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What is Core Banking?

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  • Written By: Felicia Dye
  • Edited By: Melissa Wiley
  • Last Modified Date: 02 November 2016
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Core banking refers to a financial institution's main operations. As there are different types of banks, their primary business actions can vary. In most instances, however, the main functions of a bank are to process deposits and withdrawals. Technology that drives improvement of performance in these areas is known as core banking solutions (CBS). Implementing CBS provides benefits such as the ability to link branches and to maintain more accurate ledgers.

It is common for businesses such as banks to offer a wide range of services. For example, a bank may hold money in a savings account, it may extend loans, and it may act as a broker for investors. There are certain services, however, that will be considered core functions of a particular financial institution.

For most banks, the majority of their client base consists of individuals and small businesses. The types of services that are most often required by these types of clients are depositing and withdrawing of funds. These two functions therefore represent the core banking for most financial institutions. Specialized financial institutions, such as retail banks or treasury banks, are likely to have other core functions.

Technological advancement changes the way that people live and conduct business. Those changes commonly create demands, such as improved accessibility and speed. It is in the interest of a financial institution to accommodate these demands with regard to its core banking. This is commonly done using CBS.

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Core banking solutions refer to software that serves a number of functions. One, which has drastically changed the banking industry, is the networking of branches. CBS allows multiple branches of a bank to operate as a single unit. To understand the effect technology has had, it is important to first note how banks generally operated in the past.

At one time, it was common for transactions at a bank branch to be localized. This means that if a client conducted a transaction at branch A, this was the only location to have an immediate record of that information. It would be made available to other branches some time later. Implementing CBS, however, allows a transaction at branch A to be immediately reflected on the ledgers at branch B,C, and D.

Technology is also making core banking more accessible by providing more means to conduct transactions. Instead of having to report to a branch to access a bank's primary services, a person can do so through a variety of mediums, such as telephone, automated teller machines (ATMs), and the Internet.

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