The Key Characteristics For Financial Software

Focusing on What Matters

By James Lois

Finance is a singular industry. It's a world of numbers, trades, and money movements, where software needs go beyond cool features and slick designs. In finance, software must prioritize rock-solid security, stringent compliance, and accurate design and development practices.

Financial Apps and Software Quality

As defined by Economics, we live in a world of scarce resources, so we should focus on what matters. This is true in business and it is true in software. Is it better to make the app run faster or ensure it works as intended? In case of an error, is it better to halt the program and display an error or make a reasonable assumption and continue? Perfect software doesn't exist. We have to make trade-offs.

Software quality has a set of external characteristics that can sometimes conflict with one another. Let's use the following chart to guide our thinking:

External characteristics of software quality

Interaction between the external characteristics of software quality. Code Complete 2, by Steve McConnell.

Definitions

  • Correctness: the state of being free from errors in code, design, and system functionality.
  • Usability: the degree to which something can be used easily and effectively by users.
  • Efficiency: the ability to minimize the use of resources, such as time, memory, and computational power.
  • Reliability: the consistency and stability of a system in delivering its intended behavior without frequent failures or unplanned outages.
  • Integrity: the preservation of data accuracy, completeness, and security, ensuring that data is properly stored, accessed, and protected from unauthorized access or modification.
  • Adaptability: the capability of a program or system to be used or modified for different purposes or environments without significant changes.
  • Accuracy: the degree to which the outputs or results of a system or process are free from errors, especially in numerical calculations, and how well the system performs its intended function.
  • Robustness: the ability of a system to continue operating correctly despite unexpected or invalid inputs, conditions, or circumstances, without crashing or producing incorrect results.

How This Applies to Finance

In most financial applications, accuracy is key, that is, they need to generate the right output. Even small mistakes can lead to huge swings in PnL and cash flow calculations. Integrity also matters, meaning that the system should have reasonable access restrictions and data has to be properly formatted and stored. Another important factor is correctness since financial applications should be as free from errors as possible in specification, design, code, and deployment. As a plus, these 3 characteristics play well with one another, as shown in the chart above.

The other characteristics will be more or less important depending on the kind of financial application we are building. Reliability is paramount, for example, for trading applications, since the system being down can mean losses in the millions or billions for a company. Usability, on the other hand, is a must for popular user-facing applications, like neobanks or trading apps like Robinhood.

Finally, some characteristics are usually not fundamental. You can do away with some efficiency, since it's worth it to invest more resources to get a more correct program or a more reliable system. You can also do without some adaptability and even robustness because trying to make the system work under all kinds of conditions could make the other characteristics falter.

So, for a quick recap:

  • Most important: integrity, correctness, accuracy
  • Usually important: reliability, usability
  • Not that important: efficiency, robustness, adaptability

Compliance: The Rulebook

Regulations in finance aren't friendly suggestions – they're the law. Financial institutions navigate a complex web of compliance requirements, from data privacy rules to anti-money laundering protocols. Top financial software integrates these protocols into its core functionality. This is why integrity is a key aspect of software quality in the world of Finance, as it specifically addresses the need for proper and secure access to programs and data, a critical aspect of regulatory requirements in the financial sector. It's a good idea for financial applications to make compliance effortless, with real-time reporting, automated risk assessments, and continuous monitoring of regulatory changes. Compliance shouldn't be an afterthought. It should be properly integrated into the specification, design, and code. Failing to meet compliance standards can result in hefty fines, legal troubles, and irreparable reputational damage. That's why financial software must treat compliance as a top priority, ensuring that features, processes, and data flows adhere to the relevant regulations. It's not enough to tick boxes and meet minimum requirements. You should develop an approach that gives you the freedom to know that you are operating with transparency and accountability.

Security: The Digital Vault

In finance, good data is valuable. And like anything valuable, digital assets need protection. Financial software must have multi-layered security protocols: advanced encryption, strict access controls, and continuous monitoring. Customers need assurance that sensitive information and transactions are safeguarded by secure digital vaults. Top-notch security isn't a nice-to-have; it's essential for any financial software solution. A single data breach can have devastating consequences, from financial losses to irreversible damage to customer trust. From secure coding practices to penetration testing, every aspect of the software development lifecycle must take security seriously. And it doesn't stop there – security must be an ongoing process, with regular updates and patches to address new threats and vulnerabilities.

Usability: Simplifying Complexity

Finance is complex, but software user experiences don't have to be. Great financial software strikes a balance between powerful functionality and intuitive simplicity. It makes intricate tasks feel natural, with interfaces that are both clean and efficient. We previously mentioned that usability is not as important as other aspects, but there's still a good case to be made for dedicating resources to make it better. The main reason to care about UX is that a good one improves accuracy, as shown in the chart. You have probably heard many stories of a fat-fingered number costing a company billions. Simplicity doesn't mean sacrificing depth or capability. The best financial software hides complexity behind intuitive interfaces, empowering users to make the complex simple to understand. It's about streamlining workflows, surfacing relevant information at the right time, and providing seamless integration with other systems and platforms. A well-designed user experience can be the difference between a frustrating, error-prone process and a smooth, efficient operation.

Conclusion

Financial software must excel in accuracy, integrity, and correctness, with significant attention to reliability and usability. Efficiency, robustness, and adaptability are secondary priorities, allowing for focused resource allocation to critical areas. Compliance and security are non-negotiable, and must be integrated into software to ensure protection and adherence to regulations. Investing in usability is a good idea, since it can raise accuracy.

While these characteristics matter in financial software, every company and application is different, and good programmers will know what aspects are important depending on the specific project.


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