what is the meaning of core banking system in banking sectors?
The rapid advancement in Information and Communication Technology (ICT) has had a profound impact on the banking industry and the wider financial sector over the last two decades and it has now become a tool that facilitates banks’ organizational structures, business strategies, customer services and other related functions. The recent “IT revolution” has exerted far-reaching impacts on economies, in general, and the financial services industry, in particular.
Within the financial services industry, the banking sector was one of the first to embrace rapid globalization and benefit significantly from IT development. The technological revolution in banking started in the 1950s, with the installation of the first automated bookkeeping machines at banks. This was well before the other industries became IT savvy. Automation in banking became widespread over the next few decades as bankers quickly realized that much of their labor-intensive information-handling processes could be automated with the use of computers. The first Automated Teller Machine (ATM) is reported to have been introduced in the USA in 1968, and it was only a cash dispenser. The advent of ATMs helped both to improve customer convenience and reduce costs, as before ATMs, withdrawing funds, accounts inquiries and transferring funds between accounts required face-to-face interaction between bank staff and customers.
1. Rapid advancement and gains to the banking sector
1.1 Overall, technological innovation has brought about the speedy processing and transmission of information, easy marketing of banking products, enhancement of customer access and awareness, wider networking and, regional and global links on an unprecedented scale. IT development
has thus changed the product range, product development, service channels and type of banking services, as well as the packaging of such services, with significant efficiencies not only in the banks, but also the ancillary and feeder services to banks. The financial services industry has thus become virtually dependent on IT development. Most banks make visible efforts to keep up with new systems and processes.
1.2 The development in ICT has enabled banks to provide more diversified and convenient financial services, even without adding physical branches. The present day ATMs are more sophisticated machines that can scan the customer and a bank teller, accept cash or cheques, facilitate customer application for loans and allow for face-to-face discussion with a service representative via video.
1.3 The development of Internet services, which is an extensive, low-cost and convenient financial network, has facilitated banking services to customers, anywhere and anytime. Along with Internet and Web-based services, a need for changing core banking architecture has emerged. The introduction of new core banking systems by some banks and their links with the improved telecommunication network has enabled banking transactions to be done on-line, in contrast to the batch-processing mode used earlier. The integration of e-trading with internet banking and banks’ websites is also a notable feature. These IT advancements have enabled banks to gradually replace manual work by automated procedures with on-line real time processing.