Core banking systems were originally envisaged with the singular aim of maintaining customer account data in a centralized system accessible across the bank’s network of branches. Account aggregation into assets and liabilities for general ledger consolidation was inherent in the core. To ably assist front office operations, the system comprised simple processes. Higher value transactions were often routed through multiple approval levels within the core, with a defined workflow.

The evolution of core banking necessitated workflows for customer creation and account opening, and therefore process flows were defined for KYC, de-duplication, and blacklist/negative list checks. However, some providers moved this activity into a different software/module since workflows and interfaces were associated.

As customer demand grew, multiple processes and layers were piled on to the core banking systems. Lifecycle activities for clearing operations, involving lodging of physical cheques, schedule printing, and reconciliation of instruments were incorporated. As were complex trade finance and payment functions including issuance of documentary credit with attachment of bills, payments/settlements with SWIFT message generation and so on. While these proved beneficial in the short run, the core system reeled under the weight. The problem was further compounded as banking moved from people to process oriented, with complex processes and multilevel workflows added at every given opportunity.

These aging systems, which deftly handled simple accounting functions, are now gasping for breath. By way of remedial action, complex processing can be handled outside core banking with the use of an accounting platform solely for transactions. Alternatively, complex processing functions can be bundled up into modules and plugged in as needed. A strong interfacing mechanism which can integrate to industry standard middleware may be developed.

Transaction processing and accounting form the “heart” of core banking. Segregating all other functions in a modular fashion will result in minimal impact on the “heart” thus preventing a complete collapse.