7 benefits of adopting microservices in the financial sector

As digital solutions continue to shape market dynamics, certain architectures emerge as key pieces to maintain the agility and adaptability required by the current environment.

In response, adopting microservices has become a key strategy for financial institutions looking to optimize their operational agility and improve their ability to respond to changing market conditions.

What are microservices?

Microservices are a software architecture approach that breaks down a monolithic application into multiple small, independent services that can be developed, deployed, and scaled autonomously.

This approach differentiates them from traditional applications, where each component is tightly coupled with the rest. Microservices allow different parts of the system to operate independently and be updated or repaired without affecting the entire application.

This approach, which has gained popularity across various industries, has become one of the 2024 trends in the banking sector due to its advantages in terms of scalability, flexibility, and resilience. It also enables banks to accelerate innovation processes and better adapt to new regulations, changing customer needs, and market fluctuations.

Benefits of microservices in the banking sector

1. Improved operational agility

One of the biggest challenges for banks is the need to quickly adapt to changing customer expectations, new regulations, and technological innovations. A monolithic architecture, where a change in one part of the system can affect the entire application, limits the responsiveness of banking institutions. Microservices, on the other hand, allow greater operational agility, as each service is independent and can be updated or adjusted without disrupting the operation of other services.

For example, if a bank wants to improve its online payment system, it can do so by implementing a new microservice specifically for that function without affecting other systems, such as mobile banking or loan operations. This allows financial institutions to innovate faster, launch new features, and adapt to market demands without long downtimes.

2. Efficient scalability

The banking sector handles enormous volumes of daily transactions, and this number can increase significantly during specific events, such as peak shopping periods or financial crises. With a monolithic architecture, scaling an entire system to manage demand peaks can be costly and complex. However, with microservices, banking institutions can scale only the parts of the system that need it, optimizing resource usage and reducing operating costs.

For example, if demand for a specific service, such as transaction processing, suddenly increases, the bank can scale just that microservice without needing to allocate more resources to other parts of the system that don't require it at that time. This ensures more efficient use of resources and better capacity to respond to fluctuations in demand.

3. Resilience and business continuity

In the banking sector, system reliability is crucial. A failure in one part of the application can have serious consequences, from service disruptions to loss of customer trust. Microservices architecture offers greater resilience because services are decoupled from one another. This means that if one microservice fails, the others can continue to function, reducing the risk of a total system outage.

Additionally, microservices allow for easy problem detection and resolution. By isolating a specific service, banks can quickly identify the source of a failure and resolve it without affecting other services. This improves business continuity and minimizes downtime.

4. Facilitates the adoption of new technologies

The banking sector is constantly adopting new technologies to improve customer experience, optimize processes, and comply with changing regulations. In a monolithic architecture, integrating a new technology or performing an upgrade can be complicated, as it requires modifying large parts of the system. Microservices, on the other hand, allow for faster adoption of new technologies, as they can be integrated as independent services without altering the overall system structure.

For example, if a bank wants to incorporate artificial intelligence (AI) to improve data analysis and personalize the customer experience, it can create a specific microservice to handle that function without redesigning the entire banking system. This allows financial institutions to stay at the forefront of technology without the complications and risks typically associated with monolithic systems.

5. Improves customer experience

One of the main goals of the banking sector is to improve customer experience through fast, personalized, and reliable services. Microservices facilitate this process by allowing banks to create more modular and personalized services. This means they can offer specific features for different customer segments without having to change the entire system.

For example, a bank could implement a microservice to offer personalized recommendations based on a customer's transaction history. Another microservice could be responsible for sending real-time alerts about unusual account activity. By working independently, these microservices allow banks to offer a personalized and agile experience to each customer, improving overall satisfaction.

6. Optimization of internal processes

Traditional banks often struggle with legacy systems and internal processes that can be inefficient and slow. Adopting microservices can help optimize these processes by allowing for greater automation and simplification of internal operations. By breaking down a complex system into smaller, more manageable components, banks can more easily identify and eliminate bottlenecks, improve collaboration between departments, and streamline the development of new features.

For example, microservices can help automate loan processing, from application to approval, eliminating the need for manual intervention at each step of the process. This not only speeds up response times but also reduces human error and improves the overall efficiency of the bank.

7. More efficient regulatory compliance

The banking sector is highly regulated, and regulations can change frequently. Complying with these regulations efficiently is a constant challenge for financial institutions. Microservices allow banks to quickly adapt to regulatory changes by implementing specific services to manage regulatory compliance.

For example, if a new regulation requires the bank to report on a specific type of transaction, the bank can create a dedicated microservice to collect and process the required information without needing to modify the entire system. This allows banks to comply with regulations more agilely and efficiently without compromising the overall functioning of their operations.

Challenges of adopting microservices in the banking sector

While the benefits of microservices are clear, it's also important to recognize the challenges banks may face when adopting this architecture:

• Complexity in management: Dividing a system into multiple microservices can lead to difficulties in managing and coordinating the various components. This requires a solid management infrastructure and skilled teams to oversee the operation of each service.
• Security: Microservices involve a greater number of system entry points, which can increase the attack surface for potential security threats. Financial institutions must implement advanced security measures to protect each microservice from potential vulnerabilities.
• Migration from legacy systems: Migrating from a monolithic architecture to microservices can be complex, especially for banks with old legacy systems. It's crucial to have a well-planned migration strategy to avoid service disruptions.

Transform your organization's agility with microservices

At 2Brains, we help you adopt a microservices architecture that will enhance the agility, resilience, and scalability of your operations while improving your customer experience and optimizing your internal processes.

Fill out our form and discover how we can transform your technological infrastructure to keep you at the forefront of innovation in the financial sector.