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How does core banking software work?

Banking core is a complex agile product with multipurpose modules. We explain how it works answering the most frequently asked questions about banking software solutions.

How core banking software works?

A core banking system is a complex solution for digital banking. This system has a modular structure with many functional parts in it. The dispersed modular structure makes the core more adjustable for the needs of the specific bank you may build upon it. The same banking core with a few additional functions may work for a neobank or a commercial bank.

On a basic level, a core banking system is a digital ledger of transactions, clients’ balances and credentials. So, the first module within the system is responsible for the client and his\her transaction verification. When your neobank has a license to process the payments via popular systems like Visa or Mastercard, it also has the functionality for POS and P2P transactions. 

If your product is not a mono service and you have many third-party providers you need to integrate into your ecosystem, one of the functional modules will be responsible for connecting service providers. The first function of this module will be to transfer key values via the API protocol between you and your provider. That could be the info about the service, the number of units your clients sell or buy, and the price of the service. The second function of the module is to keep track of all operations your clients have been doing with your providers. You need this data for client preferences analysis, tracking how much you may pay your provider by the end of the month and managing commissions you charge. 

You can manage these two modules with some commands or directly intervene in code. However, that is not a sustainable profound use. Instead, you can build a module for visualization of the data flow for the 1st and 2nd modules. That will be a back-office for your teams. Then, you can set limits, commissions and control client profiles in a no-code environment, instead of a pile of SQL databases. 

Do you want to see the technology stack and modules architecture of the neobank and how the core banking system works? Find out more at our products’ technology page.

Where is core banking system used?

The primary role of the core banking system is to become the key element of the bank. Banking core processes transactions, manages clients’ profiles and introduces third-party products your clients may favor. Efficient and agile core banking systems are the foundations of the neobanks. 

However, the banking core may be applied in different businesses. For example, e-commerce platforms require similar functionality as the banking core. This software system helps to create the personas of the clients, suppliers, and managers. The banking core will ledger the transactions flow, bonuses, and their records, as well as the sales analytics of your ecosystem. And the advanced API-oriented build helps to integrate the checkout functionality into one ecosystem and track your clients’ behavior from the moment they visit your platform to the successful payment. 

The banking core may be the essential functional part of the e-wallet. Being the foundation for the digital wallet, you can build the retail system around the banking software. For example, that could be a variant of the payment acceptance platform with the POS network. You can use this junction of the POS infrastructure and banking solutions in the HORECA, crypto platforms, and trading stocks. 

Do you want to find out more about where the core banking systems are used? Read more about our company’s expertise.

What is a core banking solution?

The core banking solution is the software used to conduct bank transactions and operations. This system runs daily banking transactions, collects clients’ data, and processes payments. The core banking system is the result of the digitalization of financial services and their cross-industrial cooperation.

On the very nucleus level, a core banking solution is a multifunctional product that works as a digital ledger of transactions. With retail banking development, the banking core gained more functions. Retail banking may be an example of how market development pushes the core banking creation towards more complex and sophisticated versions. Modern core banking software has a variety of potential integrations into the banking ecosystem. For example, the CRM system, KYC tools, or bank analytics.

SDK.finance has a demo of the core banking system for neobanks. Have a look at the many functions one core may have!

Core banking application is service or product?

A core banking application is a software solution. It is complex, diverse, and agile. It has more functionality at the back office than your client may see in the mobile or desktop application. Most core banking applications are a part of the neobank. That means that the application is a gateway for the financial services for millions of clients daily. 

With millions of clients at bay, client management, analysis, and service quality become the principal objectives for the neobank. So, the core banking application becomes the means of communication with clients, service providing, and service quality analysis. 

A more sustainable view on the core banking application and neobank, as a whole, is to think about what value the product adds to the clients’ lives and why you need to add up this or that banking service to the product. 

Do you want to see the core banking application that SDK.finance created with a thought of the service value and product quality? Watch our product demo

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