What has 15 years in microfinance taught you about choosing a core banking system?

A Q&A session with Zoran Novakovic, Oradian’s Global Training Team Lead and Antonio Separovic, Oradian’s Co-founder and CEO

Zoran started his career in microfinance 20 years ago with an NGO serving refugees. Since then, he has worked as an IT consultant, managed complex implementations of management information systems for microfinance institutions and trained large teams of individuals. He has worked in 15 countries and implemented nearly every core banking system available to financial institutions in frontier markets.

Oradian leaders discussing
The power of using one set of source code: making financial institutions more sustainable and standardised

Any organisation that works in the microfinance or financial inclusion space knows this to be true: there is an overwhelming level of complexity and a tendency for most operations to be customised. Across many countries and market segments of financial institutions, you can only find a few processes that are standardised and not specific to the institution.

Because nearly every microfinance institution, microfinance bank or rural bank is unique in some way, organisations that provide core banking systems or any kind of microfinance technology are tempted to customise their software to suit each financial institution.

By resisting the temptation to make customisations or quick fixes to match an institution’s unusual process, in many cases, it’s possible to correct that process to something more standard.

Zoran speaking to a customer
Customisation can create problems for financial institutions

Customisation meets certain needs but can introduce more challenges long-term. Creating customised versions of software requires larger technology teams: to customise, to fix the same bugs across multiple versions, to add a new feature or function to multiple versions and to deploy new versions. All of these additional steps increase developments costs and increase the price financial institutions pay for a core banking system or software.

Using one set of source code – offering one version of a system or software to all customers – can be more sustainable. This can be challenging because the team developing the software must understand the complexities of microfinance and direct development accordingly. Offering one version with best practices built into it is one step toward standardising processes and procedures in the microfinance industry.

You should only be responsible for your Internet, not your infrastructure

Whenever on-premise systems are compared to cloud-based technology, you can bet there will be an image of an iceberg on one of the slides. The iceberg is used to show there are costs you can see above water and there are hidden costs below the water, hidden from your view. Most time, the hidden costs below the water are much more than the cost you can see – the tip of the iceberg.

In the case of on-premise core banking systems versus cloud-based core banking systems, an image of an iceberg is not dramatic enough. The costs of on-premise systems can quickly add up to more than the price of a subscription to a cloud-based system.

Questions to ask when considering on-premise or cloud
  1. How expensive is it to purchase as server?
  2. How much will it cost to recover if there’s a natural disaster?
  3. What are the costs and risks if my servers are compromised?
  4. What must I pay to setup a redundant system that kicks in if my primary server goes down?
  5. How long does the warranty last and what happens when it ends?
  6. How much will I pay to buy and own a core banking system?
  7. Will I need to hire an IT specialist to install and configure the software?
  8. Will I pay extra for each software update?
The most important questions are about strategy

Of course, financial institutions will ask and must know the price for a subscription when considering core banking systems. The long-term costs and benefits outweigh the price of any software, system or technology.

More important questions to spend time asking are, “Will this system enable my financial institution to grow in a sustainable way for the next five to ten years? and “Am I making a decision that aligns with my business strategy?”.

Want to learn more about choosing a core banking system for your financial institution?

Fill out the form below and download the full question and answer session with Zoran. Or please contact us with any questions at hello@oradian.com.