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How Microservices Is Enabling Agility And Resilience In The World Of Banking and Finance

In today’s digital age, how do companies in the financial sector continue to stay fast, competitive, and proactive? For sure, large-sized monolithic architectures holding together the technology backend are not the answer. It’s time for microservices, the antithesis of monolithic systems.

Today, companies of all sizes and across domains are deploying microservices architecture, using which singular monolithic systems are being decoupled into smaller and more independent services. Among the popular examples, Netflix adopted the microservices architecture to expand their streaming services to millions of customers.

With the microservices market anticipated to reach $32 billion by 2023, financial companies are also switching. Among the many use cases, it enables independent and dedicated APIs that allow them to integrate payment systems with diverse customer touchpoints, while scaling, updating, and removing product features.

How do microservices enable financial service companies to construct scalable, next-generation technology that allows them to respond to today’s market challenges? And how does it enable them to become more agile and resilient?

But first, why is financial agility more important now?

Most financial executives would respond to the question, “How important is financial agility to your organization compared to the pre-pandemic era?” by saying, “very significant.”

As the economic world assesses the impact of the COVID-19 pandemic into the future, global stakeholders including governments, business enterprises, and individual customers are being impacted in ways never imagined before. Amid all the uncertainty, it has become more critical that the banking and financial services sector continues to innovate digitally to provide value to their customers.

Aurelie L’Hostis of Forrester talks about “a majority of consumers migrating to digital-first experiences.” In this move, many consumers are accessing their financial accounts through their desktop or smartphones or making digital payments for the first time.

Overall, an agile finance function can deliver business value in terms of:

  • Adding to customer value
  • Allowing the organization to work as an interactive ecosystem
  • Creating shorter work cycles executed by cross-functional teams

In credit card transaction processing, financial agility is now delivering new capabilities for retail merchants including the ability to handle multiple payment methods, the use of card-based digital wallets, and the rise of account-to-account (A2A) payments.

How do Microservices enable financial agility?

With microservices, financial companies can make near real-time alterations to their customer operations and interfaces easily. Microservices-based applications offer higher flexibility and efficiency to financial companies, as compared to software developed using the monolithic architecture.

Microservices-enabled financial agility is empowering financial companies in the following ways:

  • Become more responsive to change

Merchants conducting credit card transactions are now expected to handle all forms of payment methods. This requires seamless integration with different APIs across a complex network. Through financial agility, finance companies can now respond to changing market requirements and customer demands.

  • Provides flexibility to expand

Microservices-enabled systems can be scaled independently, thus providing greater flexibility for application developers as they can scale one service at a time. Among technical teams, application scalability is the top preference at 69% for adopting microservices, followed by faster deployment at 64%.

  • Meeting consumer demands

Retail giant Walmart witnessed their conversions improve by 20% and mobile orders by 98% after migrating to the microservices architecture.

On their part, financial services organizations can meet changing consumer demands without experiencing any significant delays or disruption. Additionally, the agile and flexible architecture provided by microservices enables them to plan focused marketing campaigns with optimum user capacity in advance.

Why is Operational resilience crucial in finance?

With the increased risk of disruptions like cyberattacks, online fraud, and environmental disasters, financial services organizations need to change their strategic focus from risk mitigation to operational resilience. Technology advancements and the adoption of microservices architecture can help finance companies stay one step ahead of others.

The COVID-19 pandemic is the latest example of operational disruption. It requires companies to continue delivering customer services even through unexpected disruptions and to remain operationally resilient in the face of unusual challenges.

The Reserve Bank of Australia reported that the number of banking outages surged to about 2,300 total hours in Australia in 2020. This number was less than 1,000 in 2017.

When it comes to the financial sector, banks and financial markets are the foundation of the overall economic system. A payment system failure essentially means that the payment recipient does not get paid – a fundamental violation of market norms.

How do Microservices enable operational resilience?

For the financial services sector, operational resilience can be challenged by various triggers like;

  • The outage of a critical service following an upgrade failure
  • Change in industry regulations and scrutiny by external regulators
  • Change in top management
  • Technological innovations

As application developers rely on a microservices architecture to build an application, microservices at the application level can induce strong firebreaks between individual services, thus allowing components to fail independently without compromising the whole system.

Microservices-enabled operational resilience can empower financial companies in the following ways:

  • Providing uninterrupted services for enhanced customer experience.
  • Enabling financial systems that are built for essential resiliency requirements like high availability, failover, disaster recovery, and circuit breaking.
  • An API layer that is much easier to manage and secure.

Conclusion

Evolving from monolithic infrastructure to a microservices architecture is now the need of the hour. The adoption of microservices architecture is enabling product owners to make changes to software without fear of disturbing the core application. The microservices model has a lot more to offer to the financial sector with benefits like greater agility, easier scalability, and quicker deployment of new options and products.

While it true that some of these requirements can be fulfilled even without adopting microservices architecture, the difference is one of degrees. It’s often not about whether a change can be implemented in systems in existing architectures but about how much time and effort that takes. But business agility and operational resilience are becoming core requirements for financial services companies including credit card companies in an ever-evolving customer and regulatory landscape. In that scenario, even a difference of mere degree tilts the balance in favor of microservices.

At CoreCard, our credit processing platform is designed to provide both agility and resilience to all functional aspects of credit card programs by leveraging the most modern technology available. Is your organization considering how to leverage microservices architecture?

 

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