In our recent white paper ‘Technology Trends in Financial Services 2022’, we explained the importance of software engineering for gaining a competitive advantage in the industry. Since the start of the year, a lot has occurred on a macro level strengthening our belief that modern financial services must be based on a solid technical foundation to deliver the user experiences and business reliability needed for commercial success.

We see the role of the underlying technology (away from the customer-facing products) as being critical in enabling success in fintech in two main ways:

• Building customer trust – by guaranteeing operational resilience and optimal availability of fintech systems
• Exceptional user experience – rapid development of features facilitated by a tech stack that just works

These tenets, if you like, are core to the Erlang ecosystem, including the Elixir programming language and the powerful BEAM VM (or virtual machine). In this follow-up article, we will dive deeper into how your choice of tech stack impacts your business outcomes and why Erlang and Elixir will often be the right tool for the job in fintech. We also share some guiding principles that underpin our expert engineering team’s approach to projects in the financial services space.

What are the desirable characteristics of a fintech system?

Let’s first look at some of the non-negotiable must-haves of a tech stack if you are involved in a fintech development project.

A seamless customer experience

Many projects fail in the fintech space due to focusing only on an application’s user interface. This short-sighted view doesn’t consider the knock-on effects of predicted (user growth) or unpredicted changes (like the pandemic lockdowns). For instance, your slick customer interface loses a lot of its shine when it’s connected to a legacy backend that is sluggish in responding to requests. 

Key point: When it comes to modern financial services, customers expect real-time, seamless and intelligent services and not clunky experiences. To ensure you deliver this, you need predictable behaviour under heavy loads and during usage spikes, resilience and fault-tolerance without the associated costs sky-rocketing.

Technology that enables business agility

Financial services is a fast-moving industry. To make the most of emerging opportunities, whether as an incumbent or fintech-led startup, you need to be agile from a business perspective, which is bound to tech agility. With the adoption of open-source technology on the rise in FS, we’re starting to see the benefits of moving away from proprietary tech, the risk of vendor lock-in, and the obstacles that can create. When you can dedicate more resources to shipping code without being constrained and forced into unfavourable trade-offs, you’re better positioned to cash in on opportunities before your competitors.

Key point: You want a system that is easy to maintain and understand; this will help with onboarding new developers to the team and focusing resources where they can make the most impact.

Tech stacks that use fewer resources

Designing for sustainability is now a key consideration for any business, especially in an industry under the microscope like financial services. The software industry is responsible for a high level of carbon usage, and shareholders and investors are now weighing this up when making investment decisions. As funding in the tech space tightens, this is something that business leaders need to be aware of as a part of their tech decision-making strategy.

CTOs and architects can help by making better choices in technologies. For instance, using a BEAM-based language can reduce the physical infrastructure requiring just one-tenth of the servers. That leads to significant cost reductions and considerable savings in terms of carbon footprint.  

Key point: Minimising costs is important, but sustainability too is now part of the consideration process.

System Reliability and availability

A robust operational resiliency strategy strengthens your business case in financial services. We’ve learnt from the stress placed on systems caused by spikes in online commerce since the pandemic is that using technologies that are proven and built to deal with the unpredictability of the modern world is critical.

One thing sure to damage any FS player, regardless of size, is high-profile system outages and downtime. This can cause severe reputation damage and attract hefty fines from regulators.

According to Gartner, the average cost of IT downtime is around $5,600 per minute. That is about $300,000 per hour on average. So avoiding downtime in your fintech production system is mission-critical.

Key point: Your fintech system must be fault-tolerant, able to handle spikes in traffic and always be available and scalable.

How Erlang/Elixir is meeting these challenges

Erlang, Elixir and the BEAM VM overview

Erlang is a programming language designed to build massively scalable, soft real-time systems that require high availability. Elixir is a programming language that runs on the BEAM VM – the same virtual machine as Erlang – and can be adopted throughout the tech stack. Many of the world’s largest banking, e-commerce and fintech companies depend on these technologies to power their tech stacks, such as Klarna, SumUp and SolarisBank.

In telecoms, where phone systems, by law, had to work, and penalties were huge if they failed. Vendors designed in resilience from day one and not as an afterthought. Erlang and Elixir, as programming languages originally designed for the telecoms, are the right tools for the job for many fintech use cases where fault-tolerance and reliability are also essential.

Of course, many languages are being used successfully across financial services but, the big differentiator with Erlang and Elixir is that high availability, fault-tolerance and scalability are built-in, out of the box. This makes developers’ lives easier and allows them the freedom to deliver innovative features to end-users. For fast-moving verticals such as fintech, the robust libraries and reduced lines of code compared to C, C++ or Java mean that you are set up for rapid prototyping and getting to market before the opposition.

Key attributes of Erlang/Elixir for fintech development:

• Can handle a huge number of concurrent activities
• Ideal for when actions must be performed at a certain point in time or within a specific time (soft real-time)
• Benefits of system distribution
• Ideal for massive software systems
• Software maintenance without stopping the system
• Built-in fault tolerance and reliability

If you’re in the early stages of your fintech project, you may not need these capabilities right away, but trying to retrofit them later will cost you valuable time and resources. Our expert team has helped many teams adopt BEAM-based technology at various times in their business lifecycle, talk to us about how we can help you.  

Let’s start a discussion about how we can help with your fintech project >

Now let’s look at how Erlang/Elixir and the BEAM VM deliver against the desirable fintech characteristics outlined in the previous section.

System availability and resilience during unpredicted events

Functional Programming helps developers to write reliable software. Using the BEAM VM means you can have reliability of up to ‘nine-nines’ (99.9999999%) – that’s almost zero downtime for your system, obviously very desirable in any fintech system.

This comes from Erlang/Elixir systems having ‘no single point of failure’ that risks bringing down your entire system. The ‘actor model’ (where parallel processes communicate with each other via messages) crucially does not have shared memory, so errors that inevitably will occur are localised and will not impact the rest of your system.

Fault tolerance is another crucial aspect of Erlang/Elixir systems, making them a good option for your fintech project. ‘Supervisors’ are programmed with instructions on how to restart parts of a system when things do fail. This involves going back to a known initial state that is guaranteed to work:

The end result is that using Erlang/Elixir means that your system will achieve unrivalled availability with far less effort and resources than other programming languages.

System scalability for when demand grows

Along with unmatched system uptime and availability, Erlang and Elixir offer scalability that makes your system able to handle changes in demand and sudden spikes in traffic. This is possible without many of the difficulties of trying to scale with other programming languages.

With Erlang/Elixir, your code allows thousands of ‘processes’ to run concurrently on the same machine – in other words, you are making the most of each machine’s resources (vertical scaling). 

These processes are distributed, meaning they can communicate with processes on other machines within the network enabling developers to coordinate work across multiple nodes (horizontal scaling).

In the fintech startup space especially, having confidence that if you achieve dramatic levels of fast growth, your tech system will stand up to demand and not require a costly rewrite of the codebase can be a critical factor in maintaining momentum.

Concurrency model for high volume transactional systems

Concurrent Programming makes it appear like multiple sequences of commands are being executed in parallel. Erlang and Elixir are ideal for workloads that involve a considerable amount of concurrency, such as with transaction-intensive segments of financial services like payments and trading.  

The functional nature of Erlang/Elixir, plus the lightweight nature of how the BEAM executes processes, makes writing concurrent programs far more straightforward than with other languages.

If your fintech project expects to need to process massive amounts of transactional data from different sources, then Erlang/Elixir could be the most frictionless way for your team to go about building it.

Developer friendly 

There are many reasons why developers enjoy working with Erlang/Elixir – in fact, Elixir has just been voted the second most loved programming language in the 2022 Stack Overflow Developer Survey.

OTP middleware (the secret sauce behind Erlang/Elixir) abstracts the technical difficulty of concurrency and handling system failures. It allows your tech team the space to focus on business logic instead of time-consuming computational plumbing and facilitates fast prototyping and development of new features. 

Speed to market is a crucial differentiator in the competitive fintech landscape, with Erlang/Elixir you can release new features in time to attract new customers and retain existing ones better than with many other languages.

Because using Erlang/Elixir for your project means less code and a lightweight execution model of processes demanding fewer CPU resources, you will need fewer servers, reducing your energy consumption and infrastructure costs. An independent study made at Heriot-Watt University found that an application written in Erlang compared to one in C++ found that 4-20 times less code was required for the Erlang codebase.

During the beginning of the pandemic in 2020, Turn.io used Elixir to launch the world’s first WhatsApp-based COVID-19 response in just 5 days. The service was designed, deployed, stress-tested, and launched. It scaled to 450K unique users on the first day and has since grown to serve over 7.5 million people.

Key takeaways about using Erlang and Elixir in fintech

We can summarise that what is needed for success in fintech is a real-time, secure, reliable and scalable system that is easy to maintain and cost-efficient. Furthermore, you need a stack that lets your developers ship code and release new products and features quickly. The Erlang Ecosystem (Erlang, Elixir and the BEAM VM) sets a solid foundation for your fintech startup or project to be successful. 

With a reliable, easy-to-maintain code base, your most valuable resource (your tech talent) will be freed up to concentrate on delivering value and competitive advantage that delivers to your bottom line.

With the right financial products to market and an Erlang/Elixir backend, you can be confident in delivering smooth and fast end-user experiences that are always available and seamless. This is crucial if you are looking to digitally onboard new customers, operate payment services, handle vast numbers of transactions or build trust in emerging areas such as cryptocurrency or blockchain.

The benefits of using Erlang/Elixir for your fintech project

2x FASTER DEVELOPMENT – of new services thanks to the language’s design, the OTP middleware, set of frameworks, principles, and design patterns that guide and support the structure, design, implementation, and deployment 

10x BETTER RELIABILITY –  services that are down less than 5 minutes per year thanks to built-in fault tolerance and resilience mechanisms built into the language and the OTP middleware, e.g. software upgrades and generic error handling, as seen by e.g. Ericsson in their mobile network packet routers.

10x MORE SECURE – solutions that are hard to hack and crash through denial of service attacks thanks to the language construction with lack of pointers, use of messages instead of shared memory and immutable state rather than variable assignments, as seen by the reduced number of vulnerabilities compared to other languages.

10x MORE USERS – handling of the potential millions of transactions per second within milliseconds thanks to a battle-tested VM.

10x LESS COSTS AND ENERGY CONSUMPTION – thanks to fewer servers needed and the fact that the BEAM is open-source. Swapping from Ruby to Elixir Bleacher report managed to reduce their hardware requirements from 150 to just 8.

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We will be an events partner with Fintech Week London again this year, hosting a special panel and networking evening at CodeNode in Central London on 12 July from 6 pm. Register your interest in attending via this link here.