The 4 C’s of core banking – part 3

A bit overdue, but here’s the third installment of the 4 C’s of core banking.

Finding the best way to tackle legacy core systems has re-emerged as a key topic of debate among banks, from top tier global players to smaller, domestic institutions. With their vast, fragmented architectures, banks’ legacy systems are typically cumbersome and lack the agility required to adapt to today’s business and market needs. Factors such as evolving customer expectations, new regulations and the need to enter new geographies or launch new products require banks to have flexible systems that can continually adapt to support their evolving business needs.

With legacy systems so far having failed to address these changing requirements, banks should consider four crucial aspects to make their core banking systems more efficient this year: componentisation, going back to the core, compliance and customer centricity.

So let’s continue with the third C: compliance.

In addition to increased competition in the banking space and a need for cost reduction, it is regulatory initiatives such as the Single Euro Payments Area (SEPA), the Payment Services Directive (PSD), the latest Basel III proposals and the UK’s Faster Payments Service (FPS), to name just a few, that are driving banks to refocus on their core banking infrastructures. Banks need flexible solutions in order to comply and respond to the evolving legislative requirements.

As part of some of the regulatory changes, the ISO 20022 messaging standard, for example, has emerged as the recommended format for all payment processing steps under SEPA. It introduces a number of benefits, such as greater STP rates that enable banks to save time and money. What’s more, it offers a more standardised payments service that allows banks to conduct business across national borders, thereby delivering improved customer service. Crucially, ISO 20022 will streamline and standardise payment processes, which means that banks will also have a greater opportunity, as well as more time and money, to focus on innovating payment solutions and services.

In order to take advantage of the benefits new regulatory initiatives offer, the move from old, siloed legacy systems to a universal messaging standard will help both banks and their corporate customers to enhance their transaction processes and help them reduce the global maintenance costs dedicated to payments processing.

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