According to Gartner, core banking downtimes cost financial institutions an average of $5,600 per minute.
That means that however much a one-minute service interruption could seem something small to the naked eye, its underlying impact could weigh heavily on your bank’s operations, revenue, customer satisfaction and the institution’s bottom line.
Sample Downtime Reported Early 2023
Early 2023, many customers of a leading bank noticed some weirdness in their account balances. These discrepancies caused great outrage that the bank had to deal with. A keen delve into the matter painted a clear picture of what was going on. It happened that the financial institution had experienced some technical issues within its systems.
The damage had been done.
Customers’ trust and confidence had been shaken and rumors circulated that the bank was unstable in its operations. This incident made it clear that maintaining and satisfying customers required a reliable banking infrastructure.
As a bank executive (CEO, CFO, CIO, CTO, etc.), you may want to know what your bank’s core system does in a typical day.
Here’s A Day in the Life of Your Core Banking System
Your core banking system (CBS) serves as the heart of your bank. Each day, your bank performs the following key operations:
- Account Management
- Transaction Processing
- Balance Management
- Customer Information Management
- Interest Calculations
- Risk Management
- Reporting and Analytics
- Compliance and Regulatory Reporting
- Customer Service Support
- Integration with Channels
etc,
And, of course, each financial transaction must be first validated, recorded, and updated in real-time in the system.
In parallel, the employees of your bank also rely on the core banking system to assist your customers with their inquiries and requests.
The employees help in resolving account discrepancies, provide account statements, or assist with loan applications.
Now that you know what your core system deals with, let’s move on to what causes this heavy weight on the core.
Weight of Core Banking System: What Are the Influencing Factors?
- Complexity of Banking Operations: Banking services have increasingly become complex. For instance, banks today struggle with regulatory requirements, and security standards that can sometimes weigh down their core systems. The core system must be able to handle diverse products and services while ensuring the institution complies with the regulator’s demands. That alone adds to the system’s burden.
- Technological Legacy Systems: If your core banking system is old, it’s often difficult to maintain it. This oldness can sometimes drag down the efficiency of your core banking system. Additionally, your core system may be unable to easily integrate with newer technologies, making it costly and heavier to manage.
- Data Volume and Integration Challenges: Your core system stores and handles big data volumes. This includes data about your customers’ accounts, transactions, balances, loans, and other important financial activities. When the data becomes overwhelming for your core, it strains its resources and infrastructure.
Read Similar article or core banking availability here: 24/7 Availability: Ensuring Seamless Access to Digital Banking Channels
Consequences of Core Banking Downtimes
- Operational Disruption
Even a brief halt in services can disrupt the flow of transactions and operations within your institution. During such times, your customers may be unable to access their accounts, initiate transactions, or even receive assistance from your customer service desk.
Moreover, the disruptions cause backlog of pending transactions, delays in account updates, and the increased workload for the employees when services are restored.
- Revenue Loss
Every minute or second of outage means loss of revenue for your institution. Think of the transaction charges on each customer, the interest rates, and other revenue sources you have tied to customer activities. If they are put on hold even for a minute, the revenue impact can be significant.
- Customer Dissatisfaction and Loss of Trust
The banking environment today does not require sluggishness. They don’t expect any interruptions while accessing their accounts and services. However, in case of any service interruption, your customers can become frustrate and erode lose their trust in your institution.
When a customer is unable to access their account or complete a particular transaction, they may seek alternative banking services elsewhere. In most instances, they switch to your close competitor for more reliable services.
- Reputational Damage
Brand and Trust are supreme. Any damage to these two can lead to long-term consequences to your financial institution. Nevertheless, even a single instance of an outage can quickly tarnish your bank’s reputation. Negative publicity or whatever you may call it, today’s news outlets quickly spreads the damaging news to a multitude within a fraction of a second. And you may not wish, as a financial institution, to deal with the consequences.
It’s Time to Talk About the Solution to Your Core Banking System’s Challenges
The NLS Tech Solutions’ Channel Manager solution is the only way to go for banks that want to improve the performance of their core banking systems and ensure 24/7 availability of their channels.
Safeguard your institution’s reputation and revenue with seamless Channel Manager today.
