Generative Data Intelligence

No More Digital Payment Headaches


In today’s rapidly-evolving digital landscape, businesses across many industries recognize the increasing significance of digital payment processing systems. As online transactions surge, companies require reliable and secure payment processing systems that cater to customers’ preferred payment methods.

Global e-commerce sales in 2022 were projected to reach $5.4 trillion, with 2023 estimates predicting $6.4 trillion. Digital payments are increasing across the board, as more and more physical stores prioritize digital payments, with some no longer accepting cash. This overall increase in micropayments is driving change and underscores the importance of payment processing systems in the digital age. 

Several factors have contributed to the critical role of payment processing systems, including mobile payments, subscription services, cross-border transactions, and payment security. Additionally, the COVID-19 pandemic accelerated the shift to digital payments, with a McKinsey survey indicating that the pandemic expedited this by two to three years.

How payment processing works 

Payment processing is the process of accepting and verifying electronic payments, including credit and debit cards, e-wallets, B2B money exchange and mobile payments. The basic building blocks of payment processing are authorization, settlement, and funding.

Authorization is the first step in payment processing, where the payment is approved by the customer’s bank or credit card company. This involves verifying the customer’s payment details, such as the card number, expiration date, and security code, and ensuring that they have sufficient funds to cover the payment.

Settlement is the process of transferring funds from the customer’s account to the merchant’s account. This involves the transaction details being sent to the merchant’s bank or payment processor, who then initiates the transfer of funds.

Finally, funding is the process of transferring the funds from the merchant’s account to their designated bank account. This usually takes 1-3 business days and involves the payment processor deducting their fees from the transaction amount before transferring the funds to the merchant’s account or can take just a few seconds if real time payment networks are leveraged.

Payments lie at the intersection of commerce and the digital economy. 

The rapid evolution of payment processing 

As the digital economy grows and customer demand for seamless payments increases, many fintechs and banks are now offering integrated solutions for consumers and merchants. 

To do this, banks have to build the right partnerships with fintechs and evolve their legacy software infrastructure stack to support the modern solutions that their customers demand. 

New entrants need to deliver seamless customer payment solutions that can reliably scale, can be adapted to meet new regulations, and are easy to consume. 

Connected commerce is driving the digital economy. New payment propositions are helping to connect merchants and consumers in the most efficient way, leading to faster, cheaper, and safer payment methods. Some of the trends we are experiencing today include:

  1. “Value beyond payment” is top of mind for many payment players as they look beyond transactions and focus on the holistic customer experience. By providing relevant services before and after payments, they’re evolving into “one-stop shops.”
  2. Open banking and other regulatory requirements are a game changer as many more players embrace “pay by bank,” as well as new payment methods like variable recurring payments (VRPs).
  3. The adoption of real-time payments rails (RTR) unlocks tremendous innovation across the overlay services, enabling all PSPs to serve customers better through account-to-account (A2A), which is further reinforced and accelerated by open banking.
  4. Embedded payments are expected to scale and become more invisible as, driven by the rise of e-commerce, platforms and marketplaces, non-financial services providers integrate payments into customer journeys.
  5. The emergence of innovative payments facilitators is fundamentally changing the way banks and card networks work together.
  6. New PaymentTech ecosystems are developing that can securely store, manage, and leverage consumer and merchant data generated through payment transactions. This represents a radical data monetization opportunities and unique customer offerings.
  7. Crypto and digital currencies will not only offer new payment methods, but a new infrastructure that enables instant settlement through distributed ledger technology (DLT), programmability, smart contracts, and tokenization.

Payments are the lifeline of most businesses in the digital economy. But, as the need for safe and reliable payment systems grows, it puts a lot of pressure on the existing software systems that are the backbone of commerce. 

As payment systems continue to evolve, several technical software challenges arise, particularly with databases. These challenges include scalability, data consistency, security, availability, data residency, and country compliance regulations

Five Key Database Capabilities to Consider Upfront

 1. Scalability is a critical challenge for payment systems as they need to handle high transaction volumes without slowing down or crashing. A scalable database architecture is essential to achieve this, one that can handle increasing amounts of data and traffic. 

2. Data consistency is a challenge for payment systems. These systems rely on accurate and consistent data to process transactions correctly. Ensuring data consistency across multiple databases and data centers can be a complex and challenging task, especially while simultaneously scaling.

3. Security is another significant concern for payment systems. Payment systems deal with sensitive customer data, and it is crucial that this data is protected from unauthorized access or theft. Payment systems must adhere to data residency regulations, which dictate where data can be stored and processed. 

4. Availability is another payment systems challenge. These systems must be available 24/7, with minimal downtime or service disruption. Achieving high availability requires a resilient database architecture that can handle failures and recover quickly.

5. As well as security and availability considerations, payment systems must comply with country-specific data protection regulations. Country compliance regulation requires payment systems to store and process customer data according to specific regulations set out by each country. These regulations include data residency, where data is physically stored, and cross-border data transfer rules.

The real challenge – scaling relational databases seamlessly

Relational database management system (RDBMS) databases have been the backbone of payment systems for a long time and have addressed many of the technical challenges that arise with payment systems’ growth and evolution, including introducing techniques such as vertical scaling and sharding.

Vertical scaling involves adding more resources, like RAM or CPU, to a single server to improve performance. This approach is useful for small payment systems that have limited growth potential. However, vertical scaling has several shortcomings, including limited scalability, single point of failure, and high cost. 

Sharding, on the other hand, involves distributing data across multiple servers. Each server stores a portion of the data, and requests are routed to the appropriate server based on a predefined partitioning key. Sharding is useful for large payment systems that need to handle a high volume of traffic and data. However, sharding also has limitations, including increased complexity, reduced data consistency, and higher development and maintenance costs. 

Another option for database architects is application level sharding, where they have to work with different instances of the databases. This adds complexity to the application layer, such as when referential integrity needs to be maintained across the instances, or when specific data residency and locality requirements come into play.

To address data consistency issues, traditional RDBMS databases rely on ACID transactions. ACID transactions ensure that data is always in a consistent state, and if a transaction fails, the database will be rolled back to its previous state. 

The challenges with both traditional RDBMS and NewSQL databases are profound as the requirements of scaling and managing infrastructure costs continue to increase due to customer demands. As a result of that ongoing challenge, distributed SQL databases are rapidly growing in popularity as the natural evolution of the relational database. 

By combining the benefits of traditional SQL databases with the scalability and fault-tolerance of NoSQL databases, distributed SQL databases address many of the technical challenges of using traditional RDBMS and NewSQL databases for modern payment systems. Distributed SQL databases, offer an innovative solution that meets the demands of modern payment systems.


As global e-commerce sales increase and the shift to digital payments accelerates, businesses require reliable, secure, and scalable payment solutions.

With the volume of consumers on payment platforms growing, the complexity of managing the underlying database infrastructure and keeping the application layer simple, reliable, and scalable becomes increasingly difficult.

Classic RDBMS databases (traditionally the backbone of payment systems) have inherent limitations, so it’s important that modern enterprises consider alternative approaches, such as geo-distributed and infinitely-scalable distributed SQL databases.

By addressing challenges head-on by adopting modern data solutions, businesses can position themselves at the forefront of the digital payment landscape. This will ensure they can deliver a seamless customer experience, while meeting regulatory requirements and driving growth.


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