5MF Issue 2: The Core Banking System

What is a Core Banking System?

The year is 1968.  You need to make a cash deposit. You put on your fancy 1968 outfit, complete with a stylish hat, and head to your local bank branch. The teller puffs on a cigarette and informs you that your account will reflect the deposit at all branches in 24 hours...if you're lucky.

This is life before 1970: awesome clothes, stylish vibes, no core banking.

What does the ‘core’ stand for?

This is the rare occasion in which an acronym works as a word and abbreviation. 

Abbreviation: Centralized Online Real-Time Exchange

Word: Core banking systems enable the core services a bank provides. 

What happened in the 70s?

Innovations in computing and telecommunication technology made data available in real time. 

This is the essential ingredient of a core banking system: a centralized data center that distributed bank branches can access via software applications, in order to get real-time (or close to real-time) account information.

Technologists built these systems on mainframe computers using early programming languages like COBOL.  Fun fact: many of today's largest banks still run a significant portion of their systems on code that was written in the 70s (this is the exact opposite of a fun fact if it is your job to maintain these systems).

What are ‘core’ bank functions?

The definition of core banking varies depending on who you ask. Let’s start with what seems to be the most widely accepted list:

  • Deposits (checking, savings)
  • Lending
  • Payments
  • Credit Cards

The above list includes a general ledger by implication and applies to both retail and commercial banking. Some banks include CRM (customer relationship management), regulatory reporting, and risk management in their definition of core banking, and others include specifically institutional functionality such as wealth management and money markets.  

The Core Banking System Landscape


Most banks implemented their core banking systems years ago. These legacy systems, clearly an inferior choice in the era of cloud computing, cost the banks hundreds of millions of dollars over the years to develop and maintain. They are bloated and integrated with other systems in ways that sometimes only a handful of people at the bank still understand.  Yet, they more or less work, which makes it even more difficult to make the tough decision to migrate towards a modern, cloud-native solution. 

Third party core banking solutions are dominated by a small group of vendors in the United States:

Fiserv: 38% Market Share

Jack Henry: 16%

FIS: 12% (high concentration of large banks)

Finastra: 4%

(source: AITE Group LLC, 2019)

Neobanks started during the past few years don’t have legacy systems or bank branches. They are helping to support a new set of core banking startups that are built for the world of cloud-based APIs. Companies like Neocova, Finxact, Nymbus, and Temenos are enabling forward-thinking banks to leverage modern application architecture.



Sandeep: Tell me a bit about the early part of your career.

Tom: I spent a decade helping to build start-ups focused on application and database software. This was where I learned how to sell and do business development. I was fortunate to be part of one company going public and another being sold to IBM.

Sandeep: What is something you learned during this time that helped you with consulting?

Tom: I began to appreciate how different customers achieved varying levels of success with the same foundational technology. This made me understand just how critical getting your team and process right can be.

Sandeep: This is something I only came to appreciate years into consulting, especially after the sale of my first consultancy to Capital One.I saw teams in different parts of the company trying to solve challenges like real-time messaging. Same corporate culture, same technology, same internal support mechanisms. Night and day outcomes.

Tom: We saw a lot of the same thing after selling our practice to EMC (sold to Dell in 2015). This is probably the thing I'm most proud of when it comes to the teams I've helped to build: the ability to perform well in a variety of contexts, sometimes in ways that inspires the client team to up their game as well.

Sandeep: Yes. It's particularly cool to see your team succeed in individual ways after an acquisition...consulting skills definitely translate into the corporate environment.

Tom: Totally. We have people who've stayed on at Dell and risen up the ranks, while others took the opportunity to become successful executives at other Fortune 100 companies....or to start their own agencies and startups.

Sandeep: We've both been around a while. My first consulting project was a Y2K thing for Cisco back in 1998. You've been around a little longer than that :). How do you think consulting has changed most during the past five years?

Tom: I think because there is so much infrastructure available now, consulting has become more delivery and outcome-oriented. A better blend of strategic and tactical. Public Cloud has also enabled velocity to increase at a pace unfathomable 5 years ago.

Sandeep: What has stayed the same?

Tom: It's still mostly about people. People who thrive on change and are focused on their personal and professional development. I love that this has not and will not change...it's what I love about consulting.

Sandeep: I know you're adjusting your work style to COVID. You're still a dude who clearly prefers to drive an hour for a socially-distanced hike or outdoor meeting over Zoom any day of the week :) But personal styles aside, what is specifically compelling about a remote agency during the era of COVID?

Tom: Kunai has been remote for years, which gives them an inherent advantage. There is something about the communication and management styles that just works in a way that other organizations are still figuring out.

Sandeep: Yeah, I think what a lot of people fail to realize is that remote work isn't just office work over Zoom. it's an entirely new paradigm. There needs to be an understanding for asynchronous efficiency...and this just takes time and effort to develop. How do you approach remote work and family? What are you learning about separating work and personal time?

Tom: No matter what the form of interaction, Focus. Be present. Quality over quantity. The best weeks are the weeks where I proactively schedule work and personal time. Neil (Kunai's Head of Delivery) shared a great quote with me "With discipline comes freedom." When I am proactively addressing the majority of my professional and personal commitments, I find I earn a little flexibility. A little freedom.

Sandeep: Tell us about a business hero of yours that I may not have heard of before.

Tom: Paul O'Neill is someone you may not know. His work in both the public and the private sector created a profound impact

Sandeep: We are both over forty years old :). How have you learned how to work smarter during the past decade or so? What do you wish you knew about consulting when you were 25 that you know now?

Tom: Consultants want to make lasting change. Lasting change is often not the act of a single person. Today I work much harder bringing others along on the journey.

Sandeep: Last question. What are you doing here? :) Why join a small consulting company this late in your career when you could have a cushy job somewhere else?

Tom: I love a good challenge personally and professionally. When I turned 40, I decided I would run a 10K every Thanksgiving weekend and try to have my finishing time be less than my age. With the exception of one year where I did not run due to a health issue, I have met the goal. I also recently completed the Leadville 100 Mountain Bike race. So, I guess I'm here because I'm a glutton for punishment :) Jokes aside, our customers have a job to do and I intend to put Kunai in a position to execute flawlessly on their behalf. I love committing jointly to audacious goals for our customers and our business.

Keep Reading

See All →