Testing of payment transactions has become a challenging topic for financial institutions and payment service providers (PSPs). Quality resources are limited, so how to ensure sufficient test coverage and risk mitigation? With no room for error in payments processing, the risks of financial and reputational damage are high. Our recent experience confirms that automation can offer viable and secure solutions to increase efficiency in testing payments. 

With increasing regulatory requirements, such as the new ISO20022 standard and instant payments regulations, combined with aging IT infrastructures and new software releases, banks are facing multiple challenging with payments testing activities. 

Any change in the payment processing chain requires regression testing of core critical components, such as validation, processing and settlement of a payment transaction. The production date and test cycle must be aligned with scheduled software releases and regulatory deadlines. Efficiency and accuracy are vital during the execution of tests. Test automation can help to address these issues. 

However, to fully leverage the benefits of automation, banks or PSPs must invest adequate time and resources into a well-thought-out automation strategy. It is crucial to consider multiple aspects. We have developed a practical roadmap to help organizations set up an efficient test automation approach.

The following four areas should be considered for an effective payment testing automation strategy. 

1. Understand your payments testing needs and set up automation accordingly 
We recommend assessing two automation approaches during the preparation phase, based on your clearing infrastructure, projects pipeline and resource availability on business side. Below we summarize pros and cons of full automation and semi-automation, based on our project experience.

Table 1: Full automation versus semi-automation

2. Recycle test cases and test data
Despite varying internal requirements (e.g. new releases, transformation programs, archive migration) or external factors (e.g. new requirements for clearing and settlement mechanisms (CSMs), new regulatory standards), in most cases, processing of the same types of payment messages from corresponding incoming channels (e.g. SEPA credit transfer from EBA CLEARING) needs to be validated. 

Testing objects, related test cases and sometimes even test data (e.g. test transactions with IBANs, BICs) can be recycled for future projects. This significantly reduces the time required for test preparation and scope definition, while creating a good basis for test execution.

This can only be successfully achieved if all steps of the testing process have been properly documented, so the knowledge can be transferred to the next project (team).

3. Use simulations of your clearing partners and affiliated systems
Requirements for change in the payment processing chain are often initiated by the bank’s or PSP’s clearing partners (e.g. EBA Clearing, Bundesbank, clearing partner banks). We recommend an initial validation of receiving and processing of payment data for new requirements within the core payment platform, without the direct involvement of CSMs. This involves using test tools which allow the simulation of the required incoming channels and can reduce unexpected errors during the actual User Acceptance Tests (but not completely replace tests with other parties). 

4. Consider all types of tests needed to be performed and prioritize 
According to our experience, prioritization of test cases according to business needs together with the implementation of continuous testing, analysis and monitoring of results help maximize test automation during the execution of different test types.

Table 2: Test types

Conclusion

Despite the complexity of payments testing, a well-configured automation setup and the utilization of appropriate tools can significantly streamline processes, save time, resources and costs while maintaining the highest level of quality.

The regulatory pressure and the frequency of new compliance demands within the payments sector are unlikely to diminish anytime soon. Testing is a vital part of transformation programs regardless of the scale of change, however it is often allocated less time and fewer resources. It is crucial for banks and PSPs to assess both their current and future testing demands for payment transactions and evaluate the appropriate level of test automation aligned with business objectives. 

How Capco can help

Capco has accompanied financial services clients in all types of change programs from large-scale transformation for cross-border and SEPA transaction processing to regulatory compliance implementations, with a strong focus on test management and execution, from test strategy development to test acceptance protocol handover. 
Contact us to find out more.