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Microservices: The Building Blocks of Success?

By 3 minute read

Microservices versus monolith - Do the benefits of moving to a modern, modular approach offset the challenges of making the change? It’s a debate that has raged across industries and markets for many years now. But with disruption and uncertainty taken to a whole new level during the global pandemic, the need for greater speed, agility and customer-centric solutions is driving even the naysayers to explore their options.

In a recent IBM survey of more than 1,200 IT executives and developers in large and mid-market companies, the majority agreed that the benefits of a microservices approach were real, and they were, therefore, likely to increase their reliance on microservices (78%) or adopt microservices (56%) within the next two years.

White paper: The use of AI in AML Transaction Monitoring

You don’t have to look far to find examples of modern financial companies that have reaped the benefits of a microservices architecture. There is an increasing number of app-based challenger banks based on thousand core-banking microservices. This infrastructure helps fintechs scale and surpass a million of customers.

In contrast, most large financial institutions were built on conventional monolithic platforms, where all core banking services were developed as a single, fully integrated IT solution. This also has its benefits – there is no need to build interfaces between services. Payment processing and account monitoring, for example, can easily communicate with each other as they form part of the same technology stack.

The difficulty with this model arises when dealing with where the tasks become so large and complicated, they need to be adapted at regular intervals. This requires a new approach to systems development - one that allows quick adjustment and scaling to user needs and requirements.

Customer onboarding and transaction monitoring is a prime example. Financial institutions must manage an ever-growing number of AML regulations, which must be continually updated to reflect new and sophisticated forms of financial crime. An efficient AML and transaction monitoring system pulls millions of client transactions and processes them against hundreds of business rules, for different timeframes, data points and threshold settings.

A chain is as strong as its weakest link

At the same time, these systems must also interact with independent services that flag transactions against Politically Exposed Persons and sanction watchlists. With the amount of data to be processed from disparate sources, and to manage this on a scale that can facilitate business growth, reliable delivery is vital at each part of the chain.

This is where microservice architecture comes into its own. In contrast to legacy technology, the microservices model breaks software development into smaller, independent units, where each unit works closely together but executes a particular function or service.

Modular AML and transaction monitoring platforms use this approach to develop scalable solutions that can quickly adapt to changing user needs. Specific services or functions can be worked on in isolation rather than working on the platform as a whole and, as they make use of the cloud, they can be created and scaled from any location in the world. This allows separate compliance teams to work on dedicated parts of the complex technical system while covering a single and focussed business capability.

API technology allows microservices to communicate with one another securely but also act independently. This means AML systems can link up internal data siloes with external data sources safely. All of these data points can then feed into an overall insights engine, which uses granular rules and machine learning models to create a clear picture of a client’s current and historic behaviour, a network of relationships and a comparison to its peers.

Ebook: How to Leverage AI for AML Compliance

Take what you need

As well as internal operational alignment, a key benefit of the microservices approach is that it allows individual parts of the output, data, and intelligence to be deployed separately. Each of the microservices can be productised to benefit the individual client’s internal operational tools. So, where a company already has a strong in-house CRM solution, an external partner can enhance existing processes by plugging into this system rather than replacing it, for example adding more advanced risk detection capabilities.

Using cloud technology adds another layer of efficiency. Microservices can operate on different servers but make use of the cloud to provide access from one location. Any back-end changes made via the cloud will not disrupt the service - updates and new features can go live instantly and with no downtime.

Intelligent future-proofing

As microservices become more intelligent, they can also provide valuable data insights, both on the end customer and the future development routes for the solution - the platform becomes more sophisticated and highly tuned with each new transaction it processes.

At Sentinels, we are firmly on board with a microservices approach. We believe that microservices allow developing products and services to focus on precision and fulfilling client-specific needs by flexibly supplying different parts of the solution.

Ebook: How to set efficient AML Transaction Monitoring Rules