IT spend at EU banks set to increase

But can they successfully innovate?

According to a recent news article on Finextra, 62% of European financial institutions expect to increase spending on payments technology throughout 2017. This major investment is being driven by the revenue-generating opportunities of instant payments and the need for increased operational efficiency.

The report explained that a survey by Ovum of over 500 banks worldwide found European banks at the forefront of the payments modernisation process as they strive to update their outmoded infrastructure. The banks are preparing themselves for a new era of real-time payments, and the imminent introduction of the EU's revised Payments Service Directive.

In the words of Kieran Hines, Ovum’s Head of Industries:

“The market is rapidly changing — banks must invest wisely in core payments platforms and infrastructure to take advantage of relevant opportunities. Financial institutions that proactively shape strategies around open APIs, fraud prevention and immediate payments will reap the benefits when it comes to both customer experience and revenue.”

In our experience, there can be a significant gap between the desire to generate new revenue, launch new products and update legacy platforms, and the capacity to develop and launch the necessary new technology. The resulting weakness in test capability will be the Achilles heel of the banking industry over the next few years. 

The cost of testing

According to Capgemini, 31% of IT budgets is spent on testing, and this figure is predicted to rise to 40% over the next two years. But it makes no sense to invest so heavily in new payment systems without also investing in systems able to test them effectively. Targeting outlay at the right types of test automation will not only enable financial institutions to get the best out of this 40%, but also to reduce that expenditure significantly. There is one sure-fire way to achieve this: the automation of the testing process.

Automated testing

The approach to testing has changed radically over the last few years but the vast majority of banks remain stuck in a process which causes them delays, and results in launches with systems riddled with problems. The way around this is by using ‘virtualisation’, allowing you to test by replication all the points in the transaction.

Let’s take a look at testing APIs as an example.

Virtualisation not only lets you test in isolation from the API provider, but allows you to orchestrate calls to multiple APIs entirely under your own control. You can more easily perform negative tests that the API may not allow, make the connection available to all members of your test team 24/7 and allow access at zero cost. In short, it liberates you from many of the constraints, but more importantly it reduces cost and risk.

Through the use of virtualisation, you can take back control of API testing, modify the API in order to prototype, and massively scale the tests for stress and performance analysis. With virtual models and 24 hour availability you can schedule complex regression tests that run automatically, regardless of how insignificant a change is made. And this is anywhere in the transaction lifecycle. When switch/migrations occur between APIs or an API release, virtualisation allows multiple “versions” to be tested in any combination, which removes the usual risks for the migration.

Automate to save time and money, and reduce risk

A key guiding principle for future testing strategies in payments should be simplicity. Without this, there is a danger that test environments will become more complex than the payments environments they are designed to test and assure.

In this context, virtualisation is an important weapon in the tester’s armoury as it pulls a payment’s entire journey into one space and thereby simplifies testing. This approach enables the creation of a consistent, standardised environment. It alleviates resource constraints and allows for the consolidation of skills – all of which drive efficiencies and reduce the risk of failure. The banks that harness this approach will be those that launch more quickly and with more confidence.