Engines

Banks offer a variety of products each of which requires a combination of back office staff and complex computer systems to set up and maintain. It is these systems, staff and processes that we refer to here as ‘Engines’.

We have identified eight key banking engines that are referred to on this site.

  • Core Banking
  • Insurance
  • Asset Finance
  • Capital Markets
  • Fund Management
  • Cards
  • Mortgages
  • Stock Broking

 

Most Financial Services products require a combination of back office staff and complex computer systems to set up and maintain the particular product or service for a customer. For example, Customer Accounting systems in banks and Life Policy systems and processes for the life assurance industry. These systems are often the heart of the “legacy software” that users and IT professionals find frustratingly inflexible. The following are a classification of the product/service areas.

Core Banking

These are the activities of a typical commercial bank that has both personal and business customers;

  • deposits and savings accounts
  • personal and commercial lending
  • payment services including direct debits, cheques, cash, High Value payments and currency payments
  • Trade products such as Letters of Credit and international Bonds and Guarantees

A number of “banking” products are included in other classifications below. See Asset Finance, Cards, and Capital Markets below.

Insurance

These are all the areas of personal and commercial insurance broking and underwriting; including –

  • Life Assurance
  • House Insurance
  • Motor Insurance
  • Health Insurance
  • Commercial Insurance
  • Loan Protector Insurance
  • Specialised Insurance (Marine, Aviation, etc)

A specific Financial Services Group is unlikely to be undertaking both broking and underwriting, nor is it likely to be selling all the insurance types (particularly not the specialised ones) but it will have several product engines covering some of these areas.

Asset Finance

These are the services such as leasing, vehicle finance, debt factoring etc. They normally have quite distinct back office processes and supporting IT.

Capital Markets

These relate to the wholesale market in money, currency, bonds, securities and the derivatives of some of these. Again, there are a number of specialised back office/system combinations that add up to product engines very distinct from those in the other areas.

Fund Management

The activities related to managing funds on customers’ behalf, be they retail or institutional, and be the funds actively or passively managed. Also included in this classification are the activities that relate to custody, bullion, Trusts, Executorships and portfolio management.

Cards

The engines required to support the key credit and debit card processes:

  • Card issuing, to both individuals and companies
  • Merchant acquisition
  • Credit and Debit Card payment processing

Mortgages

The engines required to support the set up and management of loans against personal property. With the advent of current account and offset mortgages this area is rapidly moving back to being part of the banking engine.

Stock broking

This relates only to the execution of services provided to the retail market. Taking a position or acting in the primary market for new issues is regarded as part of Capital Markets above.

 

Read articles in this category:

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    The Bank of England is consulting on the design of digital pound but they are asking the wrong question: they should be asking whether the digital pound is the best answer to the challenges that motivate them; – it is not. Executive summary The Bank of England in their February 2023 consultation paper is asking for comments ...
  • CBDCs and Digital IDs – like love and marriage (March 04th, 2021):
    They go together.  Central-Bank Digital currencies (CBDC) look to be an inevitability.  Given that, can we at least use the UK government’s new digital identity trust framework to ensure some level of privacy. Premise one – CBDCs are inevitable The Bank for International settlements (BIS) is the club for central banks and it recently produced an important ...
  • What is Trading and what is so wrong with it?‏ (September 01st, 2015):
    Governments all over Europe are trying to restrict Banks from Proprietary Trading with legislation. What is this trading thing and why and how did banks get involved in it if it is so bad?
  • UK’s ‘Big 5’ less competitive as result of ICB Ring Fencing (October 18th, 2013):
    This article looks at how the UK’s Big 5 banks will be affected by the Independent Commission on Banking’s legislation on Ring Fencing
  • Global Financial Regulatory Landscape (January 14th, 2013):
    Presentation on the likely future shape and size of banks conditioned by the emerging changes in regulation.
  • RBS Systems Incident – What it means for all banks (August 14th, 2012):
    This article looks at three questions the regulators should be asking all large money transmission banks as a result of the RBS systems incident in June 2012.
  • Banking Commission – PART 2 (May 05th, 2012):
    This article describes how a separation might be achieved in systems and operations terms to support the Independent Banking Commission’s recent reforms and the Financial Stability Boards’ “Living Wills” requirements.
  • Banking Commission – PART 1 (May 04th, 2012):
    This article describes how Investment and Retail Banks are connected.
  • Banking Disintegration – A New Industry? (August 15th, 2010):
    Discussion of banking disintegration, focussing on the various complexities arising from the partial divestment of RBS branches to the Santander Group. The specific problems of divestment might spawn a new IT service industry.
  • Banks and their loan information problem (November 15th, 2009):
    UK Banks are under increasing pressure from a range of external stakeholders to clarify the real value and nature of their assets. There are many aspects of banking and its operations that complicate a Bank’s reaction to this pressure.
  • Appendix to the Credit Crunch article (July 21st, 2008):
    This Appendix highlights why Banks lend to each other and the three means that are used: (1) Money Market Loan and Deposits; (2) Syndicated Loans and Loan Markets; (3) Securitisation and CDOs.
  • The Credit Crunch – so what for IT and Operations? (July 20th, 2008):
    What has happened to Interbank markets over the last 6 months, why has this happened and what is the expected impact on IT and Operations. There are two main areas of change as a result of the credit crunch for IT and Operations; (1) Stop / Run down programmes, and (2) New MI based on ...
  • The Anatomy of Investment Bank (December 21st, 2007):
    An Investment bank works from a systems and operations point of view. It is by necessity a simplification of reality but conveys the essence of the game. There are two parts to this; The Core Trading Business Model & The Investment Bank Structural Overlay.
  • The RBS ABN Amro Challenge (December 21st, 2007):
    The RBS challenge in integrating ABN Amro, describing the necessary stages of the ABN separation project and the RBS integration project.
  • Pre 2019 Agency Bank Cheque Clearing (January 22nd, 2007):
    For those who are not familiar with the UK Cheque clearing processes we have created two further reports that explain the current UK cheque clearing processes.
  • Pre 2019 UK Cheque Clearing Process (January 22nd, 2007):
    For those who are not familiar with the UK Cheque clearing processes we have created two further reports that explain the current UK cheque clearing processes.
  • What The Government’s Cheque Clearing Changes Mean For Banks (January 21st, 2007):
    The Government has announced changes that have to be made by end 2007 to the cheque clearing system. An explanation of the government changes and how these impact Clearing Bank and non-Clearing Bank cheque processes.
  • What is a merchant Acquirer? (November 22nd, 2006):
    Under what is called the SEPA Cards Framework (SCF) there is a drive to standardise the interface between Merchants and Merchant Acquirer – find out more about what a merchant acquirer is.
  • Development of IT Security: In the Next Two Years (July 25th, 2006):
    Discussion and forecast of the likely changes to IT Security in the next two years.
  • Development of IT Security: History of IT Security During 2005-Today (July 25th, 2006):
    A historical description of why the IT security world is the way it is during 2005-today.
  • Development of IT Security: History of IT Security During 2003 (July 25th, 2006):
    A historical description of why the IT security world is the way it is during 2003.
  • Development of IT Security: History of IT Security During 1990 (July 25th, 2006):
    A historical description of why the IT security world is the way it is during 1990.
  • Development of IT Security: History of IT Security During 1980 (July 25th, 2006):
    A historical description of why the IT security world is the way it is during 1980.
  • Development of IT Security: History of IT Security During 1970 (July 24th, 2006):
    A historical description of why the IT security world is the way it is during 1970.
  • Syndicated Lending (Loan Markets): Trends in Loan Markets (January 25th, 2006):
    Most people understand the ideas behind retail bank lending (such as house mortgages or overdrafts) from personal experience. The currently booming world of syndicated lending and loan markets is much more opaque. The purpose of this paper is to open this up. It explains how it works and some of the trends taking place; in ...
  • Syndicated Lending (Loan Markets): What Are The Loan Markets Like? (January 25th, 2006):
    Most people understand the ideas behind retail bank lending (such as house mortgages or overdrafts) from personal experience. The currently booming world of syndicated lending and loan markets is much more opaque. The purpose of this paper is to open this up. It explains how it works and some of the trends taking place; in ...
  • Syndicated Lending (Loan Markets): Customer Problem and Banking Solution (January 25th, 2006):
    Most people understand the ideas behind retail bank lending (such as house mortgages or overdrafts) from personal experience. The currently booming world of syndicated lending and loan markets is much more opaque. The purpose of this paper is to open this up. It explains how it works and some of the trends taking place; in ...
  • Syndicated Lending (Loan Markets): How Loan Markets Work (January 20th, 2006):
    The diagram below illustrates the various roles that are taken by banks in the loan markets: The Book Runner The customers do not have the contacts, knowledge of rates nor relevant experience to put together syndicates of banks so he normally chooses one bank to be the Book Runner (or Mandated Lead Arranger – MLA). The Book ...
  • Development of Payment Systems within Banks (September 25th, 2005):
    The new industry driven real time payments for internet banking, telephone banking and standing orders will cause banks’ IT departments to re-engineer their core banking systems. This will be a major area of systems development over the next few years and this article describes the impacts by systems area.
  • Collection Accounts and Agency Banks (August 28th, 2005):
    The main clearing banks provide special services for: Organisations receiving very large numbers of payments (e.g. utility companies, retailers, local government etc.) Small banks and building societies who do not want the hassle of running their own clearing and payments operations. The former use a service called a Collection Account, sometimes called a Head Office Collection Account or ...
  • Real Time Accounting (August 28th, 2005):
    The new industry driven real time payments for internet banking, telephone banking and standing orders will cause banks’ IT departments to re-engineer their core banking systems. This will be a major area of systems development over the next few years and this article describes the impacts by systems area.
  • Appendix 3: Low Value Payments – Cost Saving Opportunities (November 26th, 2004):
    Should be read in conjunction with The Outsourcer’s View – An Interview with Unisys and How can we make substantial cost reductions to Europe’s Payments?. This example is based on the kind of payments that are made by an Automated Clearing House. There is no uniformity in Europe as to exactly what is in the scope but there is ...
  • Appendix 2: Foreign Currency Payments – Cost Saving Opportunities (November 26th, 2004):
    Should be read in conjunction with The Outsourcer’s View – An Interview with Unisys and How can we make substantial cost reductions to Europe’s Payments?. This example uses foreign currency payments based on the correspondent banking model. This area is one of the most standardised but savings can still be made. The diagram below illustrates the key elements based ...
  • How can we make substantial cost reductions to Europe’s payments? – An agenda for Banks, Outsourcers and the European Commission (November 26th, 2004):
    With Europe’s hundreds of banks collectively knit together, one would expect the European Payments system to be fundamentally efficient. However, this is not the case.Our report investigates why this is the case and considers how cost savings can be made, paving the way for substantial economic growth.
  • The Outsourcer’s View – An Interview with Unisys (September 26th, 2004):
    For a different perspective on Payments and Outsourcing HBW talked to Unisys, in particular, Mike Eaton, Managing Partner for Financial Services and Gerry Heard, Head of Outsourcing Solutions.
  • How Might Mobile Payments Work? (December 26th, 2003):
    Outline of how mobile payments are working and/or are likely to work, relative to Person to Person and Person to Merchant payments.
  • Reasons Why a Bank Could Want Mobile Payments (November 27th, 2003):
    This report outlines the reasons why a bank could want to invest in the mobile payment technology.
  • The ‘Value Model’: A Detailed Description (August 27th, 2003):
    A detailed description of the assumptions and calculations that underpin the ‘Value Model’ developed by Howbankswork.com to help you estimate the true value of your Bank’s systems base.
  • How much are your Bank’s systems worth? (August 27th, 2003):
    Business users often consider their Bank’s systems to be hugely expensive and highly inflexible to change. This article argues that this perception is in part a product of undervaluing the core systems. A ‘Value Model’ is provided to help you realise the true value of your Bank’s systems.
  • Basel Operational Risk Implications (June 25th, 2003):
    Basel II embodies several important new ideas but arguably the most important aspect of it is that it represents a wake up call to the banking industry to take operational risk more seriously. In this report we look at those aspects of Basel II that relate to Operational Risk. A good introduction to this is the ...
  • A Guide to Successful Business Process Outsourcing (April 27th, 2003):
    This report examines what factors make for a successful outsourcing arrangement and what conditions / factors are likely to be detrimental.
  • Core Banking Processes and Recent Strategies (April 27th, 2003):
    This report specifically examines recent strategies and technologies in relation to the Core Banking engine and assesses success / failure.
  • Banking Operations Strategies & Technologies: Example Scenarios (April 27th, 2003):
    Brings together all the ideas distilled in the Banking Operations Strategies & Technologies report in a couple of illustrative scenarios. These show how some very common banking business processes will look if the strategies discussed are fully implemented.
  • Banking Operations Strategies & Technologies (April 27th, 2003):
    Detailed examination of the key strategies and technologies currently being pursued in UK Banking Operations departments. These trends include centralising processing, outsourcing and the separation of service and processing.