It’s the early 2000s, and I’m by my dad’s side as he fills out his bank book. Back then, he had to travel far just to use the same bank branch where he made his first deposit. Banks were not yet linked, and though I didn’t get it at the time, this showed a much bigger flaw that core banking would fix.

Now jump to 2020, when Moniepoint did what most fintechs wouldn’t do—build their own core banking system from the ground up. This system now handles billions of transactions daily, with a level of trust you don’t find often. But why does this matter to you? Most folks don’t care how core banking works. They just want their money to be safe and easy to reach.

To learn more about core banking and how Moniepoint’s system came to be, I spoke with Caleb, a Technical Program Manager (TPM), and Sulaiman, an enterprise architect. They played key roles in building a platform that could not only meet today's needs but also grow to handle what’s to come. Their insights gave me a glimpse into the care and hard work that went into ensuring Moniepoint’s system stays fast, safe, and scalable at every stage. 

In this edition of What’s the Point, we find out what exactly core banking is, how it affects your banking experience. 

What is core banking?

To understand a core banking application, we first need to understand the idea behind core banking itself.

Up until the early 2000s in Nigeria, banks were isolated. Each branch functioned as its own entity, meaning you couldn’t simply walk into a different branch of the same bank and access your account. Core banking changed that by making all branches work together as one.

Core banking is like the central nervous system of the human body. Just as the nervous system controls everything your body does—from moving muscles to sensing pain—core banking controls every financial action a bank performs, from updating account balances to processing loan applications. This system processes every deposit, transfer, withdrawal, or loan you initiate, and just like a nervous system, it operates silently in the background, ensuring everything functions smoothly.

The software that powers this essential functionality is called a core banking application (CBA). Think of it as a digital ledger. It is the backbone of a bank’s daily operations, managing everything from customer records to the seamless movement of funds across accounts. Without it, the bank’s day-to-day services would collapse, much like the human body would if the nervous system failed.

Let’s skim through what the CBA handles  behind the scenes: 

• Customer Information: Holds all customer details, from personal information to account types like savings or loans.

• Financial Records: Keeps track of every money that comes in and out of the bank, recording every transaction and updating things like assets and expenses when you make a deposit or withdrawal.

• Customised Account Types: Configures different account options (think accounts with different transaction limits or interest rates), and sets up loan products with varying terms.

• Daily Operations and Reporting: Manages everyday tasks (like teller activities and staff access) and provides reports on customer activity, loans, and transactions to keep everything running smoothly.

Why would a bank want to migrate from one CBA to the other?

Now that we’ve established what a CBA does and how crucial it is to our banking experience, why would a bank decide to change its CBA? Banks don’t decide to migrate their core banking applications (CBAs) on a whim. A migration typically comes with significant motivations, including cost, scalability, and the need to innovate. 

Let’s try to get costs out of the way. For banks using foreign CBAs, fluctuating FX rates can drastically increase the cost of maintenance, making foreign systems financially unsustainable over time. Since 2023, the cost of foreign software systems for most Nigerian businesses has increased, and you either source for local alternatives, build yours in-house or stop using the service altogether. 

Now, when companies are not worried about costs, growth and scalability are often a more pressing concern. Financial services companies anticipate growth in the number of accounts and transactions, and they need a system that can accommodate this while being able to add new features. 

Migrating to a new CBA can also allow banks to deploy new, modern features that old systems can’t support. Older CBAs often restrict banks from rolling out fresh digital experiences or adapting quickly. Financial institutions are innovating every day, and the core banking software needs to accommodate that.

The challenges of migration: Handling data and downtime

Migrating core banking data is a complex task. Banks need to create backup systems, plan phased data transfers, and thoroughly test everything to avoid disruptions. During migration, they often set up a parallel environment to simulate real transaction volumes and ensure all customer records, transaction histories, and regulatory data are safely transferred in steps.

You don’t want instances where the wrong accounts are credited, or duplicate transactions occur. If there are duplicate accounts, the system must be able to check if the customer is the same or different to prevent any confusion. Even minor errors can cause significant issues, affecting balances and records across thousands of accounts.

One big challenge is timing the final switch-over—the moment when banks go live on the new system. This usually happens during off-peak hours, like late at night, to minimise customer impact. But despite careful planning, unexpected issues can still pop up, causing delays. That’s why detailed preparation and rigorous testing are crucial to ensure customers can access their accounts smoothly and without disruptions.

How Moniepoint’s CBA was built for massive scale

In  2020, one year after we launched agency banking, more and more people were using Moniepoint, and we needed to move from using a simple database table. 

When we decided to switch to a core banking solution, we learned that off-the-shelf solutions, and open source weren’t enough for our growing needs. We needed a system that could accurately handle transaction records and the scale and demands of modern digital banking. 

You can read more about how we handled the magic in this article. All caught up? Good. Now, how did we approach reliability and scalability for the billions of transactions we pull today? Well, spoiler alert: no one in that team imagined what our numbers would look like 10 months after building, much less what they are today. 

Our approach to building a strong, fast system was clear: think ahead and plan for growth while also solving today's needs with proper maintenance and updates. We knew the system had to scale and be ready for what was coming.

To start, we used tools we knew well, like MySQL and Java Spring, so we could move fast. 

We didn’t just build for 2020; we looked ahead to how much traffic would grow. We ran tests with future numbers in mind to see how the system would cope, and made adjustments where necessary. Again, our actual numbers exploded in a surprisingly short time, so we had to get creative. We moved to more complex technologies that could support the exponential growth we were looking at. 

We also built in backup plans. If the system failed, we had ways to get back up fast. We made backups before going live and built a system that lets us move things around without stopping transactions. Before any big move, we cloned the system to test for issues. For example, when we saw a three-hour move that needed to be faster, we fixed it to take just two hours, doing it at night when fewer users were online.

Now, remember, core banking services don’t work alone. They work with diverse services, and we had to plan for when some services fail. We built a way to send traffic to other providers if one went down, and our users wouldn’t even know what was happening. 

We hope this article helps you understand core banking at a high level. At Moniepoint, it’s simply a software ledger that helps you bank without stress. 

Now, if you’d love us to get a bit more technical on issues we solved when building, please let us know. If you’d love to see things for yourself, we saved a spot for you on our careers page.