How Modern Payment Systems Evolve: From Metal Coins to Microservice Architectures

Money has played a crucial role in human development, serving as a medium of exchange and a milestone of civilization.

Early trade relied on barter, e.g., exchanging goat milk for beef. As societies grew, barter became insufficient, leading to the use of metal media such as gold, silver, and copper to assign value to goods.

In modern times, metal money's drawbacks (inconvenient to carry, security risks) gave rise to paper currency, which reduced cost and improved portability. With rapid technological advancement, electronic money emerged, completing the four stages of currency development (see Fig 1).

The rise of internet‑based payments created a large number of payment institutions. A payment license, issued by the People’s Bank of China since 2011, is required for a three‑party payment business to be compliant; institutions without a license can only provide aggregation services without a reserve fund.

Licensed institutions (about 200 nationwide) hold a reserve‑fund account, ensuring customer funds are safe and enabling full settlement services. Their business flow is illustrated in Fig 2, while unlicensed aggregation follows Fig 3.

Payment Business Architecture

Payment institutions have two core responsibilities: collecting funds from customers (in‑fund) and settling those funds to merchants (out‑fund). These correspond to the “in‑fund” and “out‑fund” processes.

Efficient and secure payment must complete within about seven seconds to meet user expectations. High transaction volumes (tens of millions per day) make performance optimization challenging.

Evolution of Payment System Architecture

Initially, a single monolithic system handled all functions (API, transaction logic, merchant management, accounting). As transaction volume grew, this architecture showed weaknesses: limited disaster recovery, high development cost, and poor scalability.

To improve availability, the system was split into independent modules such as accounting, merchant management, and channel integration (see Fig 6).

Further evolution embraced micro‑service principles, decomposing the payment platform into small services: payment gateway, merchant center, core payment system, accounting system, settlement system, fee system, and channel system (Fig 7).

All transactions flow through the payment gateway, which validates and forwards requests to the core system. The core interacts with merchant data, selects appropriate channels (UnionPay or NetUnion), and triggers downstream accounting, settlement, and fee processing. Each micro‑service operates independently, enhancing fault isolation and scalability.