As real-time payments regulations ramp up in Europe, banks are navigating the increased payments testing that goes hand-in-hand with maintaining multiple rails. At the same time, technology developments are driving the need to frequently update payments systems. As such, testing is becoming an almost never-ending task. XMLdation’s CEO, Tricia Balfe, explains why robust, self-service payments testing is essential for keeping up with the fast-evolving real-time payments space.
Payments testing is becoming an ever-larger part of banks’ ongoing operations. Each and every internal system upgrade, rail update and regulatory change demands that banks undertake thorough, end-to-end scrutiny of their payments systems. This payments testing is essential for mitigating risk and delivering ongoing, streamlined transactions to clients, with a host of different scenarios needed to be trialled to ensure a watertight transition.
Traditionally, whenever undertaking payments testing, banks adopt a three-pronged approach: building a new internal testing suite, using sample testing tools provided by the market infrastructure/scheme, and finally, coordinating with partner banks to perform penny tests.
Individually, each has presents problems – including, respectively, significant costs, a narrow pools of test cases and coordination challenges. For European banks and payment service providers (PSPs), testing is on the rise, and this disjointed, time-consuming process is becoming increasingly impractical and unsustainable.
In Europe, real-time payments are becoming a regulatory standard. Under the EU Instant Payments Regulation (IPR), every institution in the eurozone that offers standard euro credit transfers must be able to send and receive real-time payments via the SCT Inst payments scheme. As such, connection to RT1 and/or TIPS – the real-time payments rails that enable this capability – has been mandatory for all banks and PSPs in the SEPA zone since October 2025.
As a next step, the IPR stipulates that all PSPs in non‑euro EU member states be capable of receiving and processing SCT Inst euro payments by July 2027; the ability to be able to send them then comes into effect in January 2028. According to a recent Celent survey examining the future of real-time payments in Europe, over half of banks (55%) are already compliant with the July 2027 mandates, further driving RT1/TIPS adoption[1].
Banks and PSPs are also being encouraged to adopt the One-Leg-Out Instant Credit Transfer (OCT Inst) scheme to help facilitate real-time payments beyond Europe, such as sending payments to the UK’s Faster Payments rail and to the RTP rail in the US. OCT Inst uses SCT Inst for the euro leg of euro to non-euro payments, and is positioned to support the G20 Roadmap's 2027 cross-border payments targets – and ultimately the global goal of delivering real-time cross-border payments world-wide. The momentum is certainly there, with Celent predicting SCT Instant volumes will overtake those of standard SCT as early as 2030.
As the real-time landscape gathers pace and joining multiple rails becomes the norm, the volume of payments testing that needs to be undertaken is growing significantly in tandem. The more rails you have, the more testing will need to be done – not simply upon initial adoption, but ongoing, in order to incorporate regular upgrades. Indeed, new iterations of real-time rails are typically introduced once per year. This, combined with banks’ internal system updates – which can occur once a quarter or more due to rapid technology enhancements and innovations – equates to an unmanageable amount of annual testing when using existing methods, particularly given that internal teams’ capacity is often extremely overstretched.
Consequently, a domestic bank in Europe that has recently adopted RT1 or TIPS as a second rail in order to comply with new regulations, can expect their annual testing cycles to rise from five to 12 (see Figure 1). And for every additional rail adopted, end-to-end testing spirals exponentially.
| More rails = more testing: The increasing payments testing challenge for banks and PSPs | ||
|---|---|---|
| Rail | Example | Test Cycles annually (for Rail + bank system updates) |
| 1 Rail | SCTInst | 5 |
| 2 Rails | SCTInst, SCT | 10 |
| 4 Rails | SCTInst, SCT, SDD, High Value | 10 |
Figure 1: Testing European Rails
| More currencies = more testing | ||
|---|---|---|
| Rail | Example | Test Cycles annually |
| 1 Currency | GBP | 5 |
| 6 Currencies | GBP, CHF, SEK, DKK, PLN | 30 |
Figure 2: Testing for OCTInst
In practical terms, if a bank was to continue to rely on “old school” testing methods, they would need to build X tailor-made, rail-specific testing suites each year and rely heavily on numerous friendly banks to be on hand to provide testing support.
With multiple rails and regulatory- and technology-driven updates meaning testing is becoming a perpetual part of banks’ operations, it is clear that the existing approach to testing is no longer fit for purpose in the expanding world of real-time payments. This is reinforced by the fact that 50% of respondents in Celent’s survey identified operational challenges as one of their top three concerns regarding real-time payments.
Help is at hand. XMLdation has developed a first-of-its-kind self-service simulator that acts like a partner bank – but with you in full control of both sides of the transaction. Our virtual Buddy Bank is fully configurable, with the simulator able to create and test any transaction scenario requested by the user. Such comprehensive testing allows a bank or PSP to test the tenacity of its systems across the full scope of situations that may be encountered – whilst also facilitating necessary tests specified by the payments infrastructure or scheme.
Buddy Bank directly integrates with a real-time payments scheme or infrastructure through a standard interface. With EBA Clearing approval to connect directly to RT1, for example, European banks can let the RT1 Buddy Bank take the strain through its automated capabilities. And, as RT1 comes with built-in connectivity to TIPS, banks that are members of TIPS can also utilise RT1 Buddy Bank for their end-to-end testing, making the solution applicable to all payments providers, irrespective of which real-time rail they are connected to.
It is also accessible to both direct and indirect rail participants. For banks and PSPs that are directly connected to RT1 and/or TIPS[As2] , getting up and running is seamless, simply requiring the sharing of your BIC. Meanwhile, it is possible for indirect participants to access and harness the tool via a direct participant partner.
XMLdation is set to expand its Buddy Bank capabilities to incorporate testing for Swift CBPR+ and STEP2, OCT Inst and R2P, making it a holistic end-to-end testing solution for banks and PSPs across Europe. Further developments are also underway, with plans to support instant payment rails in other regions, including the US. As support for additional rails and overlays becomes available, users will ultimately have a universal tool at their fingertips that can perform end-to-end testing for all their rails – an increasingly important as the global, real-time cross-border payments landscape takes shape.
For those in Europe, the solution is primed and ready to provide comprehensive support for your ongoing end-to-end real-time payments testing needs, as real-time payments become the default.
As banks in Europe gear up for the world of real-time payments, having an agile, automated payments testing Buddy to perform the tests your systems need to undertake, at your convenience, is more than a nice to have – it is a must have. The ability to respond to change is fundamental to the future of payments – and payments testing is a core component of this.
[1] Plaid x ClearBank - Instant payments in Europe whitepaper | Plaid