How Event-Driven Architecture Enhances Financial Software Systems.

In the dynamic world of financial services, where transactions & user engagements are rapid, complex, and often unpredictable, having a software architecture that can respond in real-time and without blocking actions is crucial. This is where Event-Driven Architecture (EDA) comes into play, offering a robust solution to enhance the performance, scalability and usability of financial systems.

What is Event-Driven Architecture?

Event-Driven Architecture (EDA) is a software design pattern that enables a system to respond to events, such as changes in state or updates, which trigger specific actions or workflows. Unlike traditional request-driven architectures, where actions are performed only when explicitly requested or asked for, EDA allows for actions to be executed outside of the scope of the event producing system/component, making the environment asynchronous and allowing for continuous monitoring and automatic responses to events as they occur.

Key Components of Event-Driven Architecture

The key components of an Event-Driven system typically include, but are not limited to, the following:

1. Event Producers: These are the systems or components within a system that are the sources of events. In a financial system, event producers could be anything from customer transactions, website interactions, a business processes trigger to market updates. These events are emitted to a channel or a bus.
2. Event Channels: These are the pathways through which events are transmitted from producers to consumers. Often these channels are known as event buses or event streams. Examples include: RabbitMq, Apache Kafka, Azure Service Bus, Azure Event Grid, AWS EventBridge, and more.
3. Event Consumers: These are the components or services that react to the events that have been produced onto the event channels. When reacting to an event, they generally perform specific actions to that event type, for example, a consumer might trigger a fraud detection algorithm when a large transaction occurs and notify a human for interrogation before automatically processing the transaction.

Other components in some Event-Driven Systems are Event Dispatchers and Event Stores, just to name a few.

Request-Response vs Event-Driven Systems

In traditional request-response systems, the application processes each request sequentially, often resulting in bottlenecks and delays, especially when handling a high volume of transactions. This synchronous approach can strain the system’s resources and limit scalability.

In contrast, event-driven systems leverage queues and asynchronous processing to decouple the components, allowing them to operate independently. Events are placed in a queue and processed as soon as resources (Consumers) become available, enabling the system to handle large volumes of events efficiently without blocking other operations. This approach not only enhances performance but also improves the system’s resilience and scalability, making it ideal for complex financial software solutions.

Why Event-Driven Architecture is a Game-Changer for Financial Software Solutions

1. Improved Performance and Scalability

In the financial sector, where thousands of transactions can occur every second, performance and scalability are paramount. EDA allows financial software to handle large volumes of transactions simultaneously by processing events asynchronously and in parallel. This non-blocking approach ensures that the system can scale effortlessly, maintaining performance even during peak transaction times.

2. Real-Time Data Processing

Financial institutions rely heavily on real-time data to make informed decisions. With EDA, systems can process and react to data in real-time, allowing for immediate responses to market changes, risk assessments, and customer actions. This capability is vital for services like fraud detection, where every millisecond counts, or report generation to ensure a seamless user experience.

3. Enhanced Flexibility and Modularity

EDA enables the development of loosely coupled services, meaning that each component of the system or enterprise can operate independently and be updated or completely replaced without affecting the entire system. This modularity is particularly beneficial in the financial sector, where regulatory changes or new market conditions often require quick adaptations.

4. Better Fault Tolerance

In an event-driven system, if one component fails, it doesn’t necessarily bring down the entire system. Using a well thought out architecture, one can isolate failures and reroute events to ensure continuous operation. This resilience is critical in many financial systems, where downtime can result in significant financial losses.

Implementing Event-Driven Architecture in Financial Software

To implement EDA in financial software, it’s essential to consider the following:

• Event Sourcing: Store the state of the application as a sequence of events within an Event Store. This allows for better traceability and auditability, which are crucial in financial services. You could possibly leverage: EventStoreDb, Azure Cosmos DB, Amazon DynamoDB, Cassandra, MongoDb, Redis Streams and PostgreSQL with Event Sourcing Extensions.
• Scalable Infrastructure: Use cloud-based solutions like Azure Event Grid or AWS EventBridge to handle the scalability requirements of an event-driven system.
• Security Considerations: Ensure that each event is authenticated and encrypted to prevent tampering, as financial data is highly sensitive. This can be achieved in a number of ways such as having a structured event schema containing a hash of the whole event (HMAC signature). It is recommended that this hash asymmetrically signs each message with a once off key/GUID to make it more secure. Should the events contain sensitive information, it is also recommended to encrypt the payload using an algorithm such as AES256.

Implementation Scenario’s:

One of the most common ways EDA is leveraged in the Financial Services Sector is for data processing pipelines when the market load is available or for processing user transactions into the downstream fund administrator system and running all the necessary screening processes & data enrichment before sending the data through.

Some other useful scenarios are:

1. Data Calculations and Preparation: Denormalizing datasets

• In a secure portal, a common step a user takes is drilling down into their investments to see their fund performance by means of the IRR.
• This IRR calculation can be quite processor intensive and generally takes some time. Calculating this on the fly can be a frustrating experience for the user, while they watch and wait for the value to load on screen with navigation to other parts of the system often being blocked.
• One mechanism, leveraging EDA, is to raise an event when a user logs into the system: We can call this a “UserLoggedInEvent”.
• When this event is raised, a consumer listening for this event, could start running the IRR calculations for the user’s funds and portfolio and storing the data in a cache or updating a denormalized view of the investment.
• By the time the client navigates to the page that displays the IRR, often it is already generated or almost completed with the generation, thus speeding up page load times and making the experience of the user a pleasant one without placeholder spinners.

2. Report Generation

• Similar to the IRR calculations, generating reports such as a transaction statement or balance history can often take quite some time. Due to the time taken, the experience of a user sitting and waiting for the report download to complete before being able to navigate away can be frustrating and blocking to their desired workflow on your secure portal.
• Using EDA to generate the reports in the background and then push the results to the user leveraging technologies such as SignalR or WebRTC, allows for continued navigation and an unaffected experience for your users engaging with your systems. Should these users be internal users such as members of Front Office (Client Relationship Management and/or Client Service Representative team members), acting on this in a bulk manner and saving a few seconds of waiting per report could result in valuable time saved within your organisation, where these timesaving efficiencies can be leveraged for other critical work items that need to be executed.

3. Correspondence/Notifications and throttling

• Mass correspondence events, such as when quarterly statements are due to be emailed to clients, can often put large strain on systems causing bottlenecks throughout the enterprize and often on unintended systems due to database locks, as one example.
• Leveraging Event-Driven architecture to throttle distribution rates by queuing notification events and controlling the number of parallel consumers and the rate in which they can access resources allows for an effective way to control throughput. This also allows for quick and easy recovery at the current state if systems go down, without duplicate notifications being sent to the clients.

These are just a few examples of how and where to implement Event-Driven Architecture within the financial services sector, but EDA is not just limited to here and can be used across a wide range of industries.

Conclusion

Event-Driven Architecture is transforming the way financial software is being developed and deployed.

By enhancing performance, scalability, and resilience, EDA provides a solid foundation for building future-proof financial software solutions. As the financial industry continues to evolve, embracing EDA will be key to staying competitive and delivering exceptional services to clients.

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Protium specializes in developing innovative, secure, and scalable financial software solutions tailored to the unique needs of the financial services industry. Contact us today to learn how we can help you leverage Event-Driven Architecture for your business needs.