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What Are Core Banking Systems?

Before the 1970s, transactions were primarily manual and was mostly conducted in person. The transactions weren’t processed until the time the transaction was completed and banks were not equipped with the capability to sync their records. Then came the mainframe and telecommunications capabilities and banks were among of the first to adopt. With the introduction of Internet and the advent of online banking, came an entirely new method to manage money centralized online real-time trading also known as the core banking. It is the back-end of the system that manages transactions over a wide branch network of banks.

Core banking systems made banking easier as well as improved the user experience and created a chain reaction of improvements. For example deposits were instantly updated on bank servers and the payment information was shared across branches, which meant that customers could take deposits at any of their bank’s branches.

The ripple effect extends to the present. This is why companies can monitor their balances anytime and transfer funds with just a click button.

The Core Services

With a robust core banking system that banks can manage millions, if not millions of daily transactions, make changes to accounts in real-time and reduce the risk of payment errors through the accurate management of financial records. This is why banks across the world invest hundreds of thousands of dollars annually the maintenance of their core banking systems, it’s an vital infrastructure.

The most popular primary services are loan, deposit as well as credit processing. However, a core banking system will integrate with a myriad different systems such as reports and ledger systems.

A lot of banks depend on ledger technology to maintain an exact track of financial transactions. This is commonly known as the system of record (SoR). If there is no insight into the funds moving and coming into banks, a myriad of problems could arise for firms, including the possibility of insufficient funds, customer service expenses, as well as regulatory and compliance issues.

Ledgers give real-time visibility and transparency over balances and transactions, as well as making it less likely to make mistakes in bookkeeping. This transparency is essential for companies operating on a large scale in a highly-competitive financial environment.

Major Providers

While many traditional core banking systems remain operating, and largely reliable, the move to cloud-based banking, digital banking and APIs has transformed how banks conduct business and establish relations to other institutions. This has led to a number of banks have diversified their services to meet the new needs for payment processing.

Although banks are able to and do buy banking core systems, big commercial banks (like J.P. Morgan Chase for instance) have their own banks that have core systems for banking.

Inspiring Systems that are out of date Systems

The language was created in 1959 through Grace Hopper, Common Business Oriented Language (COBOL) is the programming language specifically designed for mainframe computers to handle processing of large-scale transactions. Although it is more than sixty years old COBOL continues to be a vital part of the majority of modern banking core systems. Its first applications were designed for large corporations as well as government entities to use an established communication system.

In spite of more modern frameworks for application development, such as .NET or Java around 43% of banks still use COBOL-based platforms. Institutions such as Social Security and the IRS IRS as well as Social Security rely on COBOL-based files for the distribution of checks and managing benefits. Furthermore, 1.5 billion COBOL lines COBOL are created every year.

The question is: when technology is evolving and banks anticipate an increasingly digital future is this old-fashioned programming language be able to survive? Modern payment systems can’t function with old-fashioned platforms for information technology alone. Moving to more agile technology systems that utilize contemporary programming languages are an an essential factor for banks looking to adapt to the demands of their clients.


The year 2022 is here and digital banking, cloud computing APIs and cloud-based banking continue to transform banking. As the requirements for payment and operations change with technological advancements banks must adapt to a rapidly changing as well as automated environment.

However, they will only be able to improve their procedures and decrease payments errors if they can have real-time transparency of payments. Transparency into payments is no longer an advantage, but a necessity.