Architecture Considerations for Next-Generation Bank Core Platforms

CIO Checklist: Architecture Considerations for Next-Generation Bank Core PlatformsI recently wrote a checklist covering areas that need to be considered when deploying a new core system. The deployment of a new core system is no trivial decision. In many cases, financial institutions like banks have been using their existing core systems for 30 or more years. Many of these systems were originally developed in the 20th century and run on mainframes. While some were originally vendor packages, many were custom built. The in-house knowledge of those systems is shrinking as the baby boomers who built them age out of the workforce.

Why replace a system now? There are many good reasons including technology change, regulatory evolution, the services that can be offered through a connected digital ecosystem, customer expectations created by other non-financial firms like Amazon, and good old-fashioned competition.  The reality is that smartphones and digital tablets are ubiquitous. People have these tools and are now used to interacting with their financial service providers using these tools. 

The great accelerator here has been the COVID-19 pandemic. People may have preferred going to a branch or sitting with a financial advisor in person in 2015. However, people have been forced to change. Hence, financial institutions must change as well. Legacy core systems act as a constraint on these changes.

Core Systems Within Reference Architecture

A new core system, if embedded correctly into an overall banking reference architecture, can generate numerous benefits: greater agility, scalability, cloud-native benefits, data-driven insights, open integration with third parties, a unified experience across the financial institution, the flexibility to offer the right products to the right people at the right time in the right way, enhanced security, and more.

The reference architecture must be comprehensive and fully aligned with the firm’s business objectives. It needs to incorporate appropriate and enforceable architecture technology patterns across the presentation layer, the client layer, and the product layer. It also needs to factor in open banking APIs; data storage and accessibility; security in the context of zero-trust design; digital experiences, along with appropriate metrics to facilitate continual improvements and tuning; and performance, scalability, and reliability to create an always-up environment. Oh, did I forget to mention being regulatory compliant?

When considering the build-out of core system solutions in the context of a reference architecture, it is important to remember that numerous business process activities will interact with the core system or be dependent on it. Areas such as compliance, credit risk, profit/loss monitoring, audit, client and investor reporting, revenue attribution, reference and market data, settlements, corporate collections, payments processing, savings and investment, and trade execution may all interact with the core system.

That may mean directly within it, using it, or perhaps in concert with third parties like payment processors. The overall architecture that governs how the core system is deployed and integrated will also need to be reviewed against an enterprise risk landscape, which includes areas like cyber-risk, third-party risk, and business continuity.

Considerations for New Core Systems

To determine if you have sufficiently considered the architectural implications of a new core system, we came up with a checklist:

CIO Checklist: Architecture Considerations for Next-Generation Bank Core Platforms Table

I’m sure other things can be considered. However, this checklist will ensure that the major architecture considerations are factored into the project, the implementation cost, and ultimately how to achieve the highest probability of success when deploying the core system.

It will also future-proof the investment being made in the new core system so it can adapt as needed to new products and solutions being deployed into the market, leveraging open banking, cloud, AI, and other advanced technologies.

Feel free to download our latest CIO Checklist: Architecture Considerations for Next-Generation Bank Core Platforms. I would be happy to hear from you to discuss this topic further; please reach out to me at [email protected].

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