Why coreless is good for innovation
A good illustration of the benefits of ‘going coreless’ comes from banking (in fact, this is where the term comes from).
In traditional banking, all operations are tightly integrated into a single, central core system that handles accounts, transactions, loans, deposits, and other financial services.
Coreless banking, by contrast, relies on a series of interconnected modules. Each module performs a specific function (e.g., payments, customer relationship management, lending). They are connected using APIs and cloud computing, and can be updated or replaced independently without affecting the rest of the system. That makes it highly adaptive and scalable.
Coreless banking can also connect – via APIs – with external services, fintech companies, and other banks, allowing it to easily offer or integrate with third-party services – such as accounting software.
This openness facilitates the creation of a banking ecosystem that can offer a wider range of services and products to customers, tailored to their specific needs.
Coreless banking represents a significant shift in the way traditional banking systems operate. It allows companies to move away from a centralized, monolithic core banking system towards a more flexible, modular, and distributed architecture.
As a result, banks can quickly adapt to changing market trends, regulatory requirements, and customer preferences by adding, updating, or replacing modules without overhauling the entire system.
For customers, coreless banking promises more personalized, efficient, and seamless banking experiences. It also offers access to a broader range of financial products and services, and the ability to easily switch their accounts between banks. This spurs competition and improves products across the board.
Imagine a large chain of Italian restaurants. The décor, menu, uniform, layout, staff rules, and prices are all dictated from above. It’s great as long as the setup works. But what if people stop coming, and there is a need to change the approach locally? Or what if a talented employee has a great idea to boost revenue? Such changes must go through processes, and be assessed by people who don’t understand the situation on the ground. Most will hit a brick wall.
Now, picture a weekend food market. Its traders operate autonomously, making their own decisions. If profits fall, they can try new products. If they see opportunities, they can act. And, a trader can fail without affecting other traders.
IT architecture can be thought of in a similar way. Most older IT systems were set up like the restaurant chain – a set of technologies (the IT stack) and rules that can only really be changed from the centre, not at a local level.
But things are much worse than our imaginary restaurant. Most IT stacks have grown ad hoc, with bits bolted on and workarounds found to make them work. That means changes must not only be approved centrally, but undergo exhaustive technical testing to ensure they integrate with everything else.
On the other hand, many startups have IT architectures more like the food market – modular technologies that all talk to each other via a single framework, but which all can operate on their own terms. That makes developing new products, or making changes, much easier at any level of the organization.
The benefits of being coreless:
Agility: A coreless network can adapt to changing traffic patterns, demands, and new technologies at a local level without central coordination, or having to upgrade the whole network, meaning changes are much quicker to implement and lower risk. Likewise, vendors at a food market can quickly adapt to changes in consumer demand, seasonality, and other factors, without having to submit applications and gain permissions.
Scalability: A coreless network can add or remove domains without the need for major reconfigurations, just as a food market can easily scale up or down by adding or removing vendors, without affecting the overall operation.
Resilience: The network's decentralized nature means data can reroute through multiple paths, enhancing its overall resilience and uptime, and ensuring it remains functional, even if parts of it fail. Equally, a food market can continue to operate even if one vendor drops out, or a section of the market is disrupted.
