The Future of Core Banking Software Market: Outlook and Potential Challenges

15 May, 2023 | Articles


The global market for core banking software was valued at USD 9,838 million in 2020 and is poised to reach a CAGR of 7.8% between 2021 and 2028, with Asia-Pacific as the dominating regional zone.

The market's promising development prospects can be attributed to the expanding demand for advanced banking technologies. The banking industry has become intensely competitive due to the advent of numerous banks of the next generation and the lowering of switching barriers. These new entrants utilize digital technologies, such as central banking software, to attract new customers by providing faster services at significantly lower prices than traditional banks.

Core banking software systems are becoming the backbone of modern banks, managing and creating accounts, transactions, journal entries, and balances and storing receipts, client data, and other reporting tools, making it the best option.

Definition and Scope

Core Banking Software is a centralized software system that banks use to manage their financial operations and conduct daily transactions. This software system is designed to provide various services, including account management, processing of deposits and loans, transaction processing, customer relationship management, and reporting.

Financial institutions are undergoing a digital transformation facilitated by core banking software. Numerous banks worldwide are implementing core banking solutions to acquire comprehensive capabilities, such as extensive parameterization, flexible product factories, reusable business components, and product bundling. These capabilities assist banks in achieving innovation-driven expansion.

The quantity of structured and unstructured data available to banks has increased dramatically in recent years. With technological advancements in machine learning and cloud computing, Artificial Intelligence (AI) is influencing the future of financial and finance services. Moreover, with the data history captured by AI-based solutions, core institutions worldwide can make more informed business decisions regarding customer experience, back-office operations, product management, and marketing, among others.

Market Segmentation and Dynamic

The core banking software market has been segmented into solution, service, deployment, end-use, and region.

Segmental Analysis of Core Banking Software

Fig. Segmentation of Core Banking Software Market

The traditional banking model centered primarily on loans and deposits has given way to a more sophisticated model. The organization now offers a comprehensive array of banking products and services. Core banking software refers to a centralized system that enables bank consumers to conduct banking transactions regardless of the bank's location. This has eliminated the restrictions on geographically-specific banking transactions. The banking software Centralized Online Real-time Exchange (CORE) grants consumers access to applications from centralized data centers.

End users such as banks, financial institutions, investment banks, and commercial banks widely adopt core banking software as it improves business operations and addresses customer queries more effectively. These software solutions help banks eradicate errors occurring due to multiple entries, manage changes in existing services, and introduce new financial services. The primary factor driving the adoption of core banking software in banking operations is the seamless integration of back-office data and self-service operations.

Key Considerations for Selecting Core Banking Software Solutions

Core banking software enables bank employees to administer customer accounts efficiently from a single server. It assists banks in supplanting tedious and time-consuming end-of-day consolidation work between centralized and branch banks. In addition, centralized institutions worldwide are mandating the implementation of core banking technology for efficient, quick, and secure banking. This single-server technology is increasing customer retention and satisfaction, delivering comprehensive business functionality, and assisting financial institutions in meeting regulatory requirements.

The rising demand for advanced banking technologies is anticipated to be one of the primary factors driving the adoption of core banking software during the forecast period. As advanced FinTech solutions rapidly transform the industry and give other actors a competitive advantage, banks worldwide must assess the limitations of their core architecture platforms. These factors have increased the demand for banking software suites that include total banking solutions of the next generation that can support all standard retail banking functions.

However, the lack of awareness about modern banking technologies among banks and financial institutions could hinder the development of the core banking software market. In addition, the need for more necessary infrastructure in rural areas of developing nations is anticipated to inhibit the market's growth. Numerous banks and financial institutions worldwide are concentrating on implementing core banking solutions to boost their business expansion prospects. However, a suitable software selection methodology may impede the purchasing decision.

Emerging Market: Synopsis

North America dominated the market for core banking software, accounting for more than 27.0% of global revenue in 2022. The widespread adoption of advanced core banking software by the region's prominent banks is anticipated to fuel the expansion of the regional market. In addition, small and medium-sized businesses in the region are implementing these solutions to facilitate the efficient flow of financial activities. The rapidly expanding enterprise sizes and application areas of these solutions are anticipated to contribute to the regional market's growth over the forecast period.

Asia-Pacific is anticipated to be the region with the highest growth rate during the forecast period. Increasing adoption of mobile and web-based business applications in the finance industry will likely be Asia-Pacific's primary driver of market growth. Moreover, numerous banks are emphasizing adopting core banking systems in the Asia Pacific region, which allow them to manage a high volume of transactions and banking functions efficiently. In addition, the expanding economies of Asia-Pacific nations, such as China and India, are anticipated to accelerate the adoption of essential banking software in the region.

The market is moderately fragmented and characterized by intense competition among the leading companies in this industry. Joint ventures, partnership agreements, mergers and acquisitions, product innovations, geographical expansions, and an increased emphasis on R&D activities are key strategies major market participants adopt to ensure their long-term survival. Finastra launched Fusion Payments To Go, a pre-packaged payment solution, in October 2020 to implement domestic and cross-border payment services in small and medium-sized institutions throughout the United States, Europe, and South Africa. This solution offers enhanced capabilities and operating principles to support clearing and settlement mechanisms, enhance customer satisfaction, and promote revenue growth.

The purveyors of core banking solutions focus on developing financial solutions with a strategic advantage over competing products. Utilizing client feedback to enhance the capabilities of their digital platforms and economic solutions is a priority for vendors. Vendors provide solutions based on their clients' professional approach for banks and financial institutions concerned with the limitations of their fundamental architecture platforms.

The following companies are among the most prominent central banking software market participants:

  1. Capgemini
  2. Finastra
  3. FIS
  4. The corporation Fiserv, Inc.
  5. HCL Technologies Limited
  6. Infosys Restricted
  7. Jack Henry and Partners, Inc.
  8. Microsoft Corporation
  9. Temenos Group
  10. Unisys

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