Financial technology (Fintech) companies are organizations offering services such as online banking, payment automation, financial consultation, and investment. These are becoming standard in today’s society. They aim to automate and simplify the processes of transacting money.
However, these companies are dealing with several challenges in setting up their business. They face problems of data security and analytics, among others. Ruby on Rails (RoR) provides a mature framework that safeguards fintech firms from these challenges.
This article will explain why Ruby on Rails answers security, analytics, and high traffic challenges that fintech companies face. It will also go over real-life applications of Ruby on Rails in the financial world.
Security, analytics, and high traffic challenges in the fintech industry
Fintech companies face several security challenges as they run their operations. In particular, they target cyber criminals who take advantage of their vulnerabilities to launch attacks. As a result, fintech companies face malware attacks and application breaches risks.
Because of the vulnerabilities of their information technology systems, cyber-criminals could plant Trojan horses or worms. Such malware can have unauthorized access to data, posing risks to fintech firms’ database systems. Financial technology companies also face upcoming data security challenges, notably deep fakes.
Deep fakes utilize artificial intelligence to impersonate authentic users. This tool is good enough to fool high-level data security. Fintech organizations have shown concern about deep fakes because they facilitate impersonations.
Fintech companies require that people verify their identities to safeguard the financial systems. But deep fake enables hackers to pose as people authorized users. For instance, they can disguise themselves as part of a Fortune 500 executive to make large financial transactions to a specific entity.
Data analytics is critical for fintech companies because it converts data into valuable information. But this is also an area that these firms are having challenges with when running their operations. The challenge with data analytics is primarily a result of the big data these companies handle.
First, the large quantity of data from fintech firms overwhelms them. It is increasingly challenging to receive big data in structured and unstructured forms and spot the desirable configuration.
Thus, these companies need data systems that can facilitate the automatic collection and information organization. On the other hand, manual sorting out data can be cumbersome and time-consuming.
Besides, fintech companies receive data from multiple sources. Therefore, data analysis from several different disjointed sources is challenging for these companies. They have to collect diverse data housed in various systems and analyze it.
The complicated procedures required to acquire and perform data analytics successfully often result in inaccuracies. Combining data can also limit the insights of data analytics. Also, data scaling is another challenge that the analytics teams in fintech companies face. This problem is also a result of the high volume of big data.
As the amount of data that fintech organizations collect increases, it becomes difficult to scale it. Unfortunately, this scalability challenge also complicates the firm’s ability to collect relevant information and make informed reports. Fintech companies need a system that can accommodate the challenges of big data. Such a system should allow them to grow while maintaining smoothness in management.
The demand for fintech services is high. Its users are many, which increases the traffic for fintech firm systems. For example, fintech app usage rose to 72% in Europe during the coronavirus pandemic.
The increased usage means more data to manage and more complications for the data systems regarding their security and ability to analyze it. Fintech firms continue to grapple with the challenges of increased traffic. As a result, it is not unusual to note crashing applications for these companies at times.
How Ruby on Rails can help overcome fintech challenges
Ruby on Rails can help fintech companies deal with the issues holding back their performance in various ways.
Ruby on Rails is an open-source software development framework. It has increasingly become popular amongst startups in the Fintech industry because of its high-security features. The framework comes with several inbuilt capabilities that help applications and software for fintech firms deal with unprecedented threats.
The framework has a secure developmental lifecycle that development teams must follow when creating their apps. The lifecycle can be cumbersome because of the lengthy nature of the procedures. But it is advantageous in also creating a long assurance security path.
Ideally, many apps use a password-based authentication procedure that requires users to input their usernames and password into an HTML form. Unfortunately, hackers can steal these passwords by taking control of the cookies, ultimately breaching an organization’s systems.
Ruby on Rails prevents the hackers’ actions by providing high-capability tools to the RoR developers that provide essential authentication functionalities.
Scalability and high traffic
Ruby on Rails’ scalability is crucial in solving the problem of high traffic in Fintech apps. Scaling this framework allows it to grow and handle more requests per minute. Scaling of Ruby on Rails can occur either vertically or horizontally.
Vertical scaling entails adding more random-access memory and upgrading the server’s processor. The aim is to increase the processor’s power. But this procedure is not open-ended, and the processor may become obsolete over time because upgrading them further becomes impossible.
Scaling RoR horizontally seems to be the best option. However, it entails converting the single server architecture of a Fintech firm’s app to three-tier. The server, load balancer, database instance, and app instance occupy different servers in such a system. So, you can allocate smaller equal loads to each of these systems.
Scaling RoR has the advantage of overcoming the challenge of high traffic. In addition, the framework facilitates the fast handling of large amounts of data. It can deal with increased traffic due to higher users and more data packages in the network. Also, although other frameworks may cause lags in apps upon scaling, RoR does not experience these challenges.
Ruby on Rails in action in the financial sector
The following are some of the applications of Ruby on Rails in the real world. Several organizations now use RoR to maintain their software and applications.
Square refers to an innovation company in San Francisco. It provides mobile payment services. It also offers several other financial and merchant services. Its product allows for the making of payments via mobile devices.
The company started as a developer of card readers for accepting payments through smartphone audio jacks. It later launched other hardware solutions such as:
- Square stand integrates with an Apple iPod to form a portable device that can accept payments.
- Square chip reader – It uses Bluetooth to connect to Android devices and allows for contactless payments through smartphones.
- Square register is a point-of-sale solution with two tablets for the customer and the merchant. The customer’s screen allows one to swipe major chip cards. It allows for mobile transactions in small and medium businesses.
- Square terminal - This is a credit card processor. It accepts various forms of payment, including chips, contactless, and swipe.
Fundera is a platform that enables small businesses to access financing. This platform relies on the RoR framework for data security. It is a business-to-business lending marketplace that connects businesses with investors ready to fund startups. Through Fundera, small firms have a better chance of growing because of the connection with the right investors.
EarlyShares also uses RoR to develop an online platform for real estate fundraising and investing. It is a crowdfunding platform connecting people who want to invest their money in viable commercial real-estate projects.
This platform helps make the process of raising capital for real estate more accessible to everyone. Users of EarlyShares can review their investment options and choose those most suitable for their budgets.
Kin is a representative of Insurtech, a subfield of Fintech. It is an innovative platform that improves the efficiency of the insurance industry. The platform grants users access to a simplified insurance procedure with core specialties in home insurance and medical insurance.
Ruby on Rails is a stable and secure framework for Fintech companies’ applications. There are many startups in the financial technology sector. Their primary challenges include the inability to contain high traffic due to big data and data security breaches.
Ruby on Rails solves high traffic challenges by providing scalability options. Besides, Ruby on Rails provides high-capability tools to RoR developers that provide essential authentication functionalities.
These capabilities can prevent the actions of hackers and secure the applications and software for fintech companies. Many platforms like Square, Kin, and Fundera are based on the RoR framework.
Peer Review Contributions by: Miller Juma