Choosing a Core Banking IT system for your fintech project is quite a difficult task, and you will need to analyse several factors before making the right decision. In addition to business requirements, the banking IT solution must comply with a wide range of legislative and industry requirements.

Read this article to avoid misinformation and learn what requirements you need to meet when choosing a Core Banking IT system.

Understanding legal requirements for Core Banking IT systems

A crucial factor whilst deciding on a Core Banking IT system is compliance with the fintech industry legislation. In the EU, the most critical regulation for payment services and electronic money issuance is the Second Payment Services Directive (PSD2) and the Second Electronic Money Directive (EMD2). With the PSD2 in mind, you will need to implement Strong Customer Authentication (SCA), which incorporates as a minimum a two-factor authorization for all transactions that the client carries out. As it turns out, a one-time SMS password or push notification don’t comply with the SCA requirements.

Additionally, there are other legal guidelines and rules in the EU that directly or indirectly impact the choice of an IT solution for financial companies and banks.  One such regulation is the Personal Data Protection Regulation (GDPR).

When deciding on a Core Banking IT system, you need to make sure that it meets those requirements fully and providers have relevant experience deploying banking IT platforms for similar companies.

Being transparent in regulatory requirements

Already at the license application stage, you will submit the information on your selected Core Banking IT system. Also, you will need to explain how the solution complies with the currently imposed legislation and demonstrate how it supports all your business operators outlined in the business plan. 

Besides, the regulator pays extra attention to AML procedures and how the chosen IT solution will support them.

The vendor’s expertise can be very beneficial to you at this stage. Before selecting IT solution providers, find out what is their experience with regulators. During the application stage, the chosen provider will also need to fill out the forms containing information about the Core Banking IT system and regulator’s questions.

Complying with the requirements of banks

When partnering with a bank and opening an account to operate with your client funds, there are also specific requirements that you and your Core Banking IT system must follow.

Nowadays, before opening an account with a payment company, many banks carry out a full Due Diligence of the company and evaluate risks associated with its clients. Also, the Core Banking IT system is assessed based on how risks are managed. That’s why sometimes, partner banks may require you to connect the transactional scoring functionality as part of the Core Banking IT system.

Another critical aspect of partner bank requirement is technologies and account management. For example, the Second Payment Services Directive (PSD2) includes the statement that all European banks must have Open Banking API, through which any client, including payment service provider (PSP), can manage accounts. However, you can see that the industry lacks a unified standard that works in practice and carries out such integrations with any bank. Additionally, interaction protocols and formats differ from bank to bank, which must also be considered.

We can see that the SWIFT system remains one of the most widespread and universal ways of interacting with partner banks. However, not all banks have enabled the management of PSP accounts via SWIFT. Therefore, when choosing a Core Banking IT system, pay close attention to whether the functionality to interact with the SWIFT terminal is included in the vendor’s proposed solution.


We recommend you do thorough research so your Core Banking IT system complies with the requirements relevant to banking IT solutions and the banking industry. Besides, make sure the vendor you have selected has extensive experience working with similar deployment and companies in your jurisdiction.

At the end of the day, you must comply with all applicable laws of the jurisdiction where you obtained or plan to obtain a license and ensure that your company adheres to regulatory and other partner bank requirements.

About Advapay

Advapay is a technology company providing the Digital Core Banking platform to empower fintech clients or digital banks to start their businesses and accelerate digital transformation. The platform delivers all essential functionalities, a front-to-back system and a set of tools to customise and bring new integrations. With Advapay, potential and existing customers can connect either to the cloud-based SaaS or on-premise software. Besides the technical infrastructure, the company provides business advisory and fintech licensing services. Interested to learn more, please drop us a message

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