Svetlana ShevchukIf you’re thinking about building a distributed payment system architecture, there are a number of key points you’ll need to bear in mind.
This article sets out some of the advantages of developing a system this way and gives you an overview of the best practices to follow to make sure what you end up with is both easy to use and robust enough to meet real-life security and scalability challenges.
Table of Contents
Distributed architecture – a recap
The term distributed architecture describes any architecture in which components and services are spread across multiple servers that work together as a single cohesive system. There are a number of different approaches that come under the distributed architecture umbrella. These include:
Peer-to-peer (P2P) architecture: In a P2P network, all participating machines act as both clients and servers. They communicate with each other directly rather than going through a centralized authority.
Distributed Ledger Technology (DLT) and Blockchain: With DLT and blockchain technology, transactions are recorded across many computers. Each one acts as a node and is used to validate transactions. Blockchain is a specific subtype of DLT that uses blocks linked in a linear, chronological order to record transactions.
Sharded databases: In this model, data is distributed across multiple databases (shards), with each shard holding a portion of the data. Payment systems with very high transaction volumes might use sharding to make sure data retrieval and storage operations run smoothly.
Microservices architecture: A very flexible type of architecture that’s commonly found in a wide range of tech fields. It’s used to break down an application into smaller, independently deployable services that communicate over network protocols.
The principal goal of using any kind of distributed architecture is to reap the benefits of decentralization. This makes it an excellent fit for payment systems.
Benefits of using a distributed payment system architecture
Distributed architecture is a popular choice in many areas of modern fintech software development because it brings a number of advantages to the table.
Scalability
Any payment system worth rolling out has to be able to cope with a high volume of transactions. It also needs to be able to deal with sudden surges in the number of transactions without the whole system going down. Distributed systems can easily handle high or increased transaction volumes by adding more nodes to the system.
High availability
Another benefit of decentralization is that distributed systems can handle faults better. If one node fails, the system will simply reroute transactions to others, which means continuous availability. The customer never notices that anything went wrong because their experience is seamless.
Reduced latency
If you develop a distributed system with nodes that are geographically spread out, this can help minimize latency. The system can serve requests from locations as close as possible to the user, which means faster transaction processing times.
Good security
Plenty of businesses use an integrated cloud-based payment system to process payments and reconcile their banking records. This wouldn’t be possible without the kind of modern security protocols and high-end encryption that comes as standard with this kind of software.
And indeed, this is a big plus with distributed architecture. The very fact it’s decentralized makes it much more difficult for attackers to compromise the system. Even if they manage to breach one node, the system as a whole remains secure.
Better resource utilization
The distributed design leads to efficiencies across the board. Resources such as processing power, memory, and storage are distributed across all nodes of the system. Not only does this lead to more efficient resource allocation but also saves on cost. That’s because there’s no need to add expensive centralized upgrades to cope with small, localized spikes in demand.
Essential elements of a payment system architecture
There are a few key points to bear in mind when building a payment system. The use of technology in financial services advances all the time, but there are some fundamental aspects of payment architectures that you need to put in place regardless of the details of the build.
Open architecture user interface layer
The user-facing layer needs to be compatible with third-party payment apps so that it’s straightforward for the customer to navigate. This also facilitates embedded payments, which is vital for many vendors who want to provide a one-click service.
Application and orchestration layer
This acts as the engine room of payment processing so needs to handle a variety of value units and payment networks. The orchestration layer has to make sure that all systems involved in a payment (such as those checking for fraud) communicate with each other smoothly.
Cloud-based functionality
Since you’re building a distributed architecture, you need the cloud. This lets the system take advantage of globally distributed processing capabilities and makes sure transactions happen quickly. It allows the system access to both structured and unstructured datasets that it can pull information from in real time.
Best practices for building a distributed payment system architecture
Now let’s cover a few of the best practices to follow during your build. Many of these are fairly self-evident, but it can be useful to bear in mind their relevance to payment systems in particular.
Select an appropriate tech stack
The tech stack is the foundation of your payment system, so getting it right is paramount. A lot will depend on the exact nature of the system. You’ll need to consider the expected volume of transactions and the specific security requirements, for example.
Assuming you’re building a payment system that features real-time processing, you should think about using in-memory databases. You should also choose tools that will scale easily so the system can cope with increased demand further down the line.
Put security front and center
This is crucial, as payment systems by their very nature handle sensitive financial information. Most fintech solutions worldwide incorporate end-to-end encryption to protect data both in transit and at rest. On top of this, they will also often include other data protection assurances that comply with local regulations.
For example, Canada’s MogoTrade investment platform deploys TLS for all transactions, while in the UK, software that simplifies accounting for self employed professionals will be ISO27001 certified and GDPR compliant.
Regular penetration testing and vulnerability assessments are a must so you can discover any potential weaknesses and fix them. As you develop the system, don’t forget to stay updated on the latest security threats. It’s also a good idea to implement access controls to limit exposure to potential threats.
Expect failures and design for them
One aspect of distributed systems to bear in mind is that an individual node should be able to fail without it affecting the system as a whole. That means you need to design your system architecture to be resilient to failures. Think about using strategies such as:
- redundant systems
- backups
- disaster recovery plans
- mechanisms for seamless failovers
Prioritize data consistency
It can be challenging to make sure that data across all nodes in a distributed system remains consistent. Challenging – but not impossible.
You can go some way toward achieving this by implementing protocols and mechanisms such as two-phase commits or vector clocks to handle data inconsistencies. In the end, this really comes down to your own judgment. Depending on the needs of the system, you might decide to favor strong consistency, eventual consistency, or even a hybrid approach.
Continuous monitoring
Monitoring is key for system health. Keep track of metrics such as transaction rates, response times, and error rates. It’s not a bad idea to set up automated alerts for unusual system behavior. This can help you detect any potential issues at an early stage so you can fix them before they cause havoc.
Incorporate rate limiting functionality
At some point, every payment system experiences high traffic. The last thing you want is for it to buckle under the strain. Set up rate limiting to make sure no single user can send more requests than the system can handle.
This has the twin virtues that it protects against malicious attacks as well as innocent but huge spikes in volume. It helps maintain top system performance and minimizes downtime.
Regular scalability testing
Your system should be capable of handling the increased load as transaction volumes grow. Carry out regular stress and load tests to simulate high-traffic scenarios.
That way, you can identify potential bottlenecks in the system and address them. It also gives you some insight into when and how to scale. For example, should you add more power to existing nodes or add more nodes?
Robust documentation
It’s a well-understood best practice for any kind of build, but it’s so important it bears repeating. Comprehensive documentation is the cornerstone of effective system management.
Make sure to document everything from system architecture and design decisions to operational procedures and troubleshooting guides. There’s no substitute when it comes to keeping things consistent. Any new team members joining the project will be happy about it too.
Invest in training
Finally, remember that a system is only as good as the people who operate it. Once the build is ready to launch, training the people who are going to use it is essential.
This should encompass all sorts of topics such as:
- technical training on the technologies used
- domain-specific knowledge about payment processes
- regulatory requirements
- awareness of common fraud patterns
Final thoughts
Using a distributed payment system architecture lets you take full advantage of decentralized processing. This makes it an ideal choice to meet the needs and expectations of today’s user.
Following the best practices set out here will help you create a system that is robust, scalable, and secure – ready for use in real-world applications.
Veljko Petrović