Infosys - Strategizing core banking products

7/28/2019 Infosys - Strategizing core banking products

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Strategizing core banking products

Thought Paper

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Strategizing core banking productsVarious parameters determine the success of a

software product. Some key attributes include

easy and quick implementation; rich product

functionality; strong technical infrastructure;

scalability, usability and performance; and

ability to evolve based on future needs. Leading

product-based companies such as Microsoft,

Google, SAP, Oracle etc. exemplify the fact that

technology, constant innovation and strategic

branding are all vital to stay ahead of the curve.

In the realm of banking software, core banking

applications form the crux of any banking

Core banking products

Those working on core banking products need to

follow a well-defined process that enables

them to “think beyond banking” and deliver

stable, agile products to the clients (banks).

These products will in turn aid banks in providing

quality services to the end customers.

The greatest challenge for the vendor is to

develop a generic framework that incorporates

solution. On the wish list of most banks is a

simple, affordable and adaptable core banking

product that can meet both global and local

market requirements.

This paper provides an insightful analysis of

the formidable task of designing core banking

products and the strategies adopted by the

software providers to address it.

all global market needs and yet can be

customized as per regional market requirements.

This can be achieved through various models,

each of which has its pros and cons. One of the

model being one single product to cater to

different regions and another one is region wise

Core banking system with minimal effort to be

spent on the customization.

Core banking product creation

Banking is all about enhancing relationships

with existing customers while establishing

new ones. The core banking product should

provide functionalities enabling cross selling

capabilities/opportunities to cater to end

customer requirements worldwide. It should

identify commonalities of the process, the

redundancies and interdependencies of existing

processes and services. The Product which is

to be introduced to the marked should improve

on the re-usability factor, remove inefficiencies

or redundant process and pace way for

02 Thought Paper

improving the product agility and make the

product cost efficient.

An ideal core banking product should enable

banks to innovate, customize and efficiently

serve the end customers with dynamic pricing,

free transactions, minimal or no charges for

channel transactions, risk analysis, credit rating

information and so on. It should also provide a

loosely coupled core banking system architecture

that is easy to maintain and aids progressive

transformation of technology and data structures

during upgrades. “Multi Channel Integration”

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E x i s t i n g

N e w

P R O D U C T S

which is fast becoming one of the most

strategic approaches for an “Optimized Core

Banking Product” must also be supported.

One can leverage the market and/or productknowledge to create four different strategies.

Originally presented by Igor Ansoff in 1957,

these concepts are still prevalent in practical

business today.

MARKET

Existing New

Market Penetration Market Development

Focusing on your Leveraging your product

market and product knowledge to reach new

by niching. markets.

Product Development DiversificationLeveraging your market Diversifying by offering

knowledge to develop new new products in new

products. markets.

Software vendors should focus on leveraging products and institutionalize the concept of

their brand name in the market, introduce agile “Building a Strong Core Banking Product.”

Single product vs. region-wise product

Single Product

Building a single core banking product that

transcends geographies is no mean task.

Regional regulations and Central Bank guidelines

which in turn are based on the prevailing

socioeconomic conditions, foreign exchange

reserves, etc. have to be factored in while

creating the product. Furthermore, disparate

processes and unique product offerings across

markets, constant changes in technology and

customer needs all add to the complexity of theexercise. A single core banking product with

inbuilt “core banking modules” is an optimum,

cost effective solution, as banks can upgrade

their existing application to newer versions with

little or no customization.

Region Wise Product

Affordabil ity is an important attribute of a core

banking product. One that is built on reusable

components can be cost effective, viable and

profitable to the bank. Various layers atop a

base product, each designated to cater to a

particular region, can be designed without

touching the base code.

A section of technology experts, bankers and

SMEs opines that the product should provide

only basic infrastructure for accounting and local

teams should customize any additional features.

Another school of thought emphasizes that

the product should be built in such a way that “a

single product can cater to a particular

region/s as it will be cost effective for the bank

both in the long and short run.”

The vendor has to ponder all aspects before

deciding to build a product catering to

global requirements.

Thought Paper 03



Market dynamics

There are differences in market practices and

regulations across countries and regions. For instance, the Middle East follows Islamic banking

practices; South Asia has large microfinance

requirements; and certain other countries need

Cooperatives/Credit Unions. The core banking

vendor has to design the product according to

these variables and must also consider factors

such as the banking practices and processes

across geographies, usability of the product, and

mindset of customers.

Basic banking practices also differ; for instance,

the functions and features of Savings Accounts

Usability

Samsung‟s success story in the mobile phone

space, attributed to its simple and eye-catching

user interface and navigation, reinforces the fact

that one can never go wrong with a clean and

simple User Interface (UI). This is true of banking

Banking process

A single product catering to the global market

needs to be governed by a global body, akin to

Basel or SWIFT, and must adhere to some set

standards. This should form the basis for core

banking vendors to build their products on.

Conclusion

It may be pertinent to note that the leading

core banking solutions developed in India have

been successful in Asian/South Asian markets,

whereas those from Europe have thrived in

Western Europe. This establishes the fact that

these products have primarily succeeded on

home turf.

04 Thought Paper

in the US may differ vastly from those in the

UK. This can provide both challenge andopportunity to the core banking vendor to

position products as per the market dynamics in

a particular region. Additionally, these practices

are an opportunity to introduce region-specific

products, which can become a differentiating

factor for the vendor. It is therefore important

for vendors to have a finger on the customers‟

pulse in any given region.

software too, which needs an interface that

customers can effortlessly navigate to access

various features and operations. Banks today

are investing substantially in an attempt to nail

the all important UI features in their products.

E.g.: One stop for Customer and A/c Opening

process to the entire life cycle of the account.

Products should cater to both current and

future needs, which in turn have to be predicted

based on emerging trends and market

dynamics. This being a costly proposition, IT

vendors should make informed guesses about

future requirements, with a plan B to fall back on

in case of poor market response.



Given the dynamic nature of the banking sector,

barring a few basic products and processes,

most other requirements are driven by customer

demand. The high rate of obsolescence of

these software products can result in huge

losses to both the bank and the vendor. A

portfolio of flexible and agile products which

can adapt quickly to future needs would be a

good workaround. Appropriate resources and

methodologies utilized in developing these

products will also ensure speedy delivery.

Recruitment of skilled people with banking

industry experience will provide gainful insights

into regional and global economic trends such

References

as inflationary pressures, currency fluctuation,

foreign exchange positions, stock market stability

etc. and consequently help in the decision-

making process during product development.

The vendor needs to envision and create a

product that is robust enough for current use

and flexible enough to meet future requirements

without compromising on the bank‟s profits.

In short, a certain amount of forward thinking is

required to conceive and bring to fruition a

product that caters to all requirements,

present and future, while minimizing costs and

maximizing returns.

1. www.dummies.com 3. www.corfja.com

2. www.microsoft.com

Reghunathan Sukumara PillaiIndustry Principal, Finacle, Infosys

Jayanthi K.J.

Principal Consultant, Finacle, Infosys

Thought Paper 05

http://www.dummies.com/

http://www.corfja.com/

http://www.microsoft.com/

http://www.microsoft.com/

http://www.corfja.com/

http://www.dummies.com/



About Finacle

Finacle from Infosys partners with banks to transform process, product andcustomer experience, arming them with „accelerated innovation‟ that is

key to building tomorrow‟s bank.

For more information, contact [email protected] www.infosys.com/finacle

© 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosysacknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.



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Infosys - Strategizing core banking products