The Evolution of Core Banking Systems

In the past 50 years, we have witnessed changes in the capability of core banking systems. Now, the emergence of fintech players stepping into banking has pushed incumbents to adopt emerging technologies to stay up to date.

Published on: August 8, 2022

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By five°degrees

From monolithic to open microservices and from on-premise to cloud-based infrastructure.

In the past 50 years, we have witnessed changes in the capability of core banking systems. The evolution of modern systems delivered better functionality but still a rigid monolithic infrastructure, inhibiting banks from reducing their costs and accelerating their time to market. 

The emergence of fintech players stepping into banking has pushed incumbents to adopt emerging technologies to stay up to date. There is no doubt that SaaS platforms will dominate the future of banking.

First Gen Monolithic.

Core banking systems developed in the 1960s and 1970s provided basic functionality for processing core banking transactions. They were mainly developed in-house and operated on mainframes with almost non-existent security. The systems introduced in the 1980s were primarily product-centric and developed in silos, with limited extensibility. The introduction of more open, flexible, and customer-centric core banking systems did not start until the 90s. 

Second Gen Off The Shelf.

Core banking systems in this period were outdated, expensive to maintain, rigid, and unable to support growth and innovation. It was complex for banks to offer new products or integrate new applications, third-party packages, and other IT assets. The core banking nature of in-house or on-premise infrastructure could not provide necessary information for today's banking data control environment and customers' demands. 

Third Gen As a Service.

Today, core banking systems are genuinely global solutions. Their architecture's nature is open, scalable, adaptable, lean, and fast. Recent solutions focus on data management and real-time processing across multiple channels to enhance customer and user experience. Core banking solutions with a SaaS approach enable financial services to launch innovative and competitive new products quickly and cost-effectively.

What's next...

There is no doubt that platforms will dominate the future of banking. The emergence of fintech players stepping into banking has pushed incumbents to adopt emerging technologies to stay up to date. The modern capabilities of cloud-native core banking solutions enhance financial services' agility in responding to competition and seizing new business opportunities. The promise of the next-gen core banking solutions will empower banks to harness the significant advances in technology and design to benefit their business and delight their customers.

Download the core banking evolution Infographic and learn what the next-gen core banking systems can bring to your business. 

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Meet °neo, the cloud-native core banking system. 

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