The Banking, Financial Services, and Insurance (BFSI) sector is on the verge of rapid digital transformation.

From AI-powered fraud detection and secure ledger wallets to Machine Learning-based credit scoring and automated claims processing, many cutting-edge technologies are worth applauding. However, with such advancements come increased complexities and vulnerabilities.

The security, functionality, and overall performance of the BFSI sector’s digital infrastructure are paramount. To safeguard sensitive financial data, state-of-the-art encryption, regular security audits, and continuous monitoring are needed.

Banking domain applications, in particular, must optimize user interfaces and backend processes to enhance customer experience and operational efficiency — a single flaw in the software can result in severe financial losses, reputational damage, and regulatory penalties!

That’s why meticulous testing of these applications is needed to ensure they’re safe, scalable, and efficient. In this guide, we’ll discuss how that process can be undertaken properly, including key test cases, types of testing, and best practices.

We’ll also cover potential challenges and future trends. But first, let’s start with the basics.

What Is a Banking Domain?

A banking domain refers to the entire system of internal operations and components that enable the banking staff to deliver end-to-end financial services to individuals, businesses, and governments, such as loans and mortgages, compliance reporting, and wealth management.

It also encompasses the infrastructure supporting these services, such as core banking systems (e.g., customer accounts), mobile and internet banking platforms, ATMs, and payment gateways.

There are two main categories of functions for banking domains:

1. Primary functions

These relate to the fundamental function of any bank, i.e., to facilitate the borrowing, lending, and depositing of money. Each banking category has unique needs, and the banking domain needs to have suitable processes to ensure that each runs smoothly and securely.

Some examples include:

• Managing credit approvals, disbursements, and repayments
• Facilitating fund transfers, bill payments, and direct debits
• Opening, maintaining, and closing savings, checking, and fixed deposit accounts
• Providing investment options such as mutual funds, stocks, bonds, and retirement plans

2. Secondary functions

These relate to certain non-banking functions that financial institutions often take on, such as collecting checks, managing asset portfolios and loans, overseeing payables, and so on. Secondary functions often contribute significantly to profit, so they need their systems to operate efficiently.

Some examples include:

• Conducting fraud detection and prevention activities
• Generating reports for regulatory authorities and internal stakeholders
• Implementing measures to mitigate credit risk, market risk, and operational risk

Types and Test Cases for Banking Domain Applications

Let’s talk about the four main banking application test cases:

1. Functional testing

This assesses whether all the features of the banking application work as they were designed. It checks whether specific actions deliver the expected outcomes and whether the software meets the stated requirements in terms of functionality and ease of use.

Examples of functional tests for a banking application include:

a. Account creation

• Creating new accounts of different types, like checking, savings, and fixed deposits
• Checking that mandatory fields when collecting account holder information are properly enforced
• Reviewing that notification emails are sent at the right times, such as when the account is successfully set up

b. Fund transfers

• Checking how soon transfers done over the weekend are completed
• Testing the speed and success of both intra-bank and inter-bank transfers
• Testing different amounts of fund transfers, including maximum and minimum limits
• Checking that transaction and/or currency conversion fees are correctly applied

c. Bill payments

• Testing both one-time and recurring payments
• Testing that payment notifications are promptly sent
• Testing the setup of new payees and scheduling payments
• Testing that payments reflect in the transaction history

d. User interface and usability testing

• Testing logins with both valid and invalid data
• Testing that all buttons and/or menu options perform as expected
• Checking the processes for cases like “forgot password” or “forgot user ID”
• Testing application installation, uninstallation, and update processes
• Testing the application for when accounts/roles/branches have invalid data
• Checking that character limits are suitably applied (such as a minimum of 16 digits for a Credit Card Number field)

2. Security testing

This is conducted to ensure that the application protects its users’ sensitive financial data from cyber-attacks and unauthorized access. It verifies that it meets accepted security standards like OWASP and tests its ability to thwart different types of attacks.

IBM reported the average cost of a data breach in 2023 to be $4.45 million, a 15% increase over three years. This indicates the importance of conducting rigorous security tests before releasing the banking domain application.

Examples of security testing include:

a. SQL injection testing

• Testing input fields and query strings for vulnerabilities
• Checking that the application sanitizes its inputs and uses prepared statements

b. Data encryption

• Checking the implementation of encryption standards like AES-256
• Verifying the encryption of sensitive data like account numbers and passwords

c. Two-factor authentication (2FA) tests

Testing the security of fallback options

Testing whether 2FA mechanisms are working as they should
Validating different 2FA methods like SMS, authenticator apps, email confirmation, and so on

d. Authentication and access control testing

• Checking the strength of password requirements
• Reviewing whether user IDs and passwords are encrypted
• Testing features like auto-saving of passwords on individual devices
• Checking how the application responds to multiple invalid login attempts
• Checking how effective user authentication is (such as prompting users to enter CAPTCHA)
• Checking timeout mechanisms (i.e., after how much inactivity a user will automatically be logged out)

3. Performance testing

This tests the banking domain application’s ability to operate smoothly under different conditions, such as high user traffic.

The goal is to ensure that users can conduct their transactions smoothly and get a top-notch user experience even during busy hours or peak times like monthly paydays.

Examples of performance tests include:

a. Load testing

• Identifying and addressing performance holdups
• Simulating peak traffic conditions to test how well the application holds up to high load
• Measuring response times, throughput, and resource utilization during low vs high traffic hours

b. Stress testing

• Checking application performance under extreme conditions like high transaction volumes or inadequate system resources
• Checking how speedily the application recovers from failure states

c. High load and network conditions testing

• Testing application performance in different situations, for example, when large volumes of users use the same functionality at the same time
• Testing performance under fluctuating network conditions, especially during ongoing transactions
• Testing performance when the battery is charging or when the battery is low vs. high

4. Compliance testing

This verifies that the banking domain application adheres to legal and regulatory requirements like GDPR or PCI DSS. It ensures that all user data is processed lawfully and transparently and that cardholder information is handled securely.

The goal is to ensure that users can exercise their data rights and trust the application to keep their information safe and that financial institutions manage data carefully to avoid potential legal fines.

Examples of compliance tests include:

a. Data privacy compliance

• Testing data handling practices to check GDPR compliance
• Validating that data deletion requests are properly processed
• Ensuring that data encryption and pseudonymisation techniques are applied

b. Transaction reporting standards

• Verifying that transactions are logged accurately
• Testing the security and integrity of transaction logs and audit trails
• Checking the timely generation of bank reports for regulatory authorities

c. Monitoring and incident response testing

• Checking that the application monitors any unusual transactions or high-risk activities
• Testing how it handles unauthorized access attempts
• Testing how it decrypts and accesses encrypted data

Best Practices for Banking Application Testing: A Step-By-Step Process

Testing applications in the banking domain is multifaceted and requires careful planning and an in-depth understanding of the system. Let’s explore the essential steps involved in this critical task.

1. Requirement analysis and gathering

If a financial institution wants to develop a new online banking portal, gather testing requirements for functionalities like user log in, account summary, fund transfers, bill payments, and customer support chat. You want to do your homework and make sure all the tasks are clearly laid out.

Next, document functionalities and business rules related to the application — checking account balances, viewing transaction history, initiating transfers between accounts, and setting up recurring bill payments. This will help you further in gathering information.

Identify integration points with other systems, such as payment gateways and credit scoring programs. In addition, conduct meetings with bank managers, IT staff, and compliance officers to confirm security requirements like 2FA and regulatory reporting.

After all, they’re the ones dealing with the end-users. This is also the right stage to get the testers on board. By participating in the initial discussions, they can better grasp the project’s vision and requirements and design test plans that align with the goals.

2. Test planning

Create a detailed test plan outlining the testing strategy, objectives, scope, resources, schedule, and deliverables.

Determine the specific types of testing needed, such as unit testing, integration testing, system testing, and user acceptance testing. Then, select appropriate testing tools and frameworks for each type of testing.

For example, you could use Selenium for functional testing, JMeter for performance testing, and a combination of manual and automated solutions for security testing. Here’s a list of the best software testing tools of 2024.

Assign roles and responsibilities within the testing team, ensuring clear ownership of tasks — the test manager handles overall coordination, while test analysts are tasked with creating and executing test cases. On the other hand, security testers spot and mitigate security vulnerabilities.

3. Test case design and development

Develop detailed test cases based on the requirements and test plan. For instance, in the online banking portal, you’ll have to do that for the login functionality, such as entering valid credentials and invalid credentials and testing the password recovery process.

Next, conduct a review session where the developers and business analysts validate test cases for the login functionality (for technical insights) to ensure all scenarios are covered.

Any gaps or missing scenarios identified during the session should be documented and addressed before finalizing the test cases.

4. Test environment setup

Set up a testing environment replicating the production environment as closely as possible. Configure necessary hardware, software, databases, and network settings.

Next, populate the test database with synthetic data that includes multiple user accounts, transaction histories, and scheduled payments. Ensure data privacy and security measures while handling sensitive banking data.

For example, perform sanity checks to ensure the test environment is correctly set up — for example, in the online banking portal, you’ll have to conduct primary test cases to verify login and account summary functionalities.

Conduct environment verification tests to ensure everything is correctly configured. Resolve any issues that arise during the setup process.

5. Test execution

Execute the prepared test cases as per the test plan. Document the outcomes of each test case, including pass/fail status and any deviations.

For example, if you encounter a defect in which the application doesn’t correctly handle special characters in passwords, log the defect within a defect tracking tool along with detailed descriptions, steps to reproduce, and screenshots where applicable.

After you fix the password issue, retest the login functionality. Additionally, perform regression testing to ensure that the fix didn’t break other features, such as account summary or fund transfer.

You must also assign severity and priority levels to each defect based on its impact on the application — this will help you perform testing within a specified timeline, without any delays.

An effective way for developers, testers, and QA specialists to collaborate on defect management is to hold daily stand-up meetings to discuss the status of defects, their priority, and expected resolution timelines.

6. Test closure and reporting

Meet with all stakeholders to review the test execution results and user stories, discuss any open issues, and gather feedback on the testing process.

Compile a test summary report detailing test coverage, defect density, quality metrics, and test results. Highlight critical defects that were resolved and any remaining risks. Also, take note of any challenges faced, lessons learned, and areas for improvement.

Basically, the point is to be as thorough as possible. Store all test-related documents, including test plans, test cases, and final reports, in a centralized repository for future reference and audit purposes.

Challenges of Testing Banking Domain Applications

Since financial institutions deal with sensitive information and large amounts of money, choosing a secure banking domain is paramount.

Moreover, both the client and staff sides of the application need to operate smoothly at all times, which can be a challenge — even seemingly simple banking activities like opening a bank account can be complicated.

For this reason, you have to be extra careful when testing a banking domain application. Here are some of the challenges you might encounter:

1. Large user load

Financial institutions tend to have millions of users, meaning the application will handle tens of millions of transactions each day. That’s why it can’t afford to crash or lag. Let’s also not forget the financial repercussions of a poorly-performing app.

Therefore, you must prioritize load testing and performance so that the application is better equipped to handle sudden activity surges due to market movements.

2. Internet stability

Different areas may have varying degrees of network coverage, and public WiFi networks may be weaker due to the large number of users. However, this will not stop them from expecting to be able to use the banking domain application wherever they go. That means you must test it for functionality, even with weaker connections.

3. High competition

The banking domain application space is very competitive, and financial institutions may understandably wish to release app updates early to outperform their competitors.

If they rush too much, however, they may speed through the testing phase and miss bugs that could later cause performance glitches and spoil the customer experience. Therefore, you must balance moving efficiently and giving each stage the careful testing it deserves.

4. Complicated workflow

As indicated above, even a simple activity like opening a bank account involves multiple steps, including:

• Collecting and verifying the customer’s ID and personal information
• Preparing the documents
• Confirming and activating the account
• Adding extra services as requested
• Therefore, test each workflow step for any bugs or slowdowns. You don’t want to fix something that should have been done right the first time.

1. Multiple device types Those using the banking domain application may do so on all types of devices with different OS versions, browsers, screen sizes, and so on.

You must rigorously test the app for cross-device compatibility, which will require a good deal of manual testing in addition to the use of simulators and/or emulators. You can read all about mastering cross-platform testing in another blog post by us.

Moreover, devices and operating systems continue to receive upgrades. This means you must keep track of these upgrades and ensure the banking application continues to function properly.

6. Third-party application integrations

Typically, users will link the application with third-party tools to help them pay their bills, manage subscriptions, book flights, transfer money to friends, and so on.

This requires the application to seamlessly sync with the other tool’s database so that information can flow both ways without compromising account security. To achieve this, you must conduct thorough API testing, including manual database checks.

Future Trends in Banking Application Testing

How will the BFSI sector’s technology landscape in the coming years? Let’s find out.

1. Zero-Knowledge Proofs (ZKPs)

ZKPs will soon be a valuable addition to your security testing toolkit. Essentially, they’ll let one party prove to another that a statement is true without revealing any extra information. In the banking application context, this will allow you to verify transactions without exposing user data, ensuring security and privacy at every step.

2. Quantum computing in risk management

The exponential power that quantum computing holds for this sector can’t be overstated. Quantum algorithms will help you rapidly simulate and implement various financial models and stress-testing scenarios much faster than classical computers.

This will give you a more in-depth examination of the application’s functionality, including risks and potential vulnerabilities. You’ll be able to deliver a more robust and resilient tool at a faster time to market.

3. Biometric authentication testing

As biometric authentication techniques like fingerprint scanning or facial recognition become more common, you must ensure they aren’t misused.

From running simulations that catch spoofing attempts to ensuring compliance with security standards, you’ll need to leverage sophisticated testing frameworks to help keep your users safe while allowing them the convenience of biometric logins.

4. Regulatory Technology (RegTech) integration

This is rapidly becoming a game changer for maintaining compliance across industries. Essentially, RegTech solutions will monitor all regulatory updates and automatically detect those that could affect the way your banking domain application works. This will minimize the hassle of running manual compliance checks yourself.

Conclusion

In conclusion, effective banking application testing requires a comprehensive approach, encompassing security, functionality, and usability. Adopting best practices like automation, continuous testing, and thorough compliance checks ensures reliability and trustworthiness, safeguarding user data and enhancing customer experience in a highly regulated environment.

Source: This article was originally published at testgrid.io.