The four digital core banking archetypes are digital skin, digital interface, digitalized core, and organic digital core
The need has arrived for core banking systems in Asia/Pacific to be truly digital, according to IDC Financial Insights Asia/Pacific’s latest report, titled A New Generation of Core Banking Systems Propels Asia/Pacific Banks to a Future Beyond Digital, which reviews four generations of core banking and its impact on digital transformation (DX). IDC Financial Insights has developed a digital core banking framework and compares four digital archetypes for processing DX, regardless of which core banking generation is being used currently.
“A new breed of digital core banking systems built on and using the technologies of our time exists, making migration easier, with the ability to continuously evolve core banking systems as needed. These new propositions effectively future-proof the core,” says Michael Araneta, Associate Vice President at IDC Financial Insights Asia/Pacific.
As core vendors have evolved legacy systems, they usually first took the abstraction approach and then started to extract microservices and build APIs. However, no vendor has taken the exact same path, and how they developed new releases of their core banking system depends on when they were first launched and the technology available at the time. IDC has defined four digital archetypes used with core banking in support of DX. The four archetypes generally align with what generation core is currently being used and are defined as follows in the order of least to most robust for DX: digital skin, digital interface, digitalized core, and organic digital core.
“The ability to provide the most robust digital core banking archetype depends on the current core in use. In general, the older the core banking system, the less robust the digital experience provided. First- to third-generation vendors have to rearchitect existing features to provide more digital capabilities. Fourth-generation core systems have often been designed and built more recently on modern technology and provide the fullest set of digital core banking features,” says Steve Shipley, Adjunct CIO at IDC Financial Insights Asia/Pacific.
This IDC Perspective presents a framework for new digital core banking and its importance in achieving DX. The attributes required for new digital core banking have been presented as four digital archetypes that can be used based on the core banking generation currently in use.