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Challenges of Core Banking Software Implementation

5 Mins read

In the dark ages before core banking software was a thing, transactions between different branches of a single bank took at least one day if the wind was fair and the weather favorable. Thanks to the expansive implementation of the core banking, the situation improved drastically, and now, 24 hours per transaction is a horror-movie material. 

However, like any other software, core banking systems have an unpleasant habit of getting old fast. If the software is quite ‘fresh’ it can be updated by tweaking, twisting, and changing things from within. However, if a system was written in a language that can go toe-to-toe with Latin in terms of being dead, the only solution is to replace the old core with a new one. Besides, the turbulent and evolving banking environment calls for the modernization of IT infrastructures, which is required to stay relevant in times of innovative fintech challengers and declining customers’ trust towards traditional banks. The sheer scale of developing core banking systems and software is astonishing, but it’s nothing a bunch of professionals can’t handle.

In this article, you will learn about the nuances of core banking software implementation, its challenges, and how to overcome them. 


1. The Core Banking System and its Features

2. Core Banking Software Implementation Challenges

3. Overcoming the Challenges of Core Banking Software Implementation

4. Conclusion

The Core Banking System and its Features? 

‘Core’ is a neat abbreviation that stands for Centralized Online Real-time Exchange/Environment. 

Core Banking System is software that processes transactions and financial operations between a bank’s branches. In essence, core banking makes remote transaction processing a convenient reality. 

Core banking is the backbone of a bank’s software ecosystem. The rest of the banking software is built around the core and communicates with the core. Thus, the core must be solid and efficient, otherwise, the whole banking software ecosystem is under considerable threat to be floppy and sloppy. 

These are some of the main core banking software features:

  • Transactions processing
  • Loans processing
  • Deposits processing
  • Withdrawals processing
  • Interests calculation
  • Payments processing

Challenges of Core Banking Software Implementation
Challenges of Core Banking Software Implementation

Core Banking Software Implementation Challenges

We won’t sugarcoat it, core-banking system implementation is a difficult and costly process, but the results are equally as beneficial and pretty-much essential for a bank’s longevity. The banking industry shows a steady decline, with less growth, lower interest rates, and decreasing margins. Customers, pampered by innovative mobile banking apps, start demanding a top-notch experience, smooth and fast processing, and devoted support. And rightfully so: if technologies can make it easier, we should seize the possibility. Besides, tense regulatory environments add their fair share of punches to banks all over the world as well. Of course, aged core banking systems aren’t the only reason, but they are the foundation of further growth, strategic flexibility, and convenient user experience. Core systems are the digital platform for innovations. Besides, old-school, traditional core banking systems are quite difficult (bu quite we mean nerve-wracking difficult ) to support 

Considering the impressive scale of banking system logic, the complexity of processing transactions, required investments, and tight regulations, when a deal gets to core banking software implementation, such challenges arise.

Challenges of core banking software implementation:

1. Difficulties developing reliable architecture for complex and heterogeneous banking structures 

2. Mind-numbing, complex bureaucratic processes may be difficult to translate into executable code

3. Extensive research and analysis across different banking lines required to get a complete understanding of a customer and their needs

4. An irresistible urge of stakeholders to take shortcuts to cut costs, decrease the time required, which leads to lacking, unsustainable results. 

The combination of these challenges creates quite a monster to defeat, but with an experienced tech partner, it’s nothing but an interesting adventure. 

In the end, the benefits of core banking software outweigh the challenges tenfold. A relevant core banking system application leads to better customer engagement, allows for lower costs across the board, and lays a nice foundation for a bank’s scaling.

Overcoming the Challenges of Core Banking Software Implementation 

The challenges aren’t that challenging if you have a nice core banking system implementation plan at hand. Such a plan, besides involving the base principles of robust and agile software development, should also include. 

Extensive Research

Gathering business requirements, analyzing customer base, researching the market to have a complete picture of the future system. When all that you have is an idea, a rough draft, or a vision, we usually recommend conducting Discovery Phase, so you don’t have to start the development blindly as it may cause a ton of unpredicted costs, time lost, and other obstacles that will hinder the process of creation. Besides, Discovery Phase will provide you with quite accurate core banking system development/implementation costs.

Put Business Value First 

The system should be built considering the business value it could deliver. Each important decision should be made relying on technical as well as business aspects of the equation. 

Find a Proper Tech Partner 

Without mentioning the obvious requirements for expertise and experience, we want to emphasize that the software partner who will develop a core banking system should know how to maintain a balance between committing to requirements expressed by core stakeholders and adhering to the basics of developing reliable and lasting solutions. Such a partner should be a good negotiator with strong product management and business analysis expertise. A company like that would know what it takes to deliver a relevant product to a highly competitive market.  

Create a New System

Don’t aim to create a new version of an old core banking system but a brand new system, which caters to the needs of customers to ensure marketability and competitiveness. 

Use the Modular Approach 

Don’t develop a monolith system from scratch. Develop and deploy a feature, test it in the real environment, and move on to another. 

White label banking solution

Consider a white lable banking solution. The customizable white-label core allows you to build on top of it and create a unique customer experience. The platform offers a robust infrastructure, ease of integration, and the ability to focus on customer and product experiences.

Double Down on Testing

As we stated previously, QA is the new Black, especially so in FinTech software development. Measure thrice, cut once — you simply cannot over test a system, therefore, don’t neglect performance, load, integration, usability testing, and all the other flairs of QA meant to uncover hidden issues. 

Train Employees

No matter how ideal the core banking system is, it’s important to train employees, so they know how to work with the new software and don’t have to deal with frustrations and a harsh learning curve. A week or two of learning will go a long way in ensuring that the workers will be efficient and not stressed out. 

Consider Kindgeek for fintech software development

Finding a reliable core banking implementation partner could be a challenge though. Such a partner should have not only extensive experience developing highly-protected FinTech applications but also a deep knowledge of the regulatory environment and the modern market state to deliver relevant and competitive solutions. Throwing away the fears of sounding arrogant, we’re confident in our skills and experience developing complex FinTech solutions, and we can handle all the heavy lifting for you efficiently and carefully. 

From product discovery phase to deployment and beyond, we guide through the whole process of developing fintech products. We build software solutions that resolve core business needs ​​with a product-oriented mindset.

Looking for an unique service like custom AI assistant for fintech? We truly have it all to bring your ideas to life!


Developing software for core banking is a fun enterprise, with plenty of challenges, a heap of things to consider, and a clear strategic vision to properly implement. Nonetheless, the ‘cost’ of core banking software is reflected in the results it provides. It pushes a bank to a new level of efficiency, helps to retain customers, and provides a great foundation for further innovation. Even though there are core banking software providers, a lot of banks opt for independent development of the system, and rightfully so: the custom system will fit the bank better and will satisfy all its nuanced needs and visions of core stakeholders. 

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