Selecting the ideal core banking solution for your digital bank involves considering various technical parameters such as functionality, integrations, architecture, and technology stack. However, one of the foremost considerations for any fintech business owner is understanding and managing the costs associated with implementing core banking software. Launching a fintech venture comes with significant expenses, and the core banking software costs are a major component of this financial equation.

Before engaging with core banking software providers, there are essential preparatory steps:

• Business and Product Development Plans: Have a well-prepared business plan outlining your goals and a comprehensive product development plan covering at least three years. This plan should provide a structured overview of the services you intend to offer.
• Budget Overview: Clearly define your maximum budget for the entire system, encompassing initial developments and subsequent ones over the initial and subsequent years.
• Technical Evaluation: Ensure the availability of a Chief Technology Officer or a technical advisor who can evaluate solutions and estimate expenses for development and customization.

Once adequately prepared, commence the evaluation process and seek quotes from various providers. To make an accurate comparison, it is recommended to assess the pricing for core banking solutions over 2-3 years rather than focusing solely on the initial cost. A solution that appears less expensive at the outset may become costlier when factoring in future developments, additional features, and customization.

Why consider a 3-year evaluation? Each provider may offer distinct pricing options and payment schedules. Evaluating costs over a set period allows for a more accurate comparison of the overall cost-effectiveness. This approach also aids in comparing various deployment options offered by the same provider. Higher initial payments do not necessarily correlate with lower cost-effectiveness over the specified period.

Now, what specific costs should you consider in this comprehensive evaluation?

Embarking on the journey of implementing a Core Banking solution entails understanding and meticulously assessing the associated costs. Let’s delve into the intricacies of these expenditures to ensure a transparent evaluation:

Basic Core Banking Costs

SaaS Deployment

• Setup Fee: A one-time fixed cost for a specific solution.
• Monthly Fee: Over a 3-year period, this fee can fluctuate based on transaction volumes, demanding consideration for business growth.

License Deployment

• Software License Price: Includes a setup fee.
• Maintenance Fees: Governed by the Service Level Agreement (SLA).

Additional Developments & Customization

Customization and additional developments are often necessary, emphasizing the importance of a meticulously detailed SaaS product development plan. This plan serves as a crucial tool for core banking software providers to accurately calculate pricing for extra development.

The level of customization required correlates directly with the specificity, uniqueness, and diversity of services outlined in your business plan. In cases where your plan is exceptionally detailed and encompasses a wide array of services, the need for customization intensifies. It’s noteworthy that the costs associated with customization over a 3-year period might surpass the expenses linked to the basic solution.

Customizing the solution and incorporating extra developments can constitute a substantial portion of your overall costs. Occasionally, vendors offer complimentary hours for customization, typically ranging from 200 to 400 hours. Once these hours are exhausted, subsequent customization is billed at the provider’s hourly rate.

Integration Costs

Depending on the chosen vendor for the initial solution package, there might be an additional cost associated with required integrations that are not part of the standard proposal. To ensure the seamless provision of services in line with your business plan, it is essential to have all necessary integrations in place. These may include:

• Integrations with AML/KYC providers
• Integrations with banks
• Integrations with payment service providers for various payment types (e.g., SEPA, SWIFT, or local payments such as Faster Payments, CHAPS, FPS)
• Integrations with card issuers
• Integrations with FX liquidity providers
• Integrations with financial accounting solutions if an in-built module is not provided
• CRM integrations

The total costs are determined by the number of hours required for development and the cost per hour. Your Chief Technology Officer or IT adviser should be responsible for estimating the actual number of hours needed for each integration. It’s important to note that integrations go beyond a standard gateway and often require customization to align with your specific business processes.

Software Updates & Hosting

• Software Updates: Clarify if updates are part of maintenance fees or billed separately.
• Hosting Costs: Confirm whether hosting expenses are inclusive in SaaS or SLA payments.

Future Developments

Additionally, it is crucial to set aside budgets for unforeseen developments and integrations that are challenging to predict or plan. This may include scenarios where certain integrations were not initially included in your plan, such as connections with new banks for opening correspondent accounts or integrating with new service providers. Having a contingency budget for these unforeseen requirements ensures financial preparedness for the dynamic aspects of your business expansion.

Conclusion

To avoid unwelcome surprises, seek a comprehensive quote that encompasses all potential costs associated with your Core Banking solution. Acknowledge that the final price includes not just software expenses but also the hiring of IT personnel, ensuring a holistic understanding of the financial commitment involved in this strategic undertaking.