Aiming to automate routine tasks, increase employee productivity, and improve client satisfaction, the majority of banking institutions worldwide have already digitized their services. With software solutions, organizations enable users to open bank accounts, carry out transactions, pay bills, control payments, generate invoices, create and sign documents.
However, to prevent customer churn, it is crucial to ensure the high availability, scalability, and performance of software systems. In order to remain competitive, companies also have to deliver new apps and features in an agile manner.
By building microservices, it is possible to address the abovementioned issues. Capital One, PayPal, and Monzo have already implemented a microservices architectural style, taking advantage of faster deployment and simplified maintenance.
In this article, software developers at Surf consider the main benefits of a microservices architecture in banking. You will get a clear understanding of what microservices are and also explore how different financial service providers managed to resolve existing challenges by using this model.
What is microservices architecture?
Microservices architecture is an architectural model, in which software engineers build an application as a set of small, loosely coupled services, each created around a certain task or feature, for instance, email management, data analytics, reporting. These services communicate with each other using lightweight synchronous protocols, such as HTTP/REST, or asynchronous protocols like AMQP.
The underlying microservices architecture principles:
- It is possible to develop services using different technologies that involve programming languages, frameworks, and databases.
- Each service can be built, deployed, managed, and scaled independently. Therefore, there is no need to upgrade or rewrite the whole banking system when introducing new functionality or minor changes.
- If software experts extend a component service, making it more complex, they can divide it into smaller services to improve scalability and maintenance.
When considering architectural styles, microservices are often compared with a monolithic approach. Unlike microservices, a monolithic solution is developed as a single unit—without modularity. Also, a monolithic platform includes a server-side application, client-side user interface, and a database while all the functions are operated in one place. This way, when programmers implement some changes, they have to upgrade the entire banking software platform.
Now, let’s take a look at the key benefits of a microservices architecture in banking and financial services.
Top advantages of a microservices architecture in banking
Banking software solutions generally have to serve thousands of customers while maintaining a growing number of users and requests. Performance issues, downtime, errors are common problems that can be encountered by users when the system is not scalable.
Furthermore, financial companies need to introduce new features and updates in a rapid manner to outrun competitors and win clients. However, this is a complex task when having a monolithic application. Additionally, if a software product is created on top of the legacy technology stack, it may be even impossible to extend it.
By building a microservices architecture or decomposing a monolithic app into multiple services, banking organizations can address all of these challenges. With the view of creating microservices, engineers can use cloud platforms such as Amazon Web Services (AWS) and Microsoft Azure that provide all the necessary tools to achieve greater scalability.
Thanks to this, software developers can easily enable auto-scaling of computing resources depending on the load that may either increase or decrease throughout a day.
2. High availability and fault tolerance
High availability is another advantage of microservices architecture solutions, which is essential to delivering services without delay. Since microservices are characterized by loose coupling and modularity, users can still interact with a software product even in case of failure.
In addition, a fault-tolerant software system will continue operating under heavy loads that may initiate when, for example, a web platform has to simultaneously process millions of requests or large data volumes. As a result, users are able to complete the necessary tasks—open a bank account, carry out a transaction, pay bills, generate an invoice—when they ever need to.
3. Ease of maintenance
With a microservices architecture, financial services companies can significantly facilitate infrastructure maintenance, this way also reducing infrastructure costs. As long as services are autonomous, loosely coupled, and relatively small, they can be maintained independently from each other.
Thus, it is much easier for banking software developers to make changes to a module and deliver new features. To compare, in a monolithic application, engineers generally have to rewrite a significant part of the codebase, which consumes time and requires more effort.
4. Improved security and compliance
Ensuring data privacy and compliance is essential for financial institutions that operate with highly sensitive information that includes personal user data, transaction details, billing data. Examples of safety legislations are Payment Card Industry Data Security Standard (PCI DSS) and General Data Protection Regulation (GDPR). In this regard, resolving these challenges has to be a top priority when building a fintech startup.
By creating a microservices architecture in banking software, organizations can improve security and facilitate compliance. For instance, if potential issues are identified in a certain module, software experts can put all effort into addressing them as fast as possible while the rest of the system is not affected due to loose coupling.
Employing containerization technologies like Docker and Kubernetes, developers enable communication management and security monitoring between and across multiple component services. At Surf, we also implement DecSecOps cybersecurity practices to safeguard banking software against various threats.
It is noteworthy that users state that enhanced safety is among the main advantages of microservices architecture solutions. According to a recent IBM survey conducted in 2021, 29% of respondents report they were able to improve the security of company/customer data while 26% of participants say they managed to achieve better application protection.
5. Facilitated deployment
Components in microservices architecture solutions can be deployed independently—without having to redeploy the whole software platform every time engineers add new features. Therefore, by automating the deployment process, banking organizations save time and costs while increasing productivity.
6. The flexibility in using different technology stacks
By choosing a microservices architecture to make a banking software system, companies eliminate the need for a long-term commitment to a technology stack. As services are loosely coupled, software experts can use different programming languages, frameworks, libraries, and databases to create different modules.
In a similar way, when introducing major changes to an existing component or building a service, software developers can employ new technologies. As a consequence, it is possible to choose a tech stack tailored to every specific case.
To learn more about the use of microservices architecture in banking, let’s consider a true-life example of Monzo.
How Monzo created a digital bank on microservices
Based in the UK, Monzo is an online bank platform and marketplace that provides customers with access to a variety of financial products and services. Established in 2015, the startup managed to raise $648.1 million over 20 rounds. As of 2020, Monzo had more than 4 million customers with $1.38 billion in transactions so far.
From the very beginning, the company’s goal was to develop a highly available, fault-tolerant, and responsive infrastructure while ensuring a seamless user experience. Monzo saw that consumers often experienced delays in accessing services or carrying out operations. For instance, users could now view their balances in real time as transactions could take 48 hours to be displayed in client statements.
To deliver scalability, resilience, and performance while minimizing delays, Monzo built a microservice architecture solution using AWS for its core banking system architecture. Employing Kubernetes for app deployment and containerization, the organization achieved better agility and fault tolerance. At the moment, Monzo runs 1600+ microservices on AWS.
How Surf can help you build a microservice architecture solution
Here at Surf, we often recommend our customers to create microservice architecture, as it allows for enabling scalability, high availability, and fault tolerance. With improved deployment speed and facilitated infrastructure maintenance, organizations reduce time to market and expenses, this way faster delivering new functionality and customizations.
Our software experts have used this architectural model in dozens of projects, delivering software systems to industries such as banking, insurance, hospitality, and entertainment. Employing the technology stack provided by cloud providers and best DevSecOps practices, we ensure data security and compliance with regulations like PCI DSS and GDPR.
If you aim to launch a banking application and want to be aware of its approximate cost and timeline, read our guide on this topic.
To get a project consultation, you are welcome to contact our team. We will soon get back to you and help address all issues. With extensive experience in fintech software development, our specialists can assist you in preparing a technical specification, choosing a technology stack and architecture, as well as prioritizing features.