Need for an Integrated Core Banking Solution

Reported by: |Updated: September 4, 2014

Banks are today realizing the disadvantages of rushing through with CBS implementation. What is important is that it should be an integrated solution to take care of all the operational issues:
Core Banking Solution (CBS) has become an integral part of any bank to provide better customer service. The final push is on the cooperative sector and as per regulatory requirement all cooperative banks are expected to implement CBS for their banking transactions.
Those banks which have implemented CBS have realized that mere switching over to CBS will not be sufficient to take care of present day banking. It is not the ultimate solution and is not yielding the desired result for all banking technology requirements. Most of the banks have realized that there is a need to go for add-on solutions to meet various new technology requirements, especially in channel solutions like ATM switching, POS, SMS banking, e-commerce, mobile payments, financial inclusion, etc which have become necessary to give better customer service. The Reserve Bank of India has issued new banking licenses to 2 entities and some more are expected in future. All the new banks are supposed to open a certain percentage of their branches in rural and semi urban locations. Any new bank coming into existence has an advantage for opting for the best CBS solution with readily built-in interfaces for all channel solutions. It is generally expected that these new banks will start offering all the latest banking services from day one onwards. This will definitely increase the competition among banks, especially those who are not having these capabilities. This is applicable in the case of some of the cooperative banks, since they have limited availability of technical persons and mostly depend on outside consultants for recommending technology solutions. The situation gets complex by the new trends like financial inclusion, mobile banking, virtual banking, e-commerce, newer modes of payment solutions and social business, use of advanced analytics, convergence banking, etc.
With the introduction of latest technology driven products, the competition among banks for getting business is increasing day by day. In the same way, customer preferences also keep on changing since they compare the services offered by different banks.
The cooperative banks which are yet to introduce CBS will have an edge, since they can go for a solution which is scalable with all the interfaces readily available compared to the banks which have already implemented CBS and which are not scalable. The former banks have got an opportunity to select the best CBS package which is capable of providing all the built in interfaces for ATM switching, POS capability, financial inclusion, mobile banking, other payment channels, etc. Most importantly, such new systems are capable of generating the regulatory reports and MIS. As such these banks can select a CBS vendor who can provide end to end solution with all the necessary interfaces and thereby avoid going to different vendors for different solutions. They need not follow those banks which have already introduced earlier versions with little scalability and find themselves in a difficult situation while introducing new products.
It is observed that some of the banks keep changing their CBS frequently. This is mainly due to short term vision of the bank while selecting a CBS vendor. Migrating from one CBS to another is a tedious and time consuming process. Banks should be careful to select software which is scalable for future requirements and for which support will be available from the vendor for a long term without warranting changing the solution often.
One of the main objectives of introducing CBS was to help the management to take informed decisions with necessary data. As such the solutions selected should be capable of making available all the necessary MIS reports, regulatory reports, compliance reports and other requirements associated with day to day operations of the bank. The management objective is fulfilled only when the data is made available in proper formats and the decisions are taken on the basis of facts and figures. Another objective has been to take care of MIS and to provide various statutory and regulatory reports. This is not happening in many of the banks. They find it difficult to cope with the genertion of different reports as required by the regulatory authorities, since the facility is not available in their existing CBS.They have to depend on excel sheets for extracting the relevant details and preparing the reports often manually. As the CBS is not scalable, these banks have to have add-on modules, which is costly proposition and requires creating interfaces. This has compelled some of the cooperative banks to replace their existing CBS.
About a couple of years back, most of the banks were competing with each other to implement CBS at the earliest, without giving much importance to data cleansing/enrichment, staff training, etc. Most of the banks went for the introduction of CBS just to satisfy the management / regulatory authorities and the implementation was a time bound program. No time was given for the UAT or for stabilizing the solution in of the branches, before replicating in all the branches. Of late, banks have realized that just implementation of CBS is not enough but it should be capable of having ready interfaces for various channels and payment solutions, instead of taking care of only debit and credits and balancing of entries and generating routine P&L, balance sheet, etc.. It should be capable of generating all the MIS reports and regulatory reports which has become main concern for most of banks today. The situation is further aggravated since the time available for introduction of any new product is very limited in a competitive situation. This has necessitated some of the banks to change their existing non-scalable CBS to take care of various new requirements.
There is no magic wand to see that the solution provider will be able to deliver all modules/interfaces as promised. But the banks can opt for a solution which has built in interfaces for channel services, staff /customer friendly, capable of in-house customization at least to take care of necessary reports, instead of depending upon the vendor for each and every small changes or customization.