How next-generation core banking platforms revolutionizing the banking & finance industry?

In this blog, we will discuss the key characteristics of next-gen banking platforms and how they are transforming the banking and finance industry.

The fierce competition in the banking industry is always at its highest level, which is excellent for customers. Every bank aspires to boost its market value by expanding the scope of its services and introducing cutting-edge capabilities. In this regard, the influx of next-gen banking platforms developed by fintech software development companies has more significantly motivated the banking industry.

They want to dramatically improve the experience their consumers receive from their optimized digital banking services by utilizing the next-generation banking platform. Current traditional banks, which are built on the outdated core banking infrastructure, frequently struggle to stay up. However, they manage to function because of their substantial financial resources. 

Another reason is that their current core banking platform's restrictive infrastructure has kept them in numerous bounds. It is difficult to provide specialized services to meet the constantly evolving needs of their consumers due to a lack of flexibility. It is precisely for this reason that one should root for top core banking platforms or simply the best core banking platforms.

Let's go over next-generation core banking platforms in more detail.

What is a next-generation core banking platform? 

By providing financial processing platforms built on cutting-edge, flexible, scalable, and open frameworks and backed by the following pillars, next-generation core banking platforms seek to remove obstacles that hinder financial institutions' shift to digital banking -

• Technology based in the cloud
• Disentangled and scalable service model-based systems
• Effective parameterization
• Open APIs that are based on standards to make integration easier

Key features of next-generation core banking platform

Financial institutions can take advantage of a variety of effective features from the Next-generation core banking platform to streamline and automate their banking procedures. The following are the key characteristics of the basic banking platform:

1. Data analytics

Top core banking platforms utilize an advanced technique called data analytics that is used to gather, handle, and evaluate both organized and unorganized data. Additionally, the next-generation core banking platform has analytics that gives organizations the ability to spot emerging market trends. Institutions can quickly advance in further optimizing their current revenue sources or developing new revenue channels by spotting patterns.

2. Real-time check system

When executing bank cheque orders, saving time is very important. Next-generation core banking platform seeks to provide the solution by offering real-time cheque processing. A digital image of the cheque with a MICR band is created by the core banking system and sent to another bank for verification. This approach eliminates the need for additional physical papers and manual interaction.

3. Chatbot integration

The best core banking platforms enable banks to provide exceptional customer care with round-the-clock support so that clients can access banking assistance whenever and wherever they need it. To accomplish this, chatbot integration has been added to the next-gen core banks, allowing consumers to fix any issues they may have even after business hours. 

Basic operations like account balance inquiries, pin generation, credit card statements, etc., can be handled by chatbots. This can also be applied to interactive, intelligent chatbots that incorporate natural language processing and generation processes, including AI, into their service.

4. Loan processing

The automated loan processing offered by next-generation core banking platform is built on cutting-edge web and cloud technologies. It's easy to set up this loan processing system. Additionally, it evaluates loan applications as well as identifies those that might meet the bank's lending standards.

5. Digital banking

Nowadays, a lot of banking transactions are handled via either internet banking or mobile banking. Banks must create a secure system while considering the various liabilities that could result from a data leak. The top core banking platforms can help banks create a more secure framework in this situation, allowing clients to rely on the online banking system with less trepidation.

6. Customer relationship

Customer relationship management, which enables financial institutions to manage the current relationships with a variety of clients and prevent them from leaving, is essential. They can spot potential clients while doing this. It can track down existing banking clients and use them to find new clients with lower COA (Cost of Acquisition). This service is a key characteristic of the best core banking platforms that are there. 

Why is there a need to shift to the next-gen banking system from the traditional ones?

1. The market is now

The next-generation core banking platforms and modern banking platforms offer the ability to deploy products quickly, which is a critical competitive differentiation in the current saturated industry. Monolithic designs, which produce plenty of interdependencies and inefficiencies, poorly documented banking code, which places an unnecessary load on a limited number of subject-matter specialists, and manual delivery processes are what the traditional banking system offers. For the banking sector industry, now is the time to change.

2. Cost

The importance of the return on investment for the clients has increased due to the low industry return on equity (ROE). Due to the huge amounts of IT spending required, a mid-sized bank spending two-thirds of its digitalization budget on technical debt in outdated systems is no longer an option. Clumsy traditional banking systems lead to unnecessarily high costs, which can be readily avoided by switching to a next-gen core banking platform.

3. The current network of systems

More and more future goods and services will be dependent on partnerships. However, the third-party connectivity required to promote innovation is not present in current systems. For instance, the traditional banking system lacks the network necessary to connect mortgage purchasers with services related to real estate. On the other hand, a next generation banking platform has the potential to be very connected.

4. A touch of personalization

Customers now demand a more customized experience. However, banks frequently store data in numerous product-aligned core systems, which makes it difficult to respond to specific demands. To give big bank's customers a unified view of bank deposits as well as investment products, the firm should shift to the next-gen banking platforms, as these platforms can accommodate all data in one place and make it easily accessible to the customers.

How a next-generation core banking platform can be profitable to the banks?

A bank's customer-focused strategy is taken into account when creating a next-generation core banking system. A next generation banking platform is now being developed to keep up with the rapidly evolving consumer and market conditions in this digital era. 

Compared to conventional banking systems, the next-generation core banking platforms and modern banking platforms are created with three key factors in mind: cost-effectiveness, future readiness/resilience, and high-speed transaction system. 

With all of this in mind, the following are the main benefits of a modern core banking system that position it as a significant player in creating new revenue streams for products and services:

1. Connectivity

In today's connected open banking ecosystem, banks desire modern banking platforms that not only seamlessly integrate with their existing traditional systems but also with sophisticated third-party platforms using flexible APIs. Seamlessly integrating in-house as well as top-tier third-party financial capabilities is crucial to provide its target consumer group with a superior user interface.

Interoperability is one of the crucial factors of the digital banking platforms that influence a bank's space in the market for new services or products. Using a platform-neutral banking services solution with flexible API infrastructure, banks may quickly adapt to new business models, such as the Banking-as-a-Service (BaaS) model.

2. Scalability

In contrast to the costly old method, where the entire program must be scaled even for a single component alteration, scalable cloud core banking platforms need to be created. The said digital core banking platforms can be best described as possessing core architecture platforms with their system pieces made modular and sufficiently separated to allow a bank to scale each component individually. Because any outage in a subsystem does not affect the bigger solution, which may continue to function while the subsystem is being rectified.

Furthermore, it is cost-effective for banks to increase only the precise services that are relevant to their business objectives. Additionally, a modular infrastructure that increases a core banking solution's administrative capacity, offers more flexibility, and enables quick responses to customer requests is suited for cloud implementation. Additionally, a core banking system is easily adaptable and has cloud-based collaboration and communication capabilities with other financial third-party systems.

3. Compliance

One of the characteristics of the modern banking industry is its complex regulatory framework, which includes multiple federal regulatory organizations. Due to the numerous reporting requirements as well as security requirements set by regulatory agencies, banks cannot function with traditional banking systems. A next-generation banking platform that complies with regional reporting criteria would greatly improve the bank's compliance reporting procedure.

4. Flexibility

Speed and responsiveness are crucial success factors in gaining a competitive edge in the extremely competitive banking industry. A workflow system, low- or no-code platform, improved production, and a platform that is extremely objective-oriented and flexible are essential components of a core banking system. Business function operators, especially non-technical ones, can build banking products specifically for their intended audience and client base because of these capabilities. A considerably longer time to market and decreased reliance on technical teams are the results of this.

5. Instantaneous processing

When crucial banking systems are not operating in real-time, the client experience is dramatically damaged, and the bank's capacity to grow into new markets is constrained. Any analytical or digital overlay capabilities will also significantly constrain the bank's consumers. A real-time transaction processing engine is a crucial component of a bank's core banking system. It offers a range of real-time services, such as quick loan approvals, quick payment transactions, and financial planning applications that are linked to the customer's bank account.

All of the above mentioned features of the next-gen banking platforms will enable the platforms to create new sources of revenue. The intended digital banking platforms will create a system that requires less time to accomplish the same work, thereby increasing efficiency. It will also make the system more user-friendly and thus will attract more and more customers, leading to more income for the banks.

Ways in which banks can change their core system to next-gen

1. Complete replacement

Replacement of the entire tech stack, starting with the core. When companies urgently need to change their fundamental platforms due to depreciation or regulatory requirements, banks frequently take this course of action. However, it might be dangerous. The advantages usually only become apparent after the last client has been converted and the legacy systems have been terminated, which necessitates considerable data migration. 

Banks typically opt for a traditional platform as a replacement due to worries that next-generation banking platforms have not yet been completely tested or are just focused on a narrow range of services and goods.

2. Step-by-step replacement

Gradual modernization or step-by-step replacement. The majority of banks have used this tactic. It entails keeping the legacy platform while gradually reducing it as modern architecture is built over it. If the present version is still functional in five to ten years, it is frequently regarded as a safe choice. 

The most cutting-edge banks begin by hollowing out commonly used capabilities and reconstructing them as microservices, using a "strangler pattern" to start with the most important client journeys. Although the technique is less risky compared to the first option, banks might not always attain their desired efficiency levels as well as time-to-market ratio due to slow transition durations.

Conclusion

Every financial institution relies on the fintech custom software development for the next-generation core banking platform as its foundation. In the past few years, their incorporation into the framework of contemporary business technology has brought about notable improvements. They have been greatly motivated by the evolving FinTech collaborative landscape. 

Banking institutions can use new technology to develop new sources of income thanks to the next-generation core banking platform. Financial institutions have been able to learn more about the present and potential clients through the analysis of customer data, thanks to the rapid growth in digitization and acceptance of digital banking in recent years. So, the formation of the next-gen core banking platforms is inevitable, so you should know all about it to reap the maximum benefit of the same. Moreover, knowing about the top core banking platforms and investing in the best ones can be quite beneficial.