A Borrower Pays €100. Where Does the Money Go?
A few years ago, I worked on a problem in Apache Fineract (an open-source platform for building financial services and core banking systems) that sounds simple until you start looking closely at it: when a borrower makes a payment, exactly where should that money go?
To solve this problem, I designed the Advanced Payment Allocation Strategy introduced in Apache Fineract 1.9.0 and implemented core parts of its behavior. The goal was to move away from repayment strategies where allocation rules were largely hard-coded, and make those rules much more configurable.
Advanced Payment Allocation allows financial institutions to define how different transaction types should be applied across past-due, currently due, and future installments; how principal, interest, fees, and penalties should be prioritized; and how payments made in advance should affect future installments. It also introduced chronological reprocessing of transactions and charges and supports different horizontal and vertical approaches to allocation. I...
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