Hacker's Handbook

How Erlang Powers High-Volume Finance

Build Scalable and Reliable Fintech Systems with Erlang

Posted: 2024-09-11

Handling high-volume transactions efficiently is a must in fintech. Fintech companies need systems that scale easily, maintain low latency, and remain reliable under heavy loads.

Erlang, initially created for the telecommunications industry, is ideal for fintech. Its features, such as lightweight concurrency, fault tolerance, and native support for distributed computing, make it effective for handling high transaction volumes with minimal latency and high reliability.

The Challenge

High-volume transactions create unique challenges for fintech systems. Every payment, trade, or cross-border transaction must be processed rapidly and accurately. With thousands or even millions of transactions per second, these systems require low latency, high availability, and strong fault tolerance.

To meet these demands, fintech systems must navigate several hurdles. Achieving high performance and low latency is crucial to avoid delays that can disrupt transactions. Security and data privacy are paramount, especially with growing concerns over cyber threats and regulatory requirements. Rapid changes in the market necessitate systems that are adaptable and resilient, able to recover quickly from failures. Integration with both internal and external systems, including legacy infrastructure, adds another layer of complexity. Fintech companies must also comply with a range of regulations while mitigating cybersecurity risks, making the choice of technology even more critical.

When choosing a programming language, there is often a trade-off: lower-level languages may offer better performance but result in more complex solutions, while higher-level languages can simplify development but may struggle with performance. Erlang provides a compelling alternative by using a process-oriented programming model that simplifies concurrent programming, making it both easier and more efficient for handling high transaction volumes.

Why Erlang?

Erlang stands out for its ability to handle high concurrency, distributed computing, and fault tolerance.

Erlang was built with concurrency in mind. It allows developers to create lightweight processes that run independently and communicate through asynchronous message passing. Unlike traditional threads in other languages, Erlang processes are highly efficient, consuming minimal memory and resources. This allows systems built with Erlang to handle millions of simultaneous transactions without slowing down or crashing, making it ideal for high-frequency trading, payment processing, and other high-volume tasks.

Erlang systems often follow the “let it crash” philosophy, where processes are designed to fail fast and recover quickly. Erlang’s built-in supervision trees automatically detect and restart failed processes without affecting the rest of the system. This architecture ensures that the system remains operational even under heavy loads or unexpected errors.

Erlang was designed to run distributed applications across multiple nodes, making it perfect for fintech environments that need to scale across servers and data centers. It natively supports building distributed systems, allowing seamless communication between nodes and enabling redundancy and load balancing. This feature helps fintech companies manage high transaction volumes while ensuring data consistency and fault tolerance across all systems.

One of Erlang’s most unique features is its ability to perform live code updates without requiring system downtime. This capability allows developers to deploy new features, security patches, and bug fixes without interrupting service. This is especially valuable for companies that operate around the clock and cannot afford downtime.

Erlang’s design minimizes the time it takes to execute transactions and respond to events. Its virtual machine, BEAM, is optimized for low-latency operations, ensuring that messages between processes are handled with minimal delay. This real-time performance is essential for applications where even microsecond delays, such as trading platforms and payment gateways, can impact transaction outcomes.

Erlang in the real world

To understand how Erlang's unique capabilities translate into real-world benefits, let's look at some case studies and examples from companies that have successfully leveraged Erlang to handle high transaction volumes.

Klarna – Scalable Payment Processing

Klarna, a leading payment provider, uses Erlang to manage its payment infrastructure. Klarna processes millions of transactions daily, requiring a robust and scalable system that can handle spikes in traffic without compromising performance. Using Erlang, Klarna can manage concurrent payment requests efficiently, reducing latency and ensuring high availability. Erlang’s fault-tolerant architecture allows Klarna to maintain seamless service even during unexpected outages, minimizing downtime and ensuring customer reliability.

Telecommunications – A Proven Model for Scalability and Reliability

Although not initially a fintech example, the use of Erlang in the telecommunications industry provides a strong parallel. Telecom networks must manage millions of concurrent connections with high uptime requirements—similar to what’s needed in fintech for real-time trading or large-scale payment processing. Ericsson initially created Erlang to handle these exact challenges, and its adoption across telecom giants demonstrates its ability to maintain performance under heavy loads.

• China Telecom (via EMQx): Relies on Erlang for its EMQx MQTT broker, which supports massive-scale IoT applications and real-time messaging systems. Erlang enables the system to handle millions of messages per second with low latency and high fault tolerance.
• Telia: Uses Erlang as a core component in its Telia ACE contact center solution, particularly for its "Call Guide" (also known as ACE) system. Telia ACE leverages Erlang to efficiently manage customer interactions across various channels, including voice, chat, and social media, ensuring high availability and responsiveness.
• Cisco: Utilizes Erlang for its NETCONF (Network Configuration Protocol) implementation. NETCONF is a protocol used for network device configuration, and Erlang’s concurrency model allows Cisco to manage multiple configuration sessions simultaneously with high reliability. According to Cisco, 90% of all Internet traffic goes through Erlang-controlled nodes.

WhatsApp – Messaging at Scale

WhatsApp, one of the most popular messaging platforms globally, uses Erlang to manage its massive user base. Although WhatsApp isn’t a fintech company, the scale at which it operates is comparable. Handling billions of messages daily, WhatsApp relies on Erlang’s concurrency model to deliver messages in real-time without delays.

Kindio – Real-Time Euro and SEK Transactions

Kindio, a fintech company specializing in real-time Euro and SEK transactions, leverages Erlang to ensure its settlement systems remain responsive and efficient under heavy load. Using Erlang, Kindio can manage complex transaction flows and ensure compliance with European payment regulations while maintaining optimal performance. Kindio’s use of Erlang enables it to offer instant transactions with minimal latency, providing a reliable and scalable solution.

Architectural considerations when building with Erlang

Erlang provides a middle ground between the complexity of microservices and the limitations of monolithic architectures. While microservices can bring about challenges such as increased operational complexity, communication overhead, and inefficient distributed data management, monoliths often face slow development speed, scalability issues, and complicated deployments. Erlang tackles these issues by allowing for a modular monolithic architecture with a "share-nothing" data model.

Erlang’s approach provides the advantages of both microservices and monoliths while minimizing their respective drawbacks. With Erlang, you can build a modular system that maintains the simplicity and coherence of a monolith but without the rigidity that typically hampers scalability and flexibility. Each module or service runs independently, enabling faster development and deployment cycles while maintaining robust fault tolerance and scalability.

The "share-nothing" architecture means that each process has its own memory and does not directly interfere with others. This allows for seamless scalability, as each process can be managed, scaled, or replaced independently, much like a microservices architecture. However, unlike typical microservices, you avoid the significant overhead of managing multiple services, complex inter-service communication, and data consistency across a distributed network.

Leveraging Erlang’s OTP (Open Telecom Platform)

Erlang's Open Telecom Platform (OTP) is a powerful framework that provides the building blocks needed to create robust, scalable, and fault-tolerant systems. OTP also provides a collection of design principles that guide the development of concurrent and distributed applications.

A key feature of OTP is its supervision trees, which are designed to monitor processes and automatically restart them if they fail. This fault-tolerance model ensures that the system remains stable even when individual components encounter errors, making it ideal for applications where uptime is non-negotiable.

Erlang’s OTP framework also supports hot code swapping, enabling developers to update and modify applications without stopping the system. This is particularly valuable in fintech, where continuous deployment and the need for rapid feature updates or security patches are common.

Best Practices for Erlang in Fintech Systems

To maximize Erlang's potential in fintech environments, it's important to adopt certain best practices. Efficient process management should be fully utilized by designing systems where each transaction or user session is isolated. This approach minimizes the impact of any single failure and allows the system to handle high volumes of concurrent transactions without performance degradation.

Asynchronous messaging should be used wherever possible. In Erlang, processes communicate through message passing, and keeping these messages non-blocking is vital for maintaining low latency and high throughput.

Hot code swapping should be leveraged to enable rapid deployment of new features, bug fixes, and security updates without causing disruptions.

Building a distributed architecture is also essential for maximizing Erlang’s benefits in fintech. Erlang's native support for distributed systems makes it easy to run applications across multiple nodes, which enhances scalability and redundancy.

Overcoming Common Challenges When Adopting Erlang

While Erlang offers substantial benefits, some organizations may face perceived challenges when adopting it, such as concerns about a steep learning curve or integrating with existing technology stacks. However, Erlang's design makes it surprisingly easy to learn for developers who are already proficient in other languages, allowing them to become productive in just a few weeks. The language’s syntax is straightforward, and its functional programming model, while different from imperative styles, is intuitive for developers who are open to thinking in terms of processes and message-passing.

To overcome initial hesitations, companies should focus on effective onboarding and training. Introducing developers to Erlang through hands-on workshops, guided tutorials, and real-world problem-solving exercises can accelerate the learning process. Engaging experienced Erlang mentors or consultants, such as those from Happi Hacking, can also help flatten the learning curve, providing practical insights and best practices from seasoned professionals. Additionally, leveraging the rich community resources available online—such as forums, open-source projects, and documentation—can support developers in quickly getting up to speed.

Integrating Erlang with an existing technology stack, which might already include languages like Python, Java, or C#, can also be a concern. However, Erlang is highly interoperable, and its distributed architecture makes it well-suited to work alongside other systems. Hybrid systems where Erlang handles the concurrent and fault-tolerant components while other languages manage user interfaces, reporting, or legacy functions are feasible. APIs, middleware, and libraries help ensure that Erlang-based applications communicate effectively with existing systems. Erlang’s compatibility with Elixir also offers a pathway for organizations to gradually adopt Erlang’s strengths while leveraging their existing development talent.

Performance tuning is another area where developers may initially struggle, but Erlang provides powerful and well-documented tools and techniques for optimization. Regular monitoring using tools like observer and recon, along with proactive performance adjustments such as garbage collection tuning and optimizing process handling, can significantly improve system performance. Encouraging developers to experiment with these tools and techniques in controlled environments can help build confidence and expertise.

The Future of Erlang in Fintech

As fintech continues to evolve, the demand for systems that are both highly scalable and resilient will only increase. Erlang is well-positioned due to its strengths in managing concurrency, fault tolerance, and distributed computing. The future of Erlang in fintech looks promising, particularly as financial services continue to shift towards real-time transactions, greater automation, and increasingly complex regulatory requirements.

One area where Erlang is expected to shine is in real-time payments and settlement systems. As instant payments become more ubiquitous, the need for reliable, low-latency processing will grow. Erlang's capabilities align perfectly with this need, making it an ideal choice for powering back-end systems that handle high-frequency trading, cross-border payments, and instantaneous currency exchanges. Moreover, as digital currencies and blockchain technology gain traction, Erlang's ability to handle large volumes of transactions in a secure and efficient manner will make it a valuable tool for developing and managing blockchain nodes and decentralized finance (DeFi) platforms.

Erlang is also likely to find increased application in the realm of artificial intelligence (AI) and machine learning (ML) within fintech. With its strong support for real-time data processing and distributed computing, Erlang can be used to build AI-driven analytics platforms that detect fraud, predict market trends, and enhance customer experiences. As the financial industry increasingly adopts AI and ML for real-time decision-making, Erlang's unique advantages in handling large-scale, real-time data flows will become even more relevant.

The potential for Erlang to integrate with emerging technologies, such as edge computing, also positions it well for future growth. As the fintech industry continues to innovate, Erlang's flexibility and adaptability will make it a suitable choice for companies looking to stay ahead of technological trends. Its compatibility with Elixir—a language designed for scalable web development—further broadens its applicability in developing customer-facing platforms that require real-time data processing and high concurrency.

Looking ahead, I hope to see more fintech companies recognize the unique advantages of Erlang and consider it as a strategic choice for building their systems. With its proven capabilities in delivering reliability, scalability, and performance, Erlang has the potential to become a key technology for those seeking to build robust, high-volume transaction systems.

Conclusion and Call to Action

Erlang offers a powerful solution for fintech companies aiming to build reliable, scalable systems capable of handling high transaction volumes. Its unique features, such as fault tolerance, real-time performance, and efficient process management, make it an ideal choice for the evolving needs of the financial sector. As real-time payments, AI-driven analytics, and advanced technology integration continue to shape the future of fintech, Erlang's relevance will only grow.

I hope more fintech companies will explore the benefits of using Erlang to optimize their systems, leveraging its strengths to stay competitive and meet the demands of an ever-changing market. If you're looking to harness Erlang's potential, Happi Hacking can provide expert consultancy services to guide you in building high-performance systems. Additionally, Kindio is available to assist with managing Euro and SEK transactions, ensuring compliance and efficiency.

To deepen your understanding of Erlang and its applications, check out these resources:

• The BEAM Book: A comprehensive guide to the Erlang virtual machine, ideal for developers looking to get started with or deepen their knowledge of Erlang.
• Designing Concurrency: The Erlang Way: An article that dives into the principles of designing concurrent applications using Erlang, providing practical insights and examples.
• Neural Networks in Elixir: Explore how Elixir, a language built on the Erlang VM, can be used for building scalable machine learning applications.
• Delta: Designing Financial Systems for Performance: An article discussing the principles of designing high-performance financial systems, relevant to those using Erlang in fintech.
• Aeternity Blockchain: Learn about Aeternity, a blockchain platform that uses Erlang for its backend, highlighting the language’s applications in blockchain technology.
• Erlang powering Internet on Twitter: Cisco telling the world that Erlang controls the Internet.

Feel free to explore these resources to get a deeper understanding of Erlang and how it can be applied to solve complex challenges in the fintech world. Reach out to Happi Hacking or Kindio for more personalized guidance and to discuss how we can support you in building efficient, reliable fintech systems.