How to Boost Efficiency in Financial Systems with Microservices

Microservices are applications-based services organized in an architectural pattern and work (communicate and function) based on protocols.

Microservices are gaining relevance in banking and financial services due to their modular architecture and configurability, offering better agility, customizability, and scalability over traditional monolithic systems.

Microservices can address the complexities associated with traditional systems and improve their fault tolerance and reliability.

In this blog, you will learn how microservices can help transform banking operations and the benefits they offer.

Decoding Microservices Architecture: Key to Robust and Scalable Systems

Microservices architecture breaks down applications into smaller and independent services, each responsible for a specific business function. This architecture facilitates a modular approach to system building.

Unlike traditional monolithic architectures, where the components are tightly interwoven, and different teams specialize in different processes or services, microservices allow each service to be developed, deployed, and scaled independently.

This decoupled nature of microservices architecture offers greater flexibility and resilience to financial institutions, allowing them to innovate and respond to market needs with agility.

Below are the key characteristics of microservices:

1. Independent

Each service operates independently and is responsible for a specific function. However, each service works together by communicating with each other through well-defined language-agnostic application programming interfaces (APIs) to solve complex and significant business problems.

2. Decentralized

Since microservices involve various technologies, traditional centralized governance methods are ineffective. Instead, governance and data management are decentralized to promote agility and allow others to solve similar problems.

3. Continuous Delivery

Supports faster and more frequent deployments, which allows financial institutions to introduce new features, updates, and fixes with minimal disruption. This feature helps them respond quickly to the growing market shifts.

Benefits of Microservices in Financial Systems

Microservices architecture offers several benefits in the banking and financial sector. Below are some key benefits that financial institutions can leverage to boost their operations.

1. Scalability and Flexibility

Microservices enable financial systems to scale individual components in response to demand fluctuations.

For example, a bank can scale its payment processing service independently during peak times without affecting other services, optimizing resource utilization and cost.

Capital One —a bank holding company— adopted the microservices architecture to break down the monolithic system and scale the payment processing service during holidays. Microservices helped them handle increased transaction volumes without any performance degradation.

2. Improved Efficiency and Speed

With microservices, financial institutions can accelerate their development cycles, releasing new features and bug fixes faster. The architecture supports Continuous Integration and Continuous Deployment (CI/CD), which helps boost operational speed and reduces time-to-market for new products.

For example, at Goldman Sachs, the speed of software innovation is critical. The organization adopted microservices with DevOps principles to deliver containerized applications at scale across on-premises and cloud environments. This approach significantly reduced the time required to deploy new apps and updates.

With this approach, Goldman Sachs accelerated software delivery velocity from one build every two weeks to over a thousand per day.

3. Enhanced Security and Compliance

Microservices break monolithic systems into independent and isolated services, reducing the attack surface and enhancing the system’s security.

Besides, the microservices architecture allows fortifying each service with tailored security protocols and enables precise control and audit of data flows that help in meeting regulatory compliance.

For example, HSBC implemented microservices using AWS services such as Amazon ECS (Elastic Container Service) and Amazon EKS (Elastic Kubernetes Service). These microservices provided robust and advanced security, helping HSBC protect sensitive financial data and comply with regulatory requirements, such as GDPR, PCI-DSS, etc.

4. Resilience and Fault Isolation

In a microservices architecture, the failure of one service does not necessarily cascade to others, although they communicate with each other with APIs.

This helps improve the system resilience and isolate the fault to ensure higher system uptime, which is crucial for financial services where downtime can have significant financial, reputational, and legal implications.

For example, when ING — a financial institution with over 38 million customers across 40 countries — went through an agile transformation, it realized the need for a standardized platform and adopted a more agile and scalable approach to keep pace with the rapidly changing financial services landscape.

The financial institution transitioned from monolithic architecture to microservices-based architecture utilizing Kubernetes as the orchestration platform. This microservices architecture combined with Kubernetes’ robust orchestration improved the system resilience and isolated the microservices to prevent cascading or causing widespread outages due to failure in one or more individual services.

Conclusion

Microservices architecture is changing how infrastructure services are designed, built, and operated.

Financial institutions can leverage microservices to rapidly develop, deploy, and manage applications to boost efficiency and innovation. By embracing microservices, organizations can stay competitive and responsive to market needs as financial systems continue to advance.

At Anaptyss, we specialize in helping financial institutions transition to microservices architecture. With over 8+ decades of combined expertise, Anaptyss can help you overcome the challenges of monolithic systems and tap into the potential of microservices.