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Bringing Monolithic and Microservice Architectures together in Banking Software
Bringing Monolithic and Microservice Architectures together in Banking Software

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What is Core Banking System?

Core banking is the beating heart of a financial institution. It includes all the services that the bank provides to its clients and all the business functions required to run a business. This includes customer and prospect management, payment processing and security transactions, regulatory reporting, risk assessment, position management, e-banking interface, and so on. In addition, key platform requirements such as reliability, availability, security (both authentication and authorization), and complete controllability are very important.

Core Banking: The benefits of the monolithic approach

Monolithic architectures cover all major banking services in a single, fully integrated software. It is important to note that you do not need to develop interfaces between services because, for example, things like a payment application and a store position application are part of the same IT solution. And because the object model is consistent across all components, there is no need to invest in complex mapping between different areas.

A solid support system

The choice of a single software to perform all functions of the bank ensures a privileged relationship with its supplier, increasing their support. Thus, the entire platform is much more reliable and resilient to single-point failures, especially during an upgrade.

The introduction of a single software with a relatively standard configuration also opens the door to software-as-a-service (SaaS) solutions. Indeed, SaaS banking software vendors will almost certainly have a standard offering with a limited number of out-of-the-box extensions. Typically, a move to SaaS can result in significant savings in maintenance and upgrades, and can even provide full back-office outsourcing while maintaining a cost-effective business and focusing on critical areas such as customer management.

Why is a microservice architecture a good architecture?

Compared to monolithic architectures, a microservices application is relatively easy to learn. For example, safety in numbers. If one item fails, the team can implement another service without changing the entire architecture, which speeds up delivery. Scaling to meet the needs of a particular item is also easier with smaller components. And since the application can run independently while changes are being made, fast and controlled updates can be implemented without slowing down or stopping other components. In addition, because the microservice architecture is more flexible, the team can use any language or platform suitable for the job, allowing them to perform tasks such as configuring servers without interrupting communications between services.

Microservices architecture brings much-needed flexibility to a sector known for its relative inertia and resistance to change. New targeted applications are developed by small teams every day. Your core banking system will be able to respond effectively to changes in regulations, best practices, and customer needs by choosing the right architecture implementation.

Any new fintech application with a new business approach can be quickly integrated, ensuring synergistic development and use. Microservices architecture also fosters niche markets by allowing for quick, easy, and affordable integration of single-purpose software that can target specific areas.

The reduction of costs and the reduction of risks

The decentralized architecture provides all the same services as a centralized bank, but without intermediaries. Smart contracts and P2P lending reduce costs and guarantee security without affecting the quality of service. In addition, the implementation of a wide range of services negates the likelihood of a complete failure of the main banking system, since the services are independent of each other.

However, there is no perfect approach. Different architectures offer different benefits in different contexts. Back-office activities would benefit from a monolithic approach. While a microservices approach would be more appropriate for customer-centric tools like e-banking and smartphone apps since it provides a range of options to the users. Microservices applications are divided into their main, independent components, so many negative problems can be solved in isolation.

What to choose?

Both approaches can be reconciled in an efficient banking system. Basic banking data and back-office tasks can be integrated into a monolithic system. The data can then be accessed by multiple microservices performing state-of-the-art tasks. One can do risk analysis and portfolio optimization, while the other does electronic banking.

 


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