel Banking: A Five Point Strategy Perspective- Multi Channel Banking: A Five Point Strategy
Perspective- Multi Channel Banking: A Five Point Strategy
 
Thought Paper:Four Strategies to Build the Smarter Bank
Thought Paper:Four Strategies to Build the Smarter BankThought Paper:Four Strategies to Build the Smarter Bank
Thought Paper:Four Strategies to Build the Smarter Bank
 
Perspective: The rise and rise of emerging market banks
Perspective: The rise and rise of emerging market banksPerspective: The rise and rise of emerging market banks
Perspective: The rise and rise of emerging market banks
 
Perspective: Needed, A Holistic Approach to Reputation Risk Management in Banks
Perspective: Needed, A Holistic Approach to Reputation Risk Management in Banks Perspective: Needed, A Holistic Approach to Reputation Risk Management in Banks
Perspective: Needed, A Holistic Approach to Reputation Risk Management in Banks
 
Perspective: Auditing norms for pki based applications
Perspective: Auditing norms for pki based applicationsPerspective: Auditing norms for pki based applications
Perspective: Auditing norms for pki based applications
 
Mobile Banking – A Transformation of Traditional Banking
Mobile Banking – A Transformation of Traditional BankingMobile Banking – A Transformation of Traditional Banking
Mobile Banking – A Transformation of Traditional Banking
 
Retail Banking: Making other Channels mobile
Retail Banking: Making other Channels mobileRetail Banking: Making other Channels mobile
Retail Banking: Making other Channels mobile
 
Social media and retail banking
Social media and retail bankingSocial media and retail banking
Social media and retail banking
 
Branch of the future
Branch of the futureBranch of the future
Branch of the future
 
International remittances
International remittancesInternational remittances
International remittances
 
Agile banking managing
Agile banking managingAgile banking managing
Agile banking managing
 
Banking in the Philippines : A close-up
Banking in the Philippines : A close-upBanking in the Philippines : A close-up
Banking in the Philippines : A close-up
 
Smartphone leading wealth managment
Smartphone leading wealth managmentSmartphone leading wealth managment
Smartphone leading wealth managment
 
Content management
Content managementContent management
Content management
 
Interactive online banking
Interactive online bankingInteractive online banking
Interactive online banking
 
How small-banks-innovating
How small-banks-innovatingHow small-banks-innovating
How small-banks-innovating
 
Cash Management - An Insight
Cash Management - An InsightCash Management - An Insight
Cash Management - An Insight
 

Recently uploaded

RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoCoinGecko
 
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINT
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINTACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINT
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINTindexPub
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfAdnet Communications
 
The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...Antonis Zairis
 
India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023SkillCircle
 
CLMV-Outlook-March-2024-ENG-20240327.pdf
CLMV-Outlook-March-2024-ENG-20240327.pdfCLMV-Outlook-March-2024-ENG-20240327.pdf
CLMV-Outlook-March-2024-ENG-20240327.pdfSCBEICSCB
 
Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Guillaume Ⓥ Sarlat
 
Buy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxBuy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxPrecize Formely Leadoff
 
Hungarys economy made by Robert Miklos
Hungarys economy   made by Robert MiklosHungarys economy   made by Robert Miklos
Hungarys economy made by Robert Miklosbeduinpower135
 
Stock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfStock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfMichael Silva
 
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdfAdnet Communications
 
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESKumarJayaraman3
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Commonwealth
 
Introduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an EntrepreneurIntroduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an Entrepreneurabcisahunter
 
The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?Stephen Perrenod
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingHenry Tapper
 
Zakat and it’s Social Benefits - THE FORGOTTEN PILLAR OF ISLAM
Zakat and it’s Social Benefits - THE FORGOTTEN PILLAR OF ISLAMZakat and it’s Social Benefits - THE FORGOTTEN PILLAR OF ISLAM
Zakat and it’s Social Benefits - THE FORGOTTEN PILLAR OF ISLAMFaisal834049
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent PreferencesGRAPE
 

Recently uploaded (20)

RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
 
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINT
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINTACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINT
ACADEMIC BANK OF CREDIT: A WORLDWIDE VIEWPOINT
 
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
 
The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...
 
India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023
 
CLMV-Outlook-March-2024-ENG-20240327.pdf
CLMV-Outlook-March-2024-ENG-20240327.pdfCLMV-Outlook-March-2024-ENG-20240327.pdf
CLMV-Outlook-March-2024-ENG-20240327.pdf
 
Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024
 
Buy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptxBuy and Sell Urban Tots unlisted shares.pptx
Buy and Sell Urban Tots unlisted shares.pptx
 
Hungarys economy made by Robert Miklos
Hungarys economy   made by Robert MiklosHungarys economy   made by Robert Miklos
Hungarys economy made by Robert Miklos
 
Stock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfStock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdf
 
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
20240314 Calibre March 2024 Investor Presentation (FINAL).pdf
 
E-levy and Merchant Payment Exemption in Ghana
E-levy and Merchant Payment Exemption in GhanaE-levy and Merchant Payment Exemption in Ghana
E-levy and Merchant Payment Exemption in Ghana
 
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTESACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
ACCOUNTING FOR BUSINESS.II BRANCH ACCOUNTS NOTES
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]
 
Introduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an EntrepreneurIntroduction to Entrepreneurship and Characteristics of an Entrepreneur
Introduction to Entrepreneurship and Characteristics of an Entrepreneur
 
Effects & Policies Of Bank Consolidation
Effects & Policies Of Bank ConsolidationEffects & Policies Of Bank Consolidation
Effects & Policies Of Bank Consolidation
 
The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB funding
 
Zakat and it’s Social Benefits - THE FORGOTTEN PILLAR OF ISLAM
Zakat and it’s Social Benefits - THE FORGOTTEN PILLAR OF ISLAMZakat and it’s Social Benefits - THE FORGOTTEN PILLAR OF ISLAM
Zakat and it’s Social Benefits - THE FORGOTTEN PILLAR OF ISLAM
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent Preferences
 

Perspective: Future core banking

  • 1. The future core banking solution – how process centricity will rule the market Thought Paper www.infosys.com/finacle Universal Banking Solution | Systems Integration | Consulting | Business Process Outsourcing
  • 2. The future core banking solution – how process centricity will rule the market The biggest challenge that core banking vendors to this being localization of functionalities by face today is to keep the core banking solution region. A solution that is a perfect fit for South (solution) synchronized with the current global East Asia is not an ideal solution for North industry requirements. This is a daunting task. America. The variation is not in the banking The primary reason being the business of products. It is the underlying processes. This banking is not the same across all geographies. thought paper presents a view point on how a In addition, the solution functionalities have core banking solution that is process centric evolved over several years with vendors gaining will have flexibility to be a truly global solution. experience and responding to client demands It is interesting to map the waves that riding on the waves of technology transformation influenced the product strategy of the new that has moved across geographical regions. entrants in the core banking arena. This resulted in solution maturity. The flip side Core banking solution transformation waves The first wave notably started in Africa and South that matter Europe. Economy, regulations and Asia. The simple manual operations moved into customers, profile the business of banking. This a core banking environment. The value was troika varies with geography. In India the major immediate, real and visible. New functionalities local banks have similar business models, the were added to the solution. In the product differentiator if any, is not very distinct. The process trade off, the products were primary. regulators are cautious and regulations strict; The second wave in South East Asia was a little the reason, why the recent financial meltdown more complex, nevertheless a success; the result, had little or no impact in India. The customer more functionalities. This wave is significant expectations from a bank in North America as the business processes asserted themselves are different from Europe or Asia. In this in addition to products. The new players with background, the core banking solutions that latest in technology smart, lean and fast blossomed in the first and second waves, find conquered all. The Rajas of legacy systems with themselves very rigid to take on the third a monopoly in the market had no immediate wave. This adds a new competition dimension answer to compete. The third wave that has just to the core banking vendors, remain rigid play started, is embracing the America and Europe local or be flexible go global. The business and not a technology wave in full measure. imperatives and banking trends require the This frontier is more process oriented. That is vendors to tow the second option. This translates the challenge the vendors are currently to being functionally flexible with strong confronted with. process orientation. The business of banking we all know is not the same in Africa as compared with Asia or for 02 Thought Paper
  • 3. Core banking product strategy The product strategy of a vendor is shaped by (North America, Asia and so on) and channel the industry trends and the banking research service (branch, online, mobility banking); this consultants forward looking vision. The three is more pronounced in North America as a top imperatives driving the industry today are direct consequence of the most recent crisis in the banking industry. 1. Customer centricity 2. Regulatory compliance The focus for vendors is on ‘how’ the solution will enable a bank move towards customer 3. Risk management. centricity, comply with regulations and manage While these are generic terms as we read, risk in a not too flat a world. To address the ‘how’ the definition and degree vary by geography part the core banking product must be flexible. The classic core banking A classic core banking solution is product centric. Table 1: Product Demand Deposit Attributes such as customer type, account Account Attributes and Values type, currency, interest, fee, minimum balance Product Account Attributes Value are attached to a product. This makes it rigid Customer Type Individual from process perspective. Figure 1 and Table 1 Account Type Checking represent the Classic Core banking model. Demand Currency US Dollar Figure 1: Classic Core Banking Model Deposit Account Minimum Balance USD 1000 Interest 0% Personal Loans Account Fee (Annual) USD 10 Home Loans Certificate of Deposits This model is simple straight forward but not flexible to address the 2 top imperatives Demand Deposit driving the banking industry (Customer Centricity Accounts and Regulatory Compliance). The attributes and values are tightly coupled. Thought Paper 03
  • 4. The future core banking solution A truly global core banking solution is process Table 2: Repository Definitions with Examples centric. The process centricity will be enabled by a set of scalable repositories (Figure 2). A Repository Definition Example Constraint product will be created by a combination (mix Business A banking Create KYC and AML Function transaction Customer cleared and match) of repository components as activity that can (Non- Financial) be classified as illustrated in the table 2. The solidity of a core Financial or banking solution will rest on the strength of Non- Financial the repository factory. Business A group of Open account The customer Processes related must be Business Rules existing and Figure 2: Future Core Banking Model approved Business Set of rules that 1. Open 1. The customer Rules drive a business account must be Process function 2. In US dollar existing Component Orchestration currency 2. Eligible to 3. Minimum open US deposit dollar Business Process amount USD account Repository 1000 Process The synergistic 1. Open Not Business Rules Repository Component association of account Applicable Orches- Business 2. In US dollar tration Processes to currency Business Rules 3. Minimum Business to accomplish deposit Functions a Business amount USD Repository Function 1000 4. Customer who is an individual Advantages Scalability: Each of the repository components a combination of Business Functions, Business has the potential to be expanded. New Rules and Business Processes. A customer in an repositories can be added and redundant ones online banking or direct banking scenarios can deleted. The process component orchestration create their own products limited by constraints will ensure harmonious linkages. as a self-service offering. There is no need to come to a branch or make a call to a call center Adaptability: The repository components for account opening. can be categorized on the basis of geography specific variables. An implementation in United Regulatory Compliance: Regulatory States of America will have that set of variables compliance is a set of Business Rules. The unique to North America. business rules can be added to business function expanding the related Business Process. For Customer Centricity: Customer analytics for example, if a new regulation requires all new an on boarded customer will determine the checking accounts to be in US dollars only. banking products that have the potential to be The business rule will have this constraint built sold to a customer. A product by definition is in to comply with the new regulation. 04 Thought Paper
  • 5. Conclusion Technology is not a differentiator any more. Over The visible, measurable business transformation the last decade the story of technology benefit is the key deliverable the business and transformation in implementation of a core IT leaders need today. To demonstrate this banking solution has lost the sheen. The benefit a process centric core banking solution technology transformation is a given benefit. is THE solution. References 1. “Global Crisis, Recession & Uneven Recovery” 4. Foundations of Banking Risk: An Overview Y V Reddy Orient BlackSwan of Banking, Banking Risks, and Risk-Based Banking Regulation – by GARP (Authors 2. K C Chakrabarty: Beyond Core Banking Richard Apostolik, Christopher Donohue, Solutions (CBS) – fast forward to Banking 2.0! Peter Went) 3. Bank 2.0: How Customer Behavior and 5. Modern Banking by Shelagh Heffernan Technology Will Change the Future of Financial Services by Brett King Vishwanath Thanalapatti Lead Product Manager, Infosys Thought Paper 05
  • 6. About Finacle Finacle from Infosys partners with banks to transform process, product and customer experience, arming them with ‘accelerated innovation’ that is key to building tomorrow’s bank. For more information, contact Finacleweb@infosys.com www.infosys.com/finacle © 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.