Cancellation and refund policy in LLD - Architecture Diagram

System Overview - Cancellation and refund policy

This system manages user requests to cancel orders and process refunds. It ensures that cancellations follow policy rules and refunds are issued correctly and securely.

Key requirements include validating cancellation eligibility, updating order status, calculating refund amounts, and notifying users.

Architecture Diagram

User
  |
  v
Load Balancer
  |
  v
API Gateway
  |
  v
Cancellation Service <--> Refund Service
      |                      |
      v                      v
  Order Database          Payment Gateway
      |
      v
  Cache (for order status)

Components

User

client

Initiates cancellation and refund requests

Load Balancer

load_balancer

Distributes incoming requests evenly to API Gateway instances

API Gateway

api_gateway

Routes requests to appropriate services and handles authentication

Cancellation Service

service

Validates cancellation policy, updates order status

Refund Service

service

Calculates refund amount and interacts with payment gateway

Order Database

database

Stores order details and status

Cache

cache

Stores frequently accessed order status for quick reads

Payment Gateway

external_service

Processes refund transactions securely

Request Flow - 12 Hops

User → Load Balancer

Load Balancer → API Gateway

API Gateway → Cancellation Service

Cancellation Service → Cache

Cache → Cancellation Service

Cancellation Service → Order Database

Cancellation Service → Cache

Cancellation Service → Refund Service

Refund Service → Payment Gateway

Payment Gateway → Refund Service

Refund Service → API Gateway

API Gateway → User

Failure Scenario

Component Fails:Order Database

Impact:New cancellations cannot update order status; refunds cannot be processed reliably

Mitigation:Use database replication for failover; allow reads from cache but block writes until DB recovers

Architecture Quiz - 3 Questions

Which component checks if an order can be cancelled according to policy?

A Load Balancer

B Payment Gateway

C Cancellation Service

D Cache

Design Principle

This architecture separates concerns by using dedicated services for cancellation validation and refund processing. It uses caching to speed up order status reads and relies on a payment gateway for secure refund transactions. Load balancing and API gateway ensure scalability and security.

Practice

1. What is the primary purpose of a cancellation and refund policy in a system?

easy

A. To define rules for stopping services and returning money

B. To increase the price of products

C. To track user login times

D. To manage database backups

Solution

1. Step 1: Understand the role of cancellation policies

   Cancellation and refund policies set clear rules about when and how users can stop services and get money back.

2. Step 2: Eliminate unrelated options

   Options about pricing, login times, or backups do not relate to cancellation or refunds.

3. Final Answer:

   To define rules for stopping services and returning money -> Option A

4. Quick Check:

   Cancellation policy = service stop rules [OK]

Hint: Cancellation policies define service stop and refund rules [OK]

Common Mistakes:

• Confusing cancellation policy with pricing strategy
• Thinking it manages user authentication
• Assuming it handles technical backups

2. Which of the following is a correct component to include in a cancellation policy data model?

easy

A. login_attempts: int

B. user_password: string

C. product_price: float

D. allowed_cancellation_time: datetime

Solution

1. Step 1: Identify relevant data for cancellation policy

   The allowed cancellation time defines until when a user can cancel and get a refund.

2. Step 2: Exclude unrelated fields

   User password, product price, and login attempts are unrelated to cancellation timing.

3. Final Answer:

   allowed_cancellation_time: datetime -> Option D

4. Quick Check:

   Cancellation policy needs cancellation time [OK]

Hint: Cancellation policy needs allowed cancellation time field [OK]

Common Mistakes:

• Including unrelated user or product fields
• Confusing cancellation time with login data
• Using incorrect data types for time

3. Given this pseudocode for refund calculation:

if cancellation_time <= allowed_cancellation_time:
    refund_amount = full_price
else:
    refund_amount = 0
print(refund_amount)

What will be printed if cancellation_time is after allowed_cancellation_time?

medium

A. Error

B. full_price

C. 0

D. null

Solution

1. Step 1: Analyze the condition

   If cancellation_time is after allowed_cancellation_time, the else branch runs.

2. Step 2: Determine refund amount

   In else, refund_amount is set to 0, so 0 will be printed.

3. Final Answer:

   0 -> Option C

4. Quick Check:

   Late cancellation = zero refund [OK]

Hint: Late cancellations get zero refund [OK]

Common Mistakes:

• Assuming refund is full regardless of time
• Expecting an error due to condition
• Confusing variable names

4. Identify the bug in this refund policy code snippet:

def calculate_refund(cancellation_time, allowed_time, price):
    if cancellation_time > allowed_time:
        refund = price
    else:
        refund = 0
    return refund

medium

A. Price variable is not used

B. Refund is given after allowed time instead of before

C. Function does not return any value

D. Refund is always zero

Solution

1. Step 1: Understand refund logic

   Refund should be given if cancellation_time is before or equal to allowed_time.

2. Step 2: Check condition logic

   Current code gives refund if cancellation_time is after allowed_time, which is incorrect.

3. Final Answer:

   Refund is given after allowed time instead of before -> Option B

4. Quick Check:

   Refund condition reversed = bug [OK]

Hint: Refund condition must check cancellation before allowed time [OK]

Common Mistakes:

• Reversing the refund condition
• Ignoring return statement
• Misusing price variable

5. You are designing a cancellation and refund system for an online booking platform. Which approach best balances user trust and system scalability?

hard

A. Allow partial refund based on how close cancellation is to booking time

B. Allow full refund anytime, no restrictions

C. Allow full refund only if cancellation is made 24 hours before booking time, else no refund

D. Never allow refunds to avoid complexity

Solution

1. Step 1: Consider user trust

   Partial refunds based on cancellation timing show fairness and flexibility, building trust.

2. Step 2: Consider system scalability

   Partial refund rules can be implemented with clear logic and scale well without manual intervention.

3. Step 3: Evaluate other options

   Full refund anytime is costly; no refunds reduce trust; strict cutoff is less flexible.

4. Final Answer:

   Allow partial refund based on how close cancellation is to booking time -> Option A

5. Quick Check:

   Partial refund balances trust and scalability [OK]

Hint: Partial refunds balance fairness and system load best [OK]

Common Mistakes:

• Choosing no refund which harms user trust
• Allowing full refund anytime which is costly
• Using strict cutoff without flexibility