Why Better Payment Testing Is Critical for Compliance Success in 2025

The global payments industry continues its digital transformation, driven by evolving consumer expectations, relentless technological innovation, and the ever-present shadow of government legislation. As Paragon highlighted in our recent blog, “How Will Government Legislation Impact the Future of Payments in 2025?” the current regulatory environment is more dynamic than ever, demanding immediate and strategic attention from financial institutions, payment processors, issuers, and acquirers alike. 

We previously looked into some of the intricacies of the US interchange fee debate, the potential shake-up at the CFPB, and the ongoing impact of foundational regulations like PSD2, GDPR, PCI DSS, and the Durbin Amendment. We also emphasized the significance of the EU’s Digital Operational Resilience Act as an indication of stricter operational requirements surfacing globally, particularly in the wake of incidents like the massive 2024 CrowdStrike outage. 

While confidence in meeting regulatory deadlines might be high among financial services leaders, a recent Finextra survey and research paper highlights the concerning reality that only 3% of surveyed executives believe their current technology stack is adequate to deal with the challenges presented by these uncertain times. This disconnect highlights a critical vulnerability in the wake of escalating compliance demands and a rapidly shifting threat landscape. 

Clearly, the pace of change across the payment industry is not slowing down. In fact, recent developments further emphasize the urgent need for an aggressive and sophisticated approach to achieving and maintaining compliance, with advanced payment testing at its core. 

The Evolving Regulatory Landscape 

Beyond the ongoing debates and established regulations, new directives and a sharper focus on existing ones are emerging, creating fresh challenges and opportunities: 

• The Global Push for Operational Resilience: The Digital Operational Resilience Act (DORA), while initially an EU initiative, signals a broader global trend. Governments worldwide are recognizing the systemic risks posed by interconnected digital infrastructures. The US government, for instance, is increasingly focused on establishing and harmonizing cyber requirements for critical infrastructure. This means that financial institutions in the US and beyond should anticipate similar operational resilience mandates, making documented and rigorous testing a non-negotiable necessity. 

• Increased Scrutiny on Emerging Payment Methods:  As innovative payment solutions proliferate, regulators are playing catch-up, introducing new frameworks to ensure consumer protection, financial stability, and anti-money laundering (AML) compliance. For example, describing the explosion of Buy Now, Pay Later (BNPL) schemes as the "Wild West" of new payment methods, the UK government is rushing to enact new rules and regulations to protect consumers from a financial ambush. This type of knee-jerk government reaction necessitates an approach to testing that facilitates quick response capabilities that help ensure immediate compliance. 

• The Specter of Global Instability: Geopolitical events are also impacting regulatory thinking. For instance, several Nordic countries, including Denmark, Finland, Norway, and Sweden, are developing offline payment backup systems in anticipation of further macroeconomic uncertainty. This highlights a growing emphasis on business continuity and resilience in the face of broader external threats, adding another layer of complexity to operational testing requirements. 

• Refined Regulatory Enforcement and Guidance: While some regulatory agencies, like the US Consumer Financial Protection Bureau (CFPB), are rescinding older pieces of guidance to streamline operations, this doesn't diminish the overall regulatory burden. Instead, it often signifies a move towards more focused and potentially more impactful enforcement. Organizations must stay abreast of these changes and understand their implications for existing compliance frameworks. 

• AI and Data Analytics in Compliance: The previously cited Finextra survey suggests that financial institutions are increasingly leveraging AI (66%) and data analytics (72%) to address compliance challenges. This adoption of advanced technologies necessitates robust testing of these tools themselves, ensuring their accuracy, fairness, and compliance with data privacy and security regulations. 

Advanced Payment Testing Tools and Strategies 

In this hyper-dynamic environment, where compliance is at a crossroads and the risk of outages is ever-present, a traditional, “legacy” approach to testing and compliance is inadequate and threatens organizational disaster. Payment companies must move beyond basic manual processes and embrace sophisticated testing tools and strategies that offer: 

Comprehensive Regulatory Coverage: 

• Automated Compliance Mapping: Modern testing tools can map specific test cases directly to regulatory requirements (e.g., PCI DSS controls, PSD2 SCA mandates, or DORA resilience criteria). This provides an auditable trail, demonstrating due diligence and simplifying regulatory reporting. 

• Continuous Compliance Validation: Automated testing allows for continuous validation of compliance as systems evolve and new regulations emerge. This proactive approach helps identify potential gaps before they lead to unnecessary risks and non-compliance penalties. 

• Emerging Payment Scheme Testing: As new payment methods (e.g., digital wallets and EMV contactless) gain traction, testing tools must support their unique protocols and compliance requirements, ensuring secure and compliant integration into existing systems. 

Proactive Risk Management and Resilience Testing: 

• Advanced Fraud Simulation: Beyond basic fraud scenarios, cutting-edge tools can simulate sophisticated, evolving fraud tactics, including AI-driven attacks, to stress-test fraud detection and prevention systems. This is crucial as fraud schemes become increasingly complex. 

• Chaos Engineering and Resilience Testing: Inspired by incidents like CrowdStrike, organizations must proactively introduce controlled "chaos" into their systems to identify weak points and ensure resilience. Advanced testing platforms can simulate partial outages, network latency, and service degradations to validate business continuity plans and recovery mechanisms. 

• Third-Party Risk Assessment: Given the increasing reliance on third-party providers, testing extends to evaluating the resilience and compliance of these critical external partners. This includes verifying their adherence to your organization's security and operational standards. 

Future-Proofing: Automation, Accuracy, and Agility: 

• Accelerated Test Cycles: The rapid pace of regulatory change means that manual testing is now simply too slow. Automated payment testing dramatically reduces test cycle times, enabling organizations to respond rapidly to new rules, implement changes, and ensure immediate compliance. 

• Improved Data Management: Manual testing across a complex web of applications, systems, and disparate data sources is inefficient and error-prone. Modern testing solutions centralize test data management to facilitate functional, regression, and performance testing in a single platform, increasing accuracy, improving collaboration, and reducing compliance overhead. 

• Continual Performance Testing: Performance testing and analysis of mission-critical payment systems should be a standard part of every organization's testing strategy. Integrated performance tests should be conducted as part of every build or release cycle, as well as before and after major events or software updates. 

The Best Defense if a Great Offense - Be Prepared 

For many organizations, adapting to a new and dynamic regulatory environment means upgrading and enhancing their operational capabilities, including taking a more strategic approach to testing and making the necessary investment in tooling and resources. 

Paragon Application Systems has been at the forefront of payment testing innovation for over 30 years, empowering financial institutions, payment processors, and networks to ensure their mission-critical payment systems are always compliant, reliable, and operating at peak efficiency. 

The complex interplay of evolving legislation, emerging payment methods, and sophisticated cybersecurity threats paints a clear picture: robust, automated, and comprehensive payment testing is no longer a luxury - it has become a business imperative. 

Is your organization prepared to navigate the complexities of today's payments landscape?  

Contact Paragon today for a consultation and discover how superior testing capabilities can transform your regulatory burdens into competitive advantages.