Transaction Banking Evolution and Testing

Transaction banking plays a significant role in the functioning of corporate and banking institutions to allow a smooth and safe flow of cross-border transactions, trade financial deals, mitigation of risks, cash flow management services, and security services. Transaction banking improves the relationship between banks, customers, and partners. It offers treasury solutions allowing a safer, secured, and effective flow of cash and financial securities across the international financial systems. It facilitates trade finance and offers cash flow management and securities for public and private entities.

The services of transaction banking are cash management services, online services, trade finance, and security services. Cash management service is a part of transaction banking that entities offer as a solution to manage the cash inflow and outflow effectively. Through online services, transaction banking provides a single point of cash access, trade, and security services to help streamline the workflow process for corporate, institutions, and small-medium enterprises. Transaction banking services for trade finance offer a range of global trade finance deals, including import and export services, buyer and seller financing, and open account receivable management. Through security services, transaction banking aims to improve the services and relationships between banks, clients, and partners.

In this article, we will explore why there is a surge of technology and innovation in transaction banking. We will track the evolution of transaction banking and highlight the business and regulatory issues. We will also investigate the scope of testing the transaction modules in banks and examine the products that are covered in testing the transaction modules and platforms.

Technology and Innovation in Transaction Banking

There is stiff competition in transaction banking that arises with changes in the regulatory compliances. With changes in regulatory requirements, banks and vendors are making considerable investments to remain competitive and ensure the quality of transaction banking platforms.

The banks no longer build their proprietary solutions. Instead, they rely on technology vendors to deliver corporate solutions. It significantly reduces costs and frees the internal resources to focus on more value-added services. Banks are investing to make the data easily available to companies and help them achieve straight-through reconciliation. Banks are focusing on collaborating with external vendors for payments. Mobile payment systems are emerging which is evident from different mobile payment platforms collaborating with Google, MasterCard, and Sprint.

Transaction banking is changing the relationship between banks and their technology vendors. Banks are improving their collaboration with the technology vendors to ensure that they offer quality banking services to the customers. Banks are utilizing the technology to the fullest to make their services flexible. With the inclusion of mobile technologies and Cloud services, banks are evolving and improving their services; banking services without these recent technologies now seem incomplete.

Evolution in Transaction Banking

Banks have reorganized their internal operation to improve different transaction banking units. The current structure unifies cash management and trade finance activities. The evolution of transaction banking has had a significant impact on the banks’ service lines. The quality of products and services like trade finance, payments, supply chain, cash management, liquidity management and more are now improved with the technology used for transaction banking.

Large corporations are using the effect of globalization on the economy to manage their cash and liquidity. They have standardized their finance processes by creating regional shared service centres and executing centralized back-office systems across regions. The earlier payment factories that used to process payments have now evolved into extensive corporate transaction banking systems utilized to manage the transaction flow between the partners, banks, and clients. Technology has helped corporates to manage and use their internal cash flow more efficiently. They have improved the visibility of cash transactions. But one area that can be challenging for treasury is to gain access of the cash once it is identified.

The situation can be grave in the countries where there are some rules imposed on tax. It prevents the easy movement of liquidity outside of the country. To facilitate this movement there are many large cash management banks present across countries that advise their clients and leverage the network to offer them value-added services. It offers greater visibility to the corporate treasurer over their cash status. They can manage the cash movement and access the cash without being worried about adverse situations. The organizations can reduce the need for short-term borrowings by up to 30-40%.

Working capital is extremely important for organizations since the liquidity risks can turn an organization into bankruptcy and counterparty risk is rising high. It is not just enough to have funds for a corporate they must manage the funds to make it more accessible and visible.

Liquidity Risk & Counterparty Risk

Liquidity risk and counterparty risk are the two common types of risk that transaction banking face. When an individual investor, business, or financial institution cannot meet their short-term debt, it raises the concern of liquidity risk. On the other hand, counterparty risk arises when the second party in credit, trading & transaction, and investment cannot fulfil their role in the deal and becomes a defaulter in a contract. An effective liquidity risk management and counterparty risk management program help banks meet their obligations to pay within due dates to avoid adverse scenarios.

The Scope of Testing Transaction Banking

The scope of testing transaction banking is spread across the area of its services. The service line of transaction banking is the flow of cross-border transactions, trade financial deals, mitigation of risks, cash flow management services, and security services. The scope of testing transaction banking includes testing the cash management, payment transactions, supply chain finance, collection and receivables, trade finance, and back and front office transaction banking modules.

Transaction banking is available through multiple sources and channels. Testing transaction banking includes testing the transaction origination medium like bank branches (back office and front office systems) and channels (internet and mobile).

Yethi’s Testing Approach and Methodologies

At Yethi, we have worked with some of the major national and international banks. We have tested prominent transaction banking applications. From User Acceptance test design & execution to regression testing and performance testing, we have conducted end-to-end testing of different transaction modules. We have also executed security testing of all the transaction banking applications.

We have tested the following modules,

  1. Payments
    1. NEFT/ RTGS/IMPS
    1. Bulk Transfers
    1. A2A Transactions
    1. UPI/NACH-based transactions
    1. Instrument Series
    1. Tax Payments
    1. ECS
    1. Products Maintenance
  2. Supply chain Finance
    1. Vendor Finance
    1. Dealer Finance
    1. Payable Finance
    1. Receivable Finance
    1. PO Finance
    1. Reverse Factoring
    1. Export Factoring
  3. Collection and Receivables
    1. Collections
    1. EOD BOD Reports
    1. Receivables
    1. All other Reports
  4. Trade Finance
    1. Bill Collection,
    1. Letters of Credit,
    1. Bank Guarantee
    1. Open Account for Trade,
    1. C2C Transactions for Trade
    1. B2C transactions for Trade

We follow strategic testing methodologies and execute testing in phases across different modules like Payments, Supply Chain Finance, Collections and Receivables, and Trade Finance. Our testing method includes identifying various business processes in the bank and customizing software based on the volume and value of transactions supported by each process.

Our testing focuses on the processes deemed to be at high risk, based on an algorithm built in conjunction with the bank. We design and execute test cases based on our analysis. We offer end-to-end and improved test coverage across all the modules and products in transaction banking. We help banks in identifying the defects at the early stage, thereby minimizing the defect leakage risk. We detect rare issues and errors and increase the overall productivity of the application.

Rising Customer Risks in Digital Lending, how efficient test automation can help?

The traditional lending process was time-consuming as the time for credit appraisal and disbursal used to be around three to four weeks, and the average time for account/money processing used to be approximately 60 – 70 days. In the traditional lending process, customers have complained that due to 30 days of the moratorium, the EMI would have started way ahead of the lending amount credited in their account. Often, customers used to opt for 6o days of the moratorium to avoid the inconvenience.

Soon organizations realized the need for digitalization to reform the lending process. Leading banks worldwide adopted digital lending to slash down the processing time to 24-hours. Digitalization brought a transformative change to the entire lending process. There has been a significant shift in end-to-end credit journeys, including the customer experience. Digital transformation has supported the credit processes. Digital transformation has improved revenue growth and achieved significant cost savings.

Digital lending allows customers to submit loan applications online. From applications, to documentation, verification and amount credited to your bank account, the entire process is carried out on mobile applications, and it takes less than a day to credit the principal amount to the customer’s bank account. From three weeks and 60-days, the time to cash is now reduced to 24-hours.

Rising customer risk in digital lending

Banks are enhancing the process by adopting paperless loan approval. They are automating the entire process to improve time and quality. But digital advancement has its own limitations. There is a rising concern for customer risk associated with digital lending. Customers share account details, personal information, credit history, and more on these applications. Hence, organizations must ensure that they maintain the stability, security, performance, and accessibility of these platforms.

The organizations are currently digitizing the credit and lending process. The banks are focusing more on improving customer experience by reducing the time taken for lending process. While organizations reduce the lending time, there is a major concern arising from customer risk. Let us look into the types of customer risks associated with the digital lending process.

  1. Multi-layered transaction process – The digital lending transacti0n is multi-layered as various lending services are outsourced to different entities. Multiple Fintech companies operate behind the operation to create a platform for transactions. As the customer uses these tech platforms for transactions, it becomes increasingly complicated in the cases of grievance redressal, like who will address the customer complaints, what actions should be taken and by whom to ensure that the services are more effective.

The platforms are integrated by embedded finance that forms a layer of services by different fintech modules. These platforms also work based on an algorithm that matches borrowers to lenders. While this algorithm creates efficiencies because several activities are performed simultaneously in a broader lending spectrum by outsourcing it to many Fintechs, there can also be certain drawbacks. If the borrower has appointed a defaulter as a guarantee, Fintech will address the loss. However, at the time of collection, customers will face many challenges.

  • Irregularity in information during loan origination process – The terms and conditions in the lending process are lengthy. The lending process becomes complex because not all organizations will have similar terms and conditions; some will have more than others. It increases the customer risk because customers may not have thorough knowledge and understanding of the repayment terms while signing the loan agreement. The customers may not comprehend the information like the interest rate, processing fees, overdue charges, annual percentage rate and more if not informed by the lenders. They would also not know the consequences of repayment delay, credit score impact, and implications of NPA.

Customers are also not aware of the payment recovery actions that organizations adopt. All this inadequate information makes borrowers make uninformed choices and affect their credit ratings. The loan disbursal is quick in digital lending, but without adequate information about the charges and consequences of non-repayment, the risk will increase.

  • Effects on unfavourable credit history – The previous point brings me to the current one that if the customers are not informed about the adversities of repayment delay or repayment overdue for months, it will affect their credit records. Most customers are not even aware that non-repayment or delays can affect their credit eligibility for future loans. Once the credit score is evaluated low, the customers must take multiple measures to rectify them or obtain credit approval to avail future loans. A low credit profile can lower the credit records making it difficult to apply for a new loan.
  • Lack of communication and transparency on assessment of creditworthiness – Digital lending, unlike the traditional lending process, which follows a thorough process of evaluation of customers’ credit profiles, does not engage in interaction with the customers, which is a requirement to analyse the customers’ creditworthiness. Digital lenders spend a lot of time on automated IVR, text messages, and social media advertisements to create awareness and push their services. Borrowers are not even aware of how the lenders have procured their contact details and credit history. It is not even clear how the lenders have evaluated the credit eligibility of borrowers. It creates a lot of confusion regarding whether it is spam or a genuine approach.

Like traditional lending, digital lending also considers two important aspects of the lending process; the customer’s willingness to pay and the ability to pay. While the first intention is evaluated through the customer’s previous credit history, the second intention is evaluated by the customer’s salary credited in the bank account, debit and credit history, investments, liabilities, and more. While applying for a loan, the digital lenders request access to contact details saved on customers’ phones. The lenders use this alternate data model to cross-verify borrowers’ credibility and positive intentions.

  • Lack of suitable assessment device – It is easy to avail of loans digitally as the processing is quick. But there is a lack of borrowers’ credit worthiness assessment that complicates the entire lending process. Often lenders provide top-up loans based on the timely repayment by the borrowers without a suitable assessment. This added loan sometimes may not flow well with the borrowers, and they may end up in high overdue.

The overdue reason could be the high-interest rates imposed within a short loan tenure. Several instances in the past highlighted that customers ended up being loan defaulters, and organizations had to contact them and force them to repay the loans. The collection process in digital lending happens digitally (mostly auto-debit). If customers miss one EMI, it will lead to a serious outcome, and lenders might look for alternative ways to recover the loans. Both borrowers and lenders face harassment.

  • Lack of grievance redressal – Digital lending lacks promptness in addressing customer complaints. In fact, the grievance redressal is not as quick as the loan disbursal process in digital lending. It also lacks transparency for customers, which their trust in digital lending. The digital lending ecosystem evolves multiple service layers offered by many fintech, making the customer interaction complicated and confusing and finally leading to failed redress. For most lending fintech, the only option for redressal is either through an integrated chatbot or WhatsApp chat sessions, which have certain limitations and do not always suggest adequate information. All these increase the intensity of redressal issues, and customers face problems.
  • Risk of compromised personal data – The unique selling feature of digital lending is how they gain access to customers’ personal data and use these alternate data for customer onboarding and credit appraisal processes. But it can be equally detrimental if the data points are sourced from external data agencies. Sometimes the borrowers sign two agreements in case the digital lending happens through a third-party service provider. In the above kind of agreement, the first signed agreement would be between the borrower and the lending app, where the lending app would be entitled to a different entity.  This structure allows the third party to gain access to customer data to collect all necessary information. These sourced data can be misused without the knowledge of the customers.

Why testing is an important digital lending platform?

Let us consider a scenario; you enter all your details, and suddenly the application stops responding with a notification message for you to close the application. You have to turn off the application, unaware of whether the application has recorded the details you have already entered. Or, you upload your documents and click your image, but the image does not get saved. The digital lending platform might have to contact the customer to inform about the missing information and ask them to upload all details again. Customers relate to the digital lending platform because of its seamless functionalities, easy navigation, superior performance, and security. If any of these is compromised and has errors, customers would not think twice about discontinuing using the application.

As per a report in Statista, “Digital lending is one of the fastest-growing fintech segments in India and grew exponentially from nine billion U.S. dollars in 2012 to nearly 110 billion dollars in 2019. It is expected that the digital lending market would reach a value of around 350 billion dollars by 2023”. We can imagine the growth of digital lending in the upcoming years with a 13.5% CAGR. The projected data give us an idea that the number of the digital lending platform will increase, which implies that it would need rigorous testing to ensure that the platform is top-notch without any technical errors. Each Fintech must also ensure that no organization loses their business to their competitors due to technical glitches of applications.

Let us investigate how efficient testing can improve the digital lending experience.

  1. UI/UX and integration – Customers seek platforms that are easy to use and navigate. Testing can evaluate a clean UI design and integration point to ensure that the customers enjoy a seamless experience of the lending platform.
  2. Performance – It is a massive turn off for customers if the application stops responding or if there is a performance error. Performance testing can ensure that the digital platform eliminates the possibilities of performance issues in the lending application.
  3. Accessibility and functionality – Customers relate to applications with easy accessibility and functionalities. They will not prefer using an application filled with features and functionalities. It confuses customers with the click-boxes and fields that do not allow them to navigate through the window command. Functionality testing helps detangle the application so that customers can easily access the applications and ensure that the platform performs at an acceptable standard.
  4. Security – Security is an important aspect of a digital lending platform. Customers share data with an expectation that the platform will maintain customer data confidentiality. The digital lending platform must ensure that the security of borrowers’ details is not compromised. Security testing can ensure that digital lenders maintain data security under the proper protocol.
  5. Regression – Changes, modifications, and addition to the digital platform are extremely frequent. Each change implemented in the application can harm the entire application functionality if not validated properly. Regression testing ensures that the new features are integrated adequately and correctly without disrupting the previous application features and functionalities.

Conclusion – Test automation is an effective solution to scrutinize the workflow of digital lending systems workflows. It validates the end-to-end process and saves time and effort for each implementation. Digital lending platforms have a high degree of inter-connectedness, which requires repeated testing to minimize manual efforts and achieve optimal coverage.

At Yethi, constantly upgrade and update your LOS and digital lending platforms to make them flexible and agile. The major challenge in testing these systems includes usability, performance, security, UI/UX, and Configuration. With Yethi’s robotic, 5th generation codeless test automation solution, Tenjin and deep domain expertise, the experts address the above challenges. Our team help banks and financial institutions drive their testing operation and ensure that their customers achieve their business goals within the stipulated timeline. Our intuitive solution – Tenjin, reduces 60-70% testing turnaround time.

How does test automation vary between development and acceptance in BFSI industry?

Test automation has transformed the core software system of organizations with a better and smarter workflow approach. The improved test automation helps to optimize the entire process, thereby, eliminating any operational gaps and offering a greater level of customer satisfaction. Test automation plays an integral part in the highly complex banking and financial sector where the process involves extremely sensitive financial data, which offers NO scope for compromise. Being popularly used in banks and financial institutions, test automation helps to reduce time and effort on repetitive jobs and increases the speed of delivery multiple folds when compared to manual testing.

Though test automation has eased the tedious and time-consuming manual software testing, its success depends only on the efficiency of automation tools being used. Adding to the sensitive data-driven and multi-layer workflow of the banking and financial sector, a perfect automation tool is required that will align with the organization’s core software system and deliver favorable outcomes. The test automation requirement varies between the development and acceptance phase in the BFSI industry, let’s discuss it in detail.

Test automation in the software development cycle

Testing in the development phase involves a series of to-and-fro cycles to ensure that the newly developed software is working without any defect. The entire cycle of software development or sub-development phase requires a specifically designed test automation tool to get the software immaculately working. Further, with the introduction of more agile DevOps processes, testing is carried out earlier in the development cycle to ensure the developed software is of higher quality. Additionally, continuous testing process is also introduced to execute the automated tests as a part of the software development pipeline to increase quality and reduce business risks.

Software development cycles in the banking processes involve critical data such as an individual’s financial information, transaction history, and personal details. To safeguard the crucial client data and have a fully functional yet completely secured banking software, it is important to have a strong testing procedure in place.

A performance failure, security breach, or a poorly functioning system will lead to loss of potential and prospective clients, eventually incurring a huge financial loss. Organizations need to understand that it’s equally important to invest in high-quality, fully functional test automation tools to give the best service to their clients.

In this era of growing dependency on digital platforms, only a good testing system has the power to make or break your business. Poorly performing testing systems can compromise on the performance and security, leading to highly dissatisfied customers, which can eventually shatter the brand within no time. That’s why, we at Yethi, have introduced an efficient test automation platform for banking and financial businesses to work at their best while offering complete peace of mind to the entire client base. Tenjin, Yethi’s codeless automation tool, has revolutionized test automation in the banking and financial sectors, offering an impeccable system that offers no scope for errors.

Yethi has established itself as a market leader in QA services to the BFSI industry by offering testing solutions to popular banking software including Oracle FLEXCUBE, Infosys Finacle, and TCS BaNCS. Tenjin has created a deep impression in the market for its quick deployment test automation solution that conducts the testing without the need for scripts or codes while offering nearly 100% accuracy.

Test automation for software acceptance

Banking and financial systems are constantly modifying their core software to add new features or upgrade the existing ones to meet the ever-changing demand of the customers. Testing associated with the adding of a new feature to cater to the company/institution’s requirement is defined as acceptance testing.

User acceptance testing forms a vital part of the software development life cycle as it is tested for real-world usage for the intended audience. Otherwise known as UAT (user acceptance testing), it is done when the software has undergone integration testing, unit testing, system testing, and other functional testing aspects. This testing is the final stage of functional testing to check if the final results are accepted by the end-users.

To ease the acceptance testing from a manual approach, test automation tools for acceptance are being used popularly by banks and other financial companies/ institutions. Manual test execution takes time as the test codes are manually written and reviewed by the testers. Such an approach is not suitable for a highly agile working system that is followed by companies today. To keep up with the trend and offer modern solutions to new-age problems, Yethi offers automation for acceptance testing.

At Yethi, we understand how essential it is to decide and use the right automation tool for testing user acceptance of the banking/ financial software. Yethi’s test automation tool, Tenjin, is a codeless platform that is designed to rapidly scan through the software and detect any defects. It improves the application quality by fully investigating the formal expression of your business needs and addressing any operational and infrastructural gaps. Tenjin is one of its kind of tools that can offer testing of banking/financial software with minimal human interference and nearly 100% accuracy.

The future of test automation in banking/ financial software

The next wave of artificial intelligence (AI) and machine learning is already taking over all the technological processes across various industries. The incorporation of these technologies has been a crucial part of the banks and financial companies/ institutions, as the number of account holders is constantly increasing. It becomes important for the banks to consider the need of the current tech-savvy millennials while keeping things simple for the previous generation.

Banks and other financial companies are creating and updating software for online, mobile, and other digital platforms. This increasing number of online users has created a need for an immensely effective software testing solution that will leave no scope for compromise in any aspects of functional usage, performance, or security.

The future of test automation in the BFSI industry looks quite promising with the growing usage of digital platforms. The sector has already seen the integration of AI, machine learning, and robotics; however, the future looks different with advanced robotics, augmented reality, and smart machines being used in a common, real-life scenario. The evolving banking/ financial process will further require an advanced testing solution. The future might see robots take over the testing process or a more agile process might come into the picture that might offer impeccable execution. Technology is evolving at a faster rate than we can imagine, so the future will see advancements much beyond our current understanding.

Outsourcing User Acceptance Testing

User Acceptance Testing (UAT) Service ensures that a software continues to perform and provide you with expected outcome under all business scenarios. UAT is an essential part of the software development process, regardless of whether the system is developed in-house and purchased from a licensed firm.

The methodology of User Acceptance Testing is complicated because it is not always easy for a developer to understand what customers seek. The developers may misconstrue and edit specifications, which may not be useful for the customers.

User Acceptance Testing involves multiple stages and some companies may not have time, bandwidth, and experienced staff to conduct the tests. Under this scenario, it is extremely profitable to outsource testing to an experienced team of professionals who can perform all the stages of UAT without any errors.

Outsourcing the manual and automation testing work to professionals allow you to focus on your business priorities with an assurance that all your testing needs are taken care off by the professionals. It does not let you drive away your focus from the fundamental requirements of your business.

Business Challenges

The software testing cycle includes a few challenges. The common business challenges are as mentioned below:

  1. The reluctance of users to perform the test
  2. Lack of participation
  3. Allocating resources for UAT testing
  4. Improper test design and planning
  5. Untrained and inexperienced UAT testers

The advantage of outsourcing User Acceptance Testing

  • A team of experienced testing professionals with thorough knowhow of the business domain executes your project
  • Develops a thorough UAT strategy and improves the quality of your project outcome
  • Projects are successfully executed within strict deadlines
  • Not just developing, but a specialised outsourcing firm provides guidance and support for seamless implementation of User Acceptance Test plans
  • You can get access to a large repository of test cases and real-life scenarios based on your business requirements
  • Availability of well-defined models like the risk-based testing approach that aligns perfectly with the ever-evolving business needs and schedules
  • With a large pool of specialised consultants being available, there is no additional responsibility for hiring and managing internal consultants
  • Get relevant defect management based on your preferences

Steps of User Acceptance Testing Services:

Steps of User Acceptance Testing Services

Outsourcing user acceptance testing services reduce risk, ensuring customer satisfaction. UAT services comes is wrapped with the following features: –

  • Enhance the productivity of your team without hiring new resources
  • Get your UAT professionals, testers, and consultants to develop relevant test cases based on user/business requirements
  • Set up relevant defect management system as per customer preferences
  • Make informed decisions based on accurate reporting and proper communication protocol

Benefits of outsourcing UAT

Cost Management: Outsourcing user acceptance testing will help you to manage your budget constraint by reducing the costs. You can be sure of high-quality services at affordable prices.

Risk Management: Outsourcing UAT services can help you to minimize risks associated with operations, testing automation, test management and resource planning as only the domain experts can make a secured test plan to control the risk.

Time Management: In addition to cost and risk management, an experienced UAT outsourcing firm can help you with time management, which is an important criterion for your project inception. The domain expert understands your time constraint and takes care of your project from start to end.

Business Expansion: When you are outsourcing the user acceptance testing process, you will gain a competitive edge across the market. The experienced outsourcing firm can optimise the use of your resources and provide you with additional support to improve your delivery schedules and service quality.

Skilled Resources: You can get access to the skilled resources who are experts in their domain practice. This allows you to free your in-house resources and delegate them on your business priorities, based on their core competencies.

Why Choose Yethi?

With years of experience, we have developed solutions of varied scales and complexities for our BFSI clients so that they can conduct comprehensive testing and auditing of their services. Our team has helped the clients with error-free implementations whether they needed to upgrade or test the applications for new modules. We offer extensive solutions within the stipulated timelines by leveraging domain expertise and script-less in-house automation platform. We offer varied testing types to unlock their business potential through new avenues and enhance application quality while managing the budget and time constraints. Our experienced team has worked with multiple technologies to seamlessly implement a user acceptance test plan based on our client’s requirements. With a team of experienced UAT consultants, advanced tools, and testers, we ensure a quality to match your organization’s reputation.

Yethi’s achievement of being 6 years in the operation:

Yethi’s Achievement

  • 300 highly experienced consultants
  • Tenjin – 5th Generation Test Automation Accelerator
  • Structured test and system integration plan
  • Tested for quality and accuracy
  • Result-driven testing processes
  • Dedicated manager and BFSI domain experts
  • Cost-effective and time-efficient deployment
  • Customised testing services
  • Comprehensive support during test execution