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Fortifying the Foundation

By: Venkataraman Balasubramanian
August 11, 2023
3 min read

In their article in Connected Banking Insights, KPMG Advisory spoke at length about Core Modernization. They noted that “Modernizing an entire bank may seem overwhelming. However, those that begin with the foundational elements can realize the greatest return on investment. Core modernization is a method to unlock things such as product innovation, speed to delivery, and real-time processing.” We agree!

One of these foundational elements is the deposit systems at banks. Typical CASA systems (current account, savings account) have been the bedrock for all deposit-taking institutions and encompass the majority of bank customers.

For years, banks have spent untold millions on customer facing and customer-centric systems. While these investments have modernized the customer interface , most have not touched the back end “core” systems other than potentially tangentially. However, the essential elements of integration have been built at the front-end that can be leveraged further.

In the current inflationary macroeconomic environment in which we find ourselves, customers are seeking higher interest rates on their deposits, and banks are attempting to create rate structures that are optimized for both lending and deposits. In their paper titled “Exploring the link between rising inflation and economic growth: The role of the banking sector”, Isha Agarwal and Matthew Baron (published in World Bank Blogs) note that “rising inflation leads to banking sector losses, prompting banks to reduce lending and ultimately affecting economic activity.”

Bank credit-to-GDP ratio after large increases in inflation

Exploring links between the rising inflation and economic growth role in the banking sector

The resulting asset-liability mismatch due to inflation is precisely what policy makers attempt to avoid. Giving banks the ability to manage lending with highly personalized rates, as well as handling deposits in the same manner, also affords them the flexibility to minimize the effects of this mismatch.

Highly personalized rates are already taking a foothold in the US with multiple deployments of Zafin’s Rates & Fees components that enable progressive modernization of these deposit systems. At Zafin, we invented the premise of ‘externalization’ of product and pricing systems. Essentially, this involves moving a significant portion of product and pricing functions from core systems to an intermediary layer that is externalized from the core. Subsequently, it is re-integrated with the core, usually through an integration and orchestration layer.  

In this intermediary product and pricing layer, we can flexibly and precisely price deposits at the point of origination, and then pass the origination data to the downstream ‘core’ deposit systems for account opening and account management processes. The flexibility extends beyond just the ability to price deposits, as shown below.

In the Modern Banking Ecosystem

We achieve this flexibility through our platform, which allows a variety of standard integration options. These options extend beyond the standard batch integration to include both real-time and near real-time via API and Streaming technologies. All of these options are critical, as core-banking ecosystems typically consist of both batch and (near) real-time systems that are tightly interconnected  through a bank’s integration layer.

Variety of integration options available at Zafin

Stay ahead of the curve. Join us next week for an insightful article featuring a real-life case study of a US bank that successfully implemented the above-mentioned concepts to modernize its deposit systems.


Founded in 2002, Zafin offers a SaaS product and pricing platform that simplifies core modernization for top banks worldwide. Our platform enables business users to work collaboratively to design and manage pricing, products, and packages, while technologists streamline core banking systems.

With Zafin, banks accelerate time to market for new products and offers while lowering the cost of change and achieving tangible business and risk outcomes. The Zafin platform increases business agility while enabling personalized pricing and dynamic responses to evolving customer and market needs.

Zafin is headquartered in Vancouver, Canada, with offices and customers around the globe including ING, CIBC, HSBC, Wells Fargo, PNC, and ANZ.

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