A core banking system (CBS) is a central system dedicated to the processing of banks’ transactions. It also handles accounts, securities, payments of loans, and so on. A Core Banking Transformation, in turn, is the process of replacing, upgrading, or outsourcing this core system. As CBS is the very heart of a bank, transforming it has a high chance of disrupting day-to-day operations. In the face of such costly disruptions, software testing can act as a reliable safeguard. This paper offers the strategies that QA teams can adopt to mitigate the risk and thus ensure the success of this radical transformation.

1. TESTING STRATEGIES FOR A
CORE BANKING TRANFORMATION
A KMS Company
I Software Testing
May 2021
Best practice of Software Testing to ensure a successful
banking digitization

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A core banking system (CBS) is a central
system dedicated to the processing of banks’
transactions. It also handles accounts,
securities, payments of loans, and so on. A
Core Banking Transformation, in turn, is the
process of replacing, upgrading, or
outsourcing this core system.
As CBS is the very heart of a bank,
transforming it has a high chance of
disrupting day-to-day operations. In the face
of such costly disruptions, software testing
can act as a reliable safeguard.
This paper offers the strategies that QA
teams can adopt to mitigate the risk and thus
ensure the success of this radical
transformation.
INTRODUCTION

3. Due to the impact, the scale, and the complexity of the CBS,
testing it can be a high order for QA teams. To be successful, the
QA team should take into account the following considerations.
Testing strategies for a core banking transformation | Software Testing
Splitting tests into smaller units.
Modules should be tested before being integrated so that
the process can be simulated entirely.
In risk-based testing, the QA team analyzes all
requirements and then assigns a level of risk to each
requirement.
The team needs to identify high-risk requirements and
assign them a high level of priority so that they can be
tested before others in the software testing life cycle.
The team should adopt techniques for creating test
scenarios focused on risks.
Risk-based test strategy is highly recommended since it is
virtually impossible to test every scenario.
Non-functional Requirements need to be tested early in the
software testing lifecycle, before functional requirements.
The QA team needs to analyze how the new volume will
impact the current Service Level Agreements (SLAs) and
include that risk in the test strategy.
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5 CONSIDERATIONS WHEN TESTING A
CORE BANKING SYSTEM

4. Coordinate testing activities across
modules.
Give team members an understanding
of the environment of the process.
Support the defect management
process to cope with potential defects
across modules.
Support proactive test reporting. This
is because if there is a point of contact
for each module, the project manager
will have a big picture of the progress.
Maintain the Run book, which is a
document containing information
about
Functional testing is the most basic and
also most important type of Testing that
needs to be performed on the CBS. QA
teams perform Functional Testing on the
back end (core system) to ensure the
functionalities of Branch, Front End
Application, and Customer Service.
Functional Testing also ensures that the
back end can support all other operations
involved in the CBS.
Test Management
Because all the modules in the CBS are
closely linked together, there needs to be
a central QA team. The team must appoint
a point of contact for each module. The
purpose of these points of contact is to:
Support Incident Management, where
the root cause of an incident is
identified and fixed.
Time boxing can be helpful during
every phase of testing. Testing within
modules will affect the system when
allocated time runs out. It also
impedes the next testing phase.
The pragmatic approach to testing
allows the QA team to identify
defects earlier as it calls attention to
realistic scenarios associated with the
modules that were integrated.
Run Book should be utilized during
the test execution phase in order to
simulate the real-life migration
process during module integration
and also the entire migration process.
The quality of test data should be
improved as it is directly related to
the quality of testing
Establishing a data management team
is highly important as it helps provide
high-quality test data when testing
each module and profiling test data in
order to improve the simulation of
scenarios.
From the beginning, each test cycle
must
about the process flow of the
migration.
Test Execution
To ensure the efficiency of functional
testing on the CBS, QA teams should take
into account these considerations:
Testing strategies for a core banking transformation | Software Testing
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5 KEY TESTING AREAS FOR A SUCCESSFUL
CORE BANKING TRANSFORMATION
Functional Testing

5. Employing techniques such as Static
Application Security Testing (SAST) to
detect potential vulnerabilities
Adhering to compliance standards such as
PCI DSS, ISO, and HIPAA.
Ensuring login authentication and auditing
mechanisms.
Creating infrastructure security controls
to protect servers, networks, and devices
that are connected to the CBS.
Banks are entrusted with money from the
public, therefore Security Testing is essential.
In specific, a CBS deals with multiple
interfaces, such as Mobile, ATM, and Internet,
in a 24/7 manner to process and transfer
financial information. And these
communication channels should be protected.
Interfaces of the CBS are extremely
vulnerable to security threats. For example,
Web and Mobile can be accessed through the
public network and therefore can be the
victims of security threats and attacks.
Security Testing serves two primary purposes,
protecting business & customer data while
ensuring system availability. To achieve that,
QA teams should adopt the following
strategies:
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Creating infrastructure security controls
to protect servers, networks, and devices
that are connected to the CBS.
Leveraging Penetration testing to
identify vulnerabilities caused by
improper configuration and patch
management.
Test Automation and Regression Testing
are two areas that need to be focused on
during the migration process.
must use and process the same test data
as the first test cycle.
Testing strategies for a core banking transformation | Software Testing
Security Testing
Interface Testing
Choose the right simulators to replicate
real-time testing.
Test all types of messages, formats of
messages, fields, and values by using
simulators or by sending flat files and
verifying in system logs and in the
database.
Test the connectivity in accordance with
the policy
Validate failover and recovery conditions
to maintain business continuity.
Test the message throttling rate and
validate session level messages such as
login requests.
The CBS connects with various internal and
external systems. Therefore, it is essential to
verify the information flowing through them.
The key challenge of interface testing is that
all message flows and transactions must be
tested thoroughly. In turn, simulating real
time tests and test environments under such
conditions can be a daunting task.
Furthermore, understanding various
payments/messaging systems is mandatory
in order to test effectively.
The challenges of interface testing can be
solved if the QA team can:
Testing strategies for a core banking transformation | Software Testing
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6. Due to the high frequency of the CBS, banks
need a fully functional database tool. On the
QA side, teams need to apply data integrity
and database integrity testing techniques to
validate that data is being stored by updating,
restoring, or retrieval processing. Employing
these techniques, the team can pinpoint
design flaws that corrupt the data, that make
the CBS vulnerable to malicious data access,
or reduce transaction performance.
Furthermore, the team needs to see the
database as a system in the CBS and test it in
a comprehensive manner. The team also
needs to ensure the accuracy of the business
rules that are associated with relational
constraints, triggers, and stored procedures.
The following areas have to be tested as part
of Performance testing across devices like
Desktop, Mobile and Tablets.
Reliability: The CBS deals with millions of
transactions daily. Therefore, its reliability
must be validated to ensure service levels
are met.
Availability: The CBS must adhere to various
service level agreements in terms of system
availability. In specifics, it must operate
optimally 24 hours a day, and 365 days a
year.
Capacity: The user load or volumes are
increased to test the performance
characteristics of the CBS.
Endurance: To push CBS’s performance to
its limits, the team needs to design stress
tests. This could be done by increasing load,
the volume of data, the amount of memory,
and computing capacity.
Scalability: To fully understand the
performance characteristics of the CBS, the
team needs to conduct a variety of tests. It is
true that the team cannot fully control the
parameters of performance testing.
However, performing analysis of the
technology stack can allow the team to
identify bottlenecks and have new ideas for
infrastructure, configuration, and tuning.
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validate session level messages such
as login requests.
Testing strategies for a core banking transformation | Software Testing
Database Testing
Performance Testing
To meet the heightened expectations of
customers, performance testing has become
essential in reducing latency and handling
peak volumes of payment transactions, etc.

7. Focusing on risk mitigation as the above
approach, your QA team can test
thoroughly every requirement and, at the
same time, account for all the potential
risks. The result is that lots of test efforts
will be saved. In addition, proper test
automation will accelerate time-to-market.
By building a central test team for the CBS,
the quality of testing will be enhanced
significantly. This team will establish points
of contacts for all modules, handle test data
management, execute both functional &
non-functional test cases, and utilize the
Run Book.
Lastly to keep the testing project on time
and within budget, the practice of time
boxing, test reporting, and better resource
management can be of great help.
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for Insurance Industry
CONCLUSION

8. KMS Solutions works closely with leading software
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and innovative technologies to Asia Pacific. The focus is
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through world-class fit-for-purpose solutions and
proven industry best practices. KMS Solutions’ success
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visit: https://kms-solutions.asia/
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