How to Build Reliable Fintech Systems: Key Technical Patterns You Need to Know

Financial technology (fintech) has revolutionized how we handle money, transforming traditional banking services into seamless digital experiences. However, building fintech applications requires meticulous attention to technical patterns that ensure transaction safety, data integrity, and financial accuracy.

This guide explores three critical technical patterns that every fintech developer must implement to build reliable and secure financial applications. Whether you're developing a payment processing system, digital wallet, or banking platform, these patterns will help you avoid common pitfalls that can lead to financial discrepancies and security vulnerabilities.

While this guide focuses on three fundamental patterns that form the backbone of secure fintech applications, implementing these patterns alongside robust security measures, comprehensive testing, and regulatory compliance is crucial for a production-ready fintech system.

What is Fintech?

Fintech stands for financial technology – it's the intersection of traditional banking and modern technology. Think of fintech as a bridge that connects the traditional banking sector with the tech world. What once required physical bank visits and paper forms can now be accomplished with a few taps on your smartphone, thanks to fintech innovations.

1. For Inflow and Outflow transactions, always use ACID transactions.

Why? Let’s break this down with examples.

Case 1: Without ACID Transactions

Imagine you’re handling a user’s account where their balance is debited during a transfer. Here’s a simplified version of what the code might look like:

const user = {
  id: '1212121',
  balance: 100,
  currency: 'USD',
};

// User sends money to a friend
function sendMoney(amount) {
  // Step 1: Check if the user has enough balance
  if (user.balance >= amount) {
    // Step 2: Deduct the amount
    user.balance -= amount;
    console.log(`Transaction successful. New balance: ${user.balance}`);
  } else {
    console.log('Insufficient balance.');
  }
}

// Simulate sending $50
sendMoney(50);
// New balance is 50

Case 2: On-the-Fly Balance Updates with findOneAndUpdate

const users = [
  { id: '1212121', balance: 100 },
  { id: '3434343', balance: 50 },
];

// Simulate sending $50 from User 1 to User 2
function transferFunds(senderId, receiverId, amount) {
  // Find sender
  const sender = users.find((user) => user.id === senderId);

  if (sender && sender.balance >= amount) {
    // Deduct from sender
    sender.balance -= amount;

    // Update receiver's balance
    const receiver = users.find((user) => user.id === receiverId);
    if (receiver) {
      receiver.balance += amount;
      console.log('Transfer successful:', { sender, receiver });
    } else {
      console.log('Receiver not found.');
    }
  } else {
    console.log('Insufficient funds or sender not found.');
  }
}

// Transfer funds
transferFunds('1212121', '3434343', 50);
// Logs: Transfer successful: {sender: {…}, receiver: {…}}

This code looks functional but is risky without an ACID-compliant transaction. Imagine if the application crashes after the sender’s balance is deducted but before the receiver’s balance is updated. The money essentially disappears, causing financial discrepancies.

The Risk in Real-Life Terms

Without ACID transactions, your fintech app can suffer from:

1. Inconsistent Data: For example, if a user's balance is deducted but the transfer isn’t completed, it leads to a mismatch between accounts.
   Real-life analogy: Imagine withdrawing money from an ATM, but the cash doesn’t come out even though your account is debited.

2. Data Corruption: A failed or partial update can leave your database in an unpredictable state, especially under high concurrency.
   Real-life analogy: Think of a cashier debiting your account but failing to provide a receipt – neither party knows if the transaction went through.

3. Customer Dissatisfaction: Issues like "missing money" can lead to angry customers, loss of trust, and legal implications.

Solution: Use ACID Transactions

By using database mechanisms that ensure Atomicity, Consistency, Isolation, and Durability (ACID), you guarantee that all parts of the transaction either succeed or fail as a single unit.
Here’s how it would look:

async function transferFundsACID(senderId, receiverId, amount) {
  // Start a new session for the transaction
  const session = await database.startSession();
  session.startTransaction(); // Begin the transaction

  try {
    // Attempt to deduct the amount from the sender's balance
    const sender = await User.findOneAndUpdate(
      { id: senderId, balance: { $gte: amount } }, // Ensure sender has sufficient balance
      { $inc: { balance: -amount } }, // Deduct the specified amount
      { session, new: true } // Use the session for transactional consistency
    );

    // If the sender doesn't exist or has insufficient balance, throw an error
    if (!sender) {
      throw new Error('Insufficient balance or sender not found');
    }

    // Attempt to credit the amount to the receiver's balance
    const receiver = await User.findOneAndUpdate(
      { id: receiverId }, // Find the receiver by their ID
      { $inc: { balance: amount } }, // Credit the specified amount
      { session, new: true } // Use the same session to ensure consistency
    );

    // If the receiver doesn't exist, throw an error
    if (!receiver) {
      throw new Error('Receiver not found');
    }

    // If both operations succeed, commit the transaction
    await session.commitTransaction();
    console.log('Transaction successful:', { sender, receiver });
  } catch (error) {
    // If any operation fails, roll back the transaction to maintain data integrity
    await session.abortTransaction();
    console.error('Transaction failed:', error.message);
  } finally {
    // End the session to clean up resources
    session.endSession();
  }
}

Using transactions ensures that all operations are executed as a single unit, greatly reducing risks and maintaining data integrity.

Takeaway

Always use ACID transactions when handling financial operations. It’s not just good practice – it’s essential for building trust and reliability in your fintech app.

2. Always Debit the Customer Before Delivering Value to Avoid Risks

This might sound obvious, but there are scenarios where value is given before the customer's wallet is debited. Let's analyze both approaches with examples.

Case 1: Debiting Before Giving Value (Preferred Approach)

In this approach, the customer's account is debited first, and only if the debit is successful, the value is provided (e.g., a product is delivered or a service is activated). This ensures that the app avoids situations where value is given without receiving payment.

Example:

async function processPurchaseACID(customerId, amount, value) {
  const session = await database.startSession();
  session.startTransaction();

  try {
    // Step 1: Debit the customer's account
    const customer = await User.findOneAndUpdate(
      { id: customerId, balance: { $gte: amount } }, // Ensure sufficient balance
      { $inc: { balance: -amount } }, // Deduct the amount
      { session, new: true } // Use the transaction session
    );

    if (!customer) {
      throw new Error('Insufficient balance or customer not found');
    }

    // Step 2: Provide the value (e.g., activate subscription, deliver product)
    const valueProvided = await Value.create(
      { customerId, value },
      { session } // Use the transaction session
    );

    // Commit the transaction after successful debit and value provisioning
    await session.commitTransaction();
    console.log('Purchase successful:', { customer, valueProvided });
  } catch (error) {
    // Rollback transaction on failure
    await session.abortTransaction();
    console.error('Purchase failed:', error.message);
  } finally {
    // End session
    session.endSession();
  }
}

Case 2: Giving Value Before Debiting (Risky Approach)

In this approach, the value is provided first, and the user's account is debited afterward. This can lead to major issues, such as the customer receiving the value but the debit failing due to insufficient balance, system crashes, or concurrency issues.

Example:

async function processPurchaseWithoutACID(customerId, amount, value) {
  try {
    // Step 1: Provide the value first (e.g., activate subscription, deliver product)
    const valueProvided = await Value.create({ customerId, value });

    // Step 2: Attempt to debit the customer's account
    const customer = await User.findOneAndUpdate(
      { id: customerId, balance: { $gte: amount } }, // Ensure sufficient balance
      { $inc: { balance: -amount } }, // Deduct the amount
      { new: true } // No transaction control
    );

    if (!customer) {
      console.log('Debit failed after providing value. Manual reconciliation needed.');
    } else {
      console.log('Purchase successful:', { customer, valueProvided });
    }
  } catch (error) {
    console.error('Error during purchase:', error.message);
  }
}

Risks of Giving Value Before Debiting

• Insufficient Funds: If the customer's balance is insufficient after providing value, the app must handle reconciliation manually. Real-life analogy: Imagine sending an online order before the payment is confirmed, only to find out the customer’s card has insufficient funds.

• System Crashes or Errors: If a failure occurs after providing value but before debiting the account, the customer receives the value for free.

• Concurrency Issues: In highly concurrent systems, other transactions might reduce the customer's balance before the debit, causing the debit to fail.

Takeaway

Always debit the customer's account first before giving value. This approach avoids critical issues like unpaid value, ensures better data integrity, and reduces financial losses. Using ACID transactions in this workflow guarantees that the operations (debit and value provisioning) succeed or fail as a single unit, ensuring consistency and reliability.

3. Always Keep a Ledger and Journal Table to Track Inflows and Outflows

It's essential to maintain a ledger and journal in your system to keep track of all financial transactions. Here’s why:

• Audit & Transparency: A ledger helps you keep a clear record of balances, which is critical for audits and regulatory compliance.

• Dispute Resolution: Journals track individual transactions, making it easier to resolve disputes.

• Fraud Prevention: Detailed records help spot irregularities and prevent fraudulent activities.

• Error Recovery: If something goes wrong, the ledger and journal help restore the correct state of the system.

• Reconciliation: They ensure that your internal records match external financial accounts.

Real-World Applications

1. Digital Wallet Systems
   Payment apps like Venmo and Cash App use ACID transactions to ensure money transfers complete fully or not at all
   Example: When splitting a dinner bill, the app must handle multiple simultaneous transfers without double-charging or losing funds

2. Investment Platforms
   Trading platforms like Robinhood implement debit-before-value to ensure users have sufficient funds before executing trades
   Example: When purchasing stocks, the system verifies and locks funds before placing the order

3. Subscription Services
   Streaming services like Netflix use ledger systems to track recurring payments and usage
   Example: When a subscription payment fails, the system can reference the ledger to determine the last successful payment and current service status

4. International Money Transfers
   Services like Wise use all three patterns to handle currency conversions and cross-border transfers
   Example: Converting USD to EUR requires atomic transactions across multiple currency accounts while maintaining detailed records

Testing Financial Operations

Implementing robust testing strategies is crucial for fintech applications. Here are essential testing approaches:

Unit Testing Transaction Flows

describe('TransferService', () => {
  it('should successfully complete transfer when sender has sufficient funds', async () => {
    const result = await transferFundsACID('sender123', 'receiver456', 100);
    expect(result.status).toBe('success');
    expect(result.senderBalance).toBe(previousBalance - 100);
  });

  it('should roll back transfer when receiver account is invalid', async () => {
    const result = await transferFundsACID('sender123', 'invalid456', 100);
    expect(result.status).toBe('failed');
    expect(result.senderBalance).toBe(previousBalance);
  });
});

1. Concurrency Testing
   Implement stress tests simulating multiple simultaneous transactions
   Test race conditions with parallel requests to the same account
   Verify transaction isolation levels under heavy load

2. Integration Testing
   Test the entire transaction flow from API to database
   Verify ledger entries match actual balance changes
   Ensure proper error handling and rollback mechanisms

3. Reconciliation Testing
   

describe('LedgerReconciliation', () => {
  it('should match account balance with sum of transactions', async () => {
    const account = await Account.findById('acc123');
    const transactions = await Transaction.find({ accountId: 'acc123' });
    const calculatedBalance = transactions.reduce((sum, tx) => 
      sum + (tx.type === 'credit' ? tx.amount : -tx.amount), 0);
    expect(account.balance).toBe(calculatedBalance);
  });
});

Conclusion: Building Reliable Fintech Systems

The three patterns we've explored – implementing ACID transactions, ensuring proper debit-before-value delivery, and maintaining comprehensive ledger systems – form the foundation of reliable fintech applications. Together, these patterns create a robust framework that:

• Guarantees transaction integrity and prevents data inconsistencies
• Protects against financial losses through proper sequence management
• Maintains clear audit trails for compliance and dispute resolution

When implementing these patterns, remember that they work synergistically. ACID transactions ensure atomicity across operations, proper debit sequencing prevents value leakage, and detailed ledger systems provide transparency and traceability. Following these patterns will help you build fintech applications that users can trust with their financial transactions.

I hope you found these insights helpful as you embark on your journey into the world of fintech. If you're working on a fintech project, I'd love to hear about it in the comments – let's start a conversation! And if you'd like to see more articles like this, just let me know. Stay curious, and happy coding!