[Article] The Key to Amazing Development of the First Internet Specialized Bank?…”Innovation in Core Banking Solution”

2017.05.23 14:50

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The Key to Amazing Development of the First Internet Specialized Bank?…”Innovation in Core Banking Solution”



[Special Article/Banking System 4.0] Evolved Core Banking System

[ 2017.05.15 13:12:21/ DigitalDaily, Reporter Ki Rok Park]

 

Korea’s first Internet bank, K-Bank, officially started its operation on April 3rd. Forty days later, the computer system has been steadily operating. Prior to this, K-Bank succeeded in completing its development of their computer system and also received approval from the Financial Services Commission. These happened only within a year. Without hesitation, K-Bank completed all the preparation process for official launch.

The promptness of computerized system development surprised the Financial IT industry more than anything else. It has generally been believed that it takes a long period of time to complete the implementation of banking system such as loan, receiving, corebanking, channel, information systems through Big Bang Process.

Even considering the difference between the size of Internet banks and general banks, it seems that at least two years were required to complete the development including the test period. In fact, since ‘Post-generation system’ era in the year of 2014, the system development has usually taken longer than 30 months.

Cutting to the chase, one of the main reasons for the rapid development of K-Bank’s computer system is that the development method of implementing the ‘Core Banking’ system was significantly different from the existing domestic method of ‘next-generation’ system. , together with Bankware Global, who was in charge of establishing K-Bank’s corebanking system, examined the next generation system development method, role of 4th generation core banking solution and strategy for cloud environment in terms of ‘Banking System 4.0’.

 

“The Whole Project’s Schedule depends on the speed of Core Banking System Development”

Bankware Global, a Korean financial Software company (Chief Executive Officer, KyungJo Lee), is the main operator/manager/developer of Core Banking system from K-Bank project. Bankware Global implemented the core banking system through their own products such as ‘BX CBP’ (package), BX PF (product factory) and ‘BX framework’

KyungJo Lee, CEO of Bankware Global, explained “”BX-CBP’s ‘object-oriented design’ structure has made possible to develop the core banking system fast, and we were able to complete the project in a short period of time,”

The ‘object-oriented design’ approach is also commonly referred to as the ‘component-based’ development approach. Just as a “Lego block” is used for build, a financial firm may select the required business (application) module and upload it to the framework. In other words, it is a method of transferring system-related modules such as credit, deposit, and etc. If necessary, the financial firm can complete the system by developing only the parts that needs to be added. The innovation of this development process can significantly shorten system buildup time.

Of course, this type of development process has not been attempted in Korean financial sector at all. In the early and mid-2000s, the banks suggested this kind of process when discussing about their next generation system projects among the banking sectors. The imported core banking solution such as ‘Temenos’ also had the object-oriented design structure.

However, it only remained in the concept. There were many reports that the business modules that make up the core banking package did not fit the Korean financial environment.

It is inevitable to face gap between foreign solutions and Korea. Even though their ideas are innovative they do not correspond with current Korean financial environment. It is a fact that there are risks arose not from only Core Banking but also from IFRS, Compliance, and etc.

Therefore, it would be meaningless for a company to adopt an expensive foreign package if they had to spend additional expense to close the gap.

As a result, the development of the next generation system has progressed based on framework of that systems core banking, loan, receiving, foreign exchange, and etc., were independently developed since the mid-2000s. This was the reason that the cost and period of the project increased.

Completion of ‘core banking package + framework’ combination, meets the market environment.

 Bankware Global, which was founded by financial IT professionals in 2009, focused on this point. They believed they are able to secure market’s needs if they can provide a Core Banking Package that has been modularized to fit into Korean financial environment. They also believed that they can design innovative core banking platform which is time-saving and cost-effective when developing next generation system project.

In this regard, President Lee KyungJo emphasized that “’BX CBP’ is a core banking solution that combines core banking system and frameworks and is appropriate for financial environment of Korea. He said, “We succeeded in differentiating ourselves from foreign core banking solutions that did not fit to existing domestic environment, and proved it in the case of K-Bank’s project.” As the case of K-bank, if the project period can be greatly shortened, financial institutions will have change to reduce their costs.

Bankware Global emphasizes that its core banking solution, core banking package and framework, is a fourth generation solution that was designed for the Korean financial environment. President Lee pointed out that core banking solutions presented in the domestic financial market are not packages but only frameworks. With this reason, Bankware Global uses the term ‘Banking system 4.0’ instead of ‘Post generation system’.

Bankware Global established Software Research Institute in 2011 in order to develop Korean Core Banking solution. As of April 2017, it has about 90 R&D working personnel. In addition, about 30% of annual revenues are invested in R&D to manufacture excellent software that can be used in the global banking system market.

With this investment effort of R&D, Bankware Global has built on its project-based solutions, including financial solutions, development-support solutions, infrastructure solutions, and performance management solutions. Especially in recent years, it is expanding its business into mobile financial solutions that delivers meaningful results.

Bankware Global also participated in the next-generation system (new card system) project that Hyundai Card successfully opened in 2014. It made its name known to market through ‘BX PF’ which is one of its solution. BX PF implements a modularized structure that standardize products and service rules and combines with provided conditions. “Hyundai Card’s Product Factory engine has been recognized as a very flexible system since it has not undergone a single modification since its opening,” the company said.

Moreover, Bankware Global sold its BX PF solution to ICBC, the largest bank in China, in October 2011, and in 2014, it provided BX PF to the post-next-generation system conducted by IBK Industrial Bank.

Bankware Global’s core banking solution includes core banking package ‘BX CBP’, product factory engine ‘BX PF’, and Internet financing platform (P2P/SCF/DIRECT BANKING). Its development-supported solutions include ‘BX BA’ (business architecture and analytics/design support), BX MU (UI design that supports screen design and prototyping). BX UI (integrated solution for screen development), and BX framework.

See more:

http://www.ddaily.co.kr/news/article.html?no=154681

 

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