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What is the ‘digital core’ for a bank?

I’ve been talking about banks replacing their legacy mess with a digital core for a while now. Rearchitect your bank by getting rid of spaghetti based systems organised around products and channels to market, and redesign them for digital structures focused upon customers.

That is not easy, as it implies replacing systems in real-time. How do you change the engines on a jet when it’s flying high? is the usual question, but that is not what I am suggesting. This came to me the other day when someone said: “what do you mean by a digital core Chris?”

I thought about it for a second and realized that the digital core I’m talking about is bank data in the cloud. A single store of data. For some time, I’ve said that bank products are being restructured by the cloud, and that data is the competitive battleground, and this is what I mean by a digital core.

A digital core then becomes a single, consistent provision for access by internal and external users. It moves the bank away from pushing products through channels to providing knowledge through data.

This is why most banks will, over time, take all of their disparate data across the enterprise and move it towards a cleansed and single data store that is cloud based. This cloud based data store will then feed all of their products and services, channels and staff. It is the internal and external store that provides a consistent and comprehensive system for leveraging data across the enterprise.

The more you consider this idea, the more compelling it becomes, as a single cloud-based data store for the bank can then deliver real-time feeds for both internal and external access. Once established, it allows the bank to phase out legacy processing and introduce fresh systems that leverage the digital core (the cloud-based data service). In other words, it de-risks the legacy replacement by allowing the data to be extracted first, before replacing the processing.

Equally, this new digital core will allow all customers to see consistency across all products and access, as will all staff. Any cyber-attack on the bank will also be trapped, as all the data is seen in real-time through the enterprise data store. The old cracks in the banks structures thanks to disparate and fragmented systems disappear.

I am not 100% certain that all banks would be ready to move all of their data to a cloud based store, but I am 100% certain that this is where most will move over the next decade. Private cloud based stores of all bank data, which deliver real-time leverage through APIs into all of the banks products and services.

Meanwhile, for those banks that bite this bullet sooner rather than later, there will be immense competitive advantage for data leverage is the new battleground for banks. The bank that can cleanse, analyse, utilize and leverage their data more effectively than others, will be the bank that wins. However, in order for a bank to do this with their data, they need a digital core and, to create a digital core, they need to move to the cloud.


About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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