Modernize Your Payment System with Microservices: Part 1 – Are Microservices Right for You?

Nov 23, 2023 | Brett Westgarth

Do you know how your online payments are processed? How do a few clicks and taps pay for your groceries, an online purchase, or your ride share? Behind the scenes, there are complex systems and architectures that enable these transactions to happen smoothly and securely. But these systems are not static; they are constantly evolving to meet the changing needs and expectations of customers, regulators, and businesses. In this blog series, we will explore effective strategies and best practices for migrating from legacy systems to modern payment architectures, focusing on the following aspects: strategic decomposition, ensuring resilience, security in transition, modernization framework, cost efficiency, and cultural shift.

In this first blog, we will cover the following topics:

  • What are the differences and trade-offs between monolithic and microservice systems?
  • Why should you evaluate the needs and goals of your payment system, and align them with your business and IT objectives?
  • How to decide if microservices are right for your payment system, and what are the benefits and challenges of migrating to them?

What Are Monolithic and Microservice Systems?

According to the 2023 Canadian Payment Methods and Trends Report, 9 out of 10 Canadians tapped a payment card at least once a month for a store purchase in 2022. In 2023 and beyond, payment systems are essential for any business that wants to offer fast, convenient, and secure payment experiences to its customers. However, not all payment systems are created equal. Some payment systems are based on systems that are monolithic in nature, while others are based on architectures that are microservice-oriented. How do you know which one is better for your business? And how do you migrate from one to another?

Monolithic systems are ones which consist of a single, large, and complex application that handles all the business logic, data processing, and user interface. Monolithic systems have some advantages, such as:

  • Simplicity: Monolithic systems are easier to develop, test, and deploy, as they have a single codebase and a single deployment unit.
  • Consistency: Monolithic systems are more consistent and reliable, as they have a single version and a single source of truth.
  • Compliance: Monolithic systems are more compliant with the latest standards and regulations, as they have a single set of rules and policies.

However, monolithic systems also have some disadvantages, such as:

  • Lack of Flexibility: Monolithic systems are harder to change and update, as they have a tight coupling and a high dependency among the components, requiring a full redeployment of the entire system for any modification. In October, 2023, an outage of the Japanese interbank system lasted more than a day and halted over $81B in transfers.
  • Increased Costs: Monolithic systems are more expensive and wasteful, as they have a high maintenance and operational cost, requiring a large and dedicated infrastructure and staff.
  • Security Considerations: Monolithic systems have different sets of vulnerabilities and risks than microservices, as they have a large and complex attack surface and a high impact of breaches. This means that an attacker can exploit a single vulnerability to compromise the entire system and data, and that a breach can cause a severe damage and loss to the business and its customers.

Microservice systems are ones which consist of a collection of small, independent, and loosely coupled services that each perform a specific function. Microservice systems have some advantages, such as:

  • Update Ease: Microservices can be updated, deployed, and scaled independently, without affecting the rest of the system, enabling faster and more frequent delivery of new features and improvements. This allows for rapid adaptation to and integration with new payments standards, enhanced functionality, or even new payment processors.
  • Scalability: Microservices can handle variable and unpredictable workloads, by dynamically adjusting the number and size of the services, according to the demand and capacity. Seasonal payments spikes—think Cyber Monday or the end of a fiscal quarter—can be elegantly addressed by a scalable microservices architecture.
  • Flexibility: Microservices can leverage the latest technologies and frameworks, by choosing the most suitable ones for each service, without being constrained by the legacy system.
  • Security: Microservices can enhance the security of the system, by isolating the services and applying the appropriate security measures and policies for each service, reducing the attack surface and the impact of breaches.
  • Customer Experience: Microservices can improve the customer experience, by providing faster, more reliable, and more personalized payment services, tailored to the customer needs and preferences.

However, microservice systems also have some disadvantages, such as:

  • Complexity: Microservice systems are harder to design, coordinate, and monitor, as they have a distributed and heterogeneous architecture, requiring a high level of communication and integration among the services.
  • Inconsistency: Microservice systems are more prone to errors and failures, as they have multiple versions and multiple sources of truth, resulting in data inconsistency and service unavailability.
  • Overhead: Microservice systems are more resource-intensive and time-consuming, as they have a high network and infrastructure overhead, requiring a sophisticated and automated deployment and management process.
  • Culture: Microservice systems are more challenging and demanding, as they require a new culture and mindset, embracing DevOps methodologies and the continuous delivery and improvement practices.

Both monolithic and microservice systems have their pros and cons, and there is no one-size-fits-all solution for every business. Therefore, it is important to align your business and IT objectives, and to evaluate the needs and goals of your payment system, before deciding whether to migrate from a monolithic system to a microservice system.

Why You Should Evaluate Your Payment System

Before you decide to migrate your payment system, you need to understand the current state and the desired state of your system, and the gap and the opportunity between them. You also need to consider the value and the impact of migrating your system, and the risks and the costs involved in the process. To do this, you can ask yourself some questions, such as:

  • What are the main pain points and challenges of your current payment system?
  • What are the main benefits and opportunities of your current payment system?
  • What are the main drivers and motivations for migrating to a microservice system?
  • What are the main risks and costs of migrating to a microservice system?

By answering these questions, you can identify the gaps and opportunities of your current payment system and determine the value and impact of migrating to a microservice system. You can also prioritize the services that are most critical and beneficial for your business and plan the migration process accordingly.

How to Decide If Microservices Are Right for Your Payment System

After you have evaluated your payment system, you can decide if microservices are right for your system, and what are the benefits and challenges of migrating to them. To do this, you can use some criteria, such as:

  • Business Alignment: How well does your payment system align with your business strategy, vision, and goals? How does your payment system support your business value proposition, differentiation, and competitive advantage? Here are some business examples of why to migrate:
    • To develop features independently, avoid long development cycles, and respond to market and customer needs faster.
    • To reduce costs by scaling only the needed services, avoiding resource wastage, and improving performance.
    • To simplify your codebase, improve your modularity, and reduce your dependencies by breaking down the monolith and isolating your services.
  • Technology Alignment: How well does your payment system align with the latest technology trends, standards, and best practices? How does your payment system leverage the new and emerging technologies, frameworks, and tools? Here are some technology examples of why to migrate:
    • To use different technology stacks for different services, depending on the best fit for each service. This allows developers to choose the most suitable tools and languages for each service, rather than being constrained by the monolith’s technology choices.
    • To improve the testability and maintainability of the application by reducing the scope and complexity of each service. This enables developers to test and debug each service in isolation, rather than dealing with the entire monolith’s codebase and dependencies.
    • To enhance the security and resilience of the application by isolating the failure domains and encrypting the communication between services. This prevents a single service’s failure from affecting the whole system and protects the data from unauthorized access or tampering.

By using these criteria, you can assess the strengths and weaknesses of your payment system as well as compare the advantages and disadvantages between monolithic and microservice systems. You can also weigh the benefits and challenges of migrating to microservices and decide if they outweigh the benefits and challenges of staying with a monolith.

Migrating from a monolithic system to a microservice system is not a simple task. It involves significant planning, execution, and monitoring, as well as the adoption of best practices and strategies that can facilitate the transition and mitigate the potential issues. However, it can also be a rewarding and beneficial task that can improve the performance, functionality, and security of your payment system, as well as the satisfaction and loyalty of your customers and stakeholders. Therefore, it is important to decide if microservices are right for your payment system, and to align the migration process with your business needs and goals to achieve the best results and outcomes.

Closing Thoughts

The payment industry is undergoing a rapid transformation, driven by the emergence of new technologies, regulations, and customer expectations. To keep up with these changes, organizations need to modernize their payment systems and architectures, which often rely on legacy applications that are outdated, inflexible, and costly to maintain. However, migrating from legacy systems to modern architectures is not a simple task, so we hope you will find this series useful and informative. In part 2 of the series will be a blog on strategic decomposition. Thank you for reading and we invite you to follow Level19 for more great content!

#PaymentSystems #DigitalTransformation

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