Design a scalable payment system

Q: Design a scalable payment system

This question evaluates system design and financial-systems competencies, including distributed systems, transactional integrity, ledger and money-movement models, API and data-model design, failure handling, security, compliance, and operational concerns like scalability and auditability.

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Question

Design a payment system that supports moving money between users and paying merchants.

Your design should cover:

Core product requirements: user-to-user transfers, merchant payments, refunds/chargebacks (if applicable), payment status tracking, transaction history.
Non-functional requirements: correctness (no double-spend), idempotency, high availability, low latency, auditability, compliance considerations, and scalability.
Money movement model: ledger design (e.g., double-entry), authorization vs capture (if cards), holds, settlement, and reconciliation.
APIs and data model: key endpoints, request/response fields, idempotency keys, and how you represent accounts/balances/transactions.
Failure handling: retries, exactly-once vs at-least-once processing, deduplication, consistency guarantees.
Security and risk: authentication, authorization, encryption, fraud detection hooks, limits, and monitoring.

Assume the system may integrate with external payment rails/providers (e.g., card networks, bank transfers). Explain key trade-offs and provide a high-level architecture diagram in words.

Design a scalable payment system

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