PSD2 testing: How to test open banking applications

What is PSD2 testing?

Simple definition

PSD2 testing is the process of testing banking applications to ensure they work securely, reliably, and in compliance with the Revised Payment Services Directive (PSD2).

It verifies that customers can authenticate safely, payments are processed correctly, third-party providers can access banking services as intended, and sensitive financial data remains protected throughout every transaction.

Technical definition

PSD2 testing is a specialized approach to software testing that validates the technical, functional, security, and regulatory requirements introduced by the Revised Payment Services Directive.

It includes testing open banking APIs, Strong Customer Authentication (SCA), consent management, payment initiation services (PIS), account information services (AIS), and third-party provider (TPP) integrations. QA teams also perform integration, regression, performance, and security testing to ensure systems remain compliant while delivering reliable digital banking services.

The objective is to identify defects before they affect customers, reduce compliance risks, and verify that critical banking workflows continue to operate correctly as applications evolve.

Where PSD2 testing fits in the software testing process

PSD2 testing spans the entire software testing process because compliance, security, and functionality need to be validated at every stage of development.

It begins with testing individual APIs and authentication mechanisms before moving into integration and end-to-end testing of complete banking journeys. As applications evolve, regression testing ensures that new releases don't introduce issues into existing payment flows or third-party integrations.

PSD2 testing also includes performance and security testing to verify that banking systems can handle real-world traffic while protecting sensitive customer data. Together, these testing activities help banks and fintechs deliver secure, compliant, and reliable open banking services.

Why PSD2 testing matters

PSD2 transformed banking from closed systems into connected ecosystems.

Banks now need to support secure API access, work with licensed third-party providers, and deliver seamless digital experiences while meeting strict regulatory requirements. That makes testing far more complex than validating internal banking applications alone.

Effective PSD2 testing helps organizations reduce compliance risks, protect customer data, and ensure critical payment services continue to work as expected after every release.

PSD2 changed how banks build software

Before PSD2, banks controlled almost every customer interaction within their own systems.

Today, customers expect to connect budgeting apps, payment providers, and other financial services directly to their bank accounts. This shift has made APIs, third-party integrations, and secure authentication central parts of modern banking platforms.

Testing now needs to cover complete customer journeys that span multiple systems, organizations, and services.

Security and compliance go hand in hand

PSD2 introduced strict security requirements, including Strong Customer Authentication (SCA) and secure communication between banks and third-party providers.

Meeting these requirements isn't just about passing an audit. QA teams need to verify that authentication works correctly, permissions are enforced, sensitive data is protected, and payment requests cannot be intercepted or manipulated.

Regular testing helps identify vulnerabilities before they become security incidents or compliance issues.

Customer trust depends on reliable integrations

Open banking only works if customers can rely on it.

Whether someone is connecting a budgeting app, making an online payment, or sharing account information with another provider, the experience needs to be secure, accurate, and uninterrupted.

A failed API call or broken payment flow can quickly damage customer trust. Thorough PSD2 testing helps ensure integrations remain reliable, even as applications, APIs, and regulations continue to evolve.

How PSD2 testing works

PSD2 testing verifies that every component of an open banking ecosystem functions securely, reliably, and in compliance with regulatory requirements. Rather than testing individual features in isolation, QA teams validate complete customer journeys, from authentication and consent to payment execution and API communication.

A comprehensive PSD2 testing strategy typically includes the following areas.

Test Strong Customer Authentication (SCA)

Strong Customer Authentication (SCA) is one of the core requirements of PSD2. QA teams need to verify that authentication is triggered when required and that customers can successfully complete the process using two independent authentication factors.

Testing should also cover scenarios such as failed authentication attempts, biometric login, one-time passwords, authentication timeouts, and exemptions for low-risk or recurring transactions.

Validate APIs and third-party integrations

PSD2 requires banks to expose APIs that licensed third-party providers can use to access account information or initiate payments.

Testing these APIs involves verifying request and response formats, authentication tokens, authorization rules, error handling, rate limiting, and compatibility with external applications. End-to-end integration testing helps ensure data flows correctly between banks and third-party providers.

Verify consent management

Customers must explicitly authorize third-party providers before their financial data can be accessed or payments initiated.

QA teams should verify that consent can be granted, updated, renewed, and revoked correctly. Tests should also confirm that expired or withdrawn consent immediately prevents further access and that permissions are enforced consistently across all services.

Test payment initiation and account information services

Payment Initiation Services (PIS) and Account Information Services (AIS) are at the heart of PSD2.

Testing should validate that payment requests are processed correctly, account information is retrieved accurately, transaction statuses are updated in real time, and failures are handled gracefully without compromising customer data or system stability.

Perform security, performance, and regression testing

Functional testing alone isn't enough for PSD2 compliance.

Security testing helps identify vulnerabilities such as unauthorized API access, data exposure, or authentication weaknesses. Performance testing verifies that APIs and payment services remain responsive under peak demand, while regression testing ensures that application updates don't unintentionally break existing payment flows, authentication processes, or third-party integrations.

PSD2 testing vs traditional banking testing

Traditional banking applications primarily operated within the bank's own systems. PSD2 introduced an ecosystem where banks, fintechs, payment providers, and customers all interact through secure APIs, significantly expanding what needs to be tested.

Traditional banking testing

Traditional banking testing focuses on validating internal banking systems and customer-facing applications.

QA teams typically test account management, transaction processing, loan applications, card services, and online banking functionality within environments that are largely controlled by a single organization.

PSD2 testing

PSD2 testing extends beyond the bank's internal systems.

In addition to validating banking functionality, teams must verify secure API communication, third-party provider integrations, consent management, Strong Customer Authentication, and regulatory compliance. Testing often spans multiple organizations, environments, and technologies that the bank doesn't fully control.

Key differences

As open banking continues to evolve, QA teams need testing strategies that go beyond traditional banking applications. Modern PSD2 testing requires comprehensive API validation, security testing, and end-to-end testing across interconnected systems to ensure both compliance and a seamless customer experience.

Key areas to test under PSD2

PSD2 introduces several technical and regulatory requirements that go beyond traditional banking functionality. To ensure compliance and deliver a reliable customer experience, QA teams should validate every critical component of the open banking ecosystem.

Open banking APIs

Open banking APIs enable licensed third-party providers to access banking services and customer data.

Testing should verify that APIs return accurate data, enforce authentication and authorization rules, validate request and response formats, handle invalid requests correctly, and remain stable under different traffic conditions. Compatibility across API versions should also be tested to prevent disruptions after updates.

Strong Customer Authentication (SCA)

SCA is one of the most critical areas of PSD2 testing because it protects customers from unauthorized access and fraudulent transactions.

QA teams should validate successful and failed authentication scenarios, multi-factor authentication methods, biometric authentication, one-time passwords, authentication timeouts, and regulatory exemptions. Testing should also ensure authentication is triggered only when required to avoid unnecessary friction for customers.

Third-party provider (TPP) integrations

Banks must securely communicate with licensed Third-Party Providers (TPPs), including payment providers and financial management applications.

Testing focuses on secure data exchange, certificate validation, authentication tokens, permission management, API compatibility, and error handling. End-to-end testing is particularly important to verify that integrations function correctly across organizational boundaries.

Payment initiation services (PIS)

Payment Initiation Services allow third-party providers to initiate payments directly from a customer's bank account.

QA teams should verify payment authorization, payment execution, transaction status updates, duplicate payment prevention, cancellation scenarios, and recovery from interrupted transactions. These tests help ensure payment journeys remain accurate and reliable.

Account information services (AIS)

Account Information Services allow customers to share their financial data with authorized third-party applications.

Testing should confirm that account balances, transaction history, and account details are retrieved accurately while ensuring customers only share the information they have explicitly authorized.

Consent and authorization flows

Consent management is central to PSD2 compliance.

Testing should verify that customers can grant, modify, renew, and revoke consent without errors. QA teams should also confirm that expired or withdrawn consent immediately blocks further access and that authorization rules are consistently enforced across all connected services.

Error handling and fallback mechanisms

Not every API request or payment succeeds.

PSD2 testing should validate how applications respond to unavailable services, invalid requests, expired tokens, network interruptions, and third-party failures. Clear error messages, proper recovery mechanisms, and graceful degradation help maintain a reliable customer experience even when issues occur.

Common PSD2 testing challenges

Testing PSD2-enabled applications is often more complex than traditional banking software because multiple organizations, systems, and regulatory requirements are involved. QA teams need strategies that address both technical complexity and compliance.

Multiple third-party integrations

Each bank may integrate with numerous licensed Third-Party Providers, each using different environments, API versions, and implementation approaches.

Maintaining compatibility across these integrations while avoiding regressions requires comprehensive API and end-to-end testing.

Complex authentication flows

Strong Customer Authentication introduces multiple authentication methods, exemptions, and edge cases.

Testing every possible combination of devices, authentication factors, payment types, and customer scenarios can quickly become difficult without extensive automation.

Regulatory compliance requirements

PSD2 requirements continue to evolve through updates to technical standards and regulatory guidance.

QA teams need to ensure that applications remain compliant after every release while adapting test suites to reflect new requirements and changing implementation standards.

Test data and sandbox limitations

Many PSD2 integrations rely on external sandbox environments that may have limited functionality or unrealistic test data.

These constraints can make it difficult to reproduce production scenarios, validate edge cases, or perform realistic end-to-end testing across multiple providers.

Maintaining end-to-end test coverage

A single customer journey may involve multiple APIs, authentication services, payment processors, third-party providers, and internal banking systems.

As these systems evolve independently, maintaining reliable end-to-end regression coverage becomes increasingly challenging. Risk-based testing can help QA teams prioritize the customer journeys that have the greatest business, customer, and regulatory impact.

Benefits of effective PSD2 testing

Effective PSD2 testing helps banks, fintechs, and payment providers deliver secure, compliant, and reliable open banking services. By validating critical customer journeys before release, QA teams can reduce operational risks while improving the overall quality of digital banking applications.

Reduce compliance risks

PSD2 introduces strict requirements around authentication, customer consent, API security, and data sharing.

Regular testing helps organizations identify compliance gaps early, reducing the likelihood of regulatory violations, failed audits, or costly production incidents.

Improve API reliability

Open banking depends on APIs working consistently across different applications and providers.

Testing helps ensure APIs return accurate data, handle failures gracefully, and remain stable as new versions, integrations, and features are introduced. Reliable APIs also reduce disruptions for customers and third-party providers.

Protect customer data

Financial data is among the most sensitive information organizations manage.

PSD2 testing verifies that authentication, authorization, encryption, and consent mechanisms work as intended, helping prevent unauthorized access and ensuring customer data is shared only with approved third-party providers.

Deliver stable digital banking experiences

Customers expect payments, account information, and financial services to be available whenever they need them.

Comprehensive functional, integration, performance, and regression testing helps ensure that digital banking services continue to operate reliably, even after frequent application updates.

Increase confidence before releases

Modern banking applications are updated regularly to introduce new features, improve customer experiences, and address regulatory changes.

Thorough PSD2 testing gives development and QA teams greater confidence that releases won't disrupt payment processing, authentication, or third-party integrations in production.

What PSD2 testing changes for QA teams

PSD2 has expanded the scope of software testing in banking. Instead of validating only internal applications, QA teams now need to ensure complete customer journeys work across multiple organizations, APIs, and security layers.

More focus on end-to-end customer journeys

Testing individual components is no longer enough.

QA teams need to validate complete workflows, from customer authentication and consent through payment initiation and confirmation, ensuring every interaction works correctly across interconnected systems.

Closer collaboration with security teams

Security is no longer a separate activity performed just before release.

Because PSD2 introduces strict authentication and data protection requirements, QA engineers work more closely with security teams to validate secure communication, access controls, authentication mechanisms, and potential vulnerabilities throughout the development lifecycle.

Greater emphasis on API testing

APIs are the foundation of open banking.

As a result, API testing has become a core responsibility for banking QA teams. Testers need to validate functionality, security, performance, version compatibility, and integration behavior across internal and external services.

Continuous regression testing after regulatory updates

PSD2 requirements, technical standards, and banking applications continue to evolve.

Continuous regression testing helps ensure that new releases, API updates, and regulatory changes don't introduce unexpected issues into existing payment flows, authentication processes, or third-party integrations.

Risk-based prioritization of critical payment flows

Not every customer journey carries the same level of business or regulatory risk.

Risk-based testing helps QA teams prioritize high-impact workflows, such as payment initiation, authentication, and consent management, so testing efforts focus on the areas where failures would have the greatest consequences. This approach improves test efficiency while reducing the likelihood of critical defects reaching production.

Where PSD2 testing works best

PSD2 testing is essential for any organization that develops, operates, or integrates with open banking services. While banks are the primary organizations affected by the regulation, many other financial service providers also need to validate compliance, security, and reliability.

Retail banking

Retail banks rely on PSD2 testing to ensure customers can securely access their accounts, authenticate transactions, connect third-party applications, and make payments without disruption.

Testing helps protect everyday banking services while maintaining compliance with regulatory requirements.

Corporate banking

Corporate banking platforms often support larger transactions, multiple account holders, and more complex authorization workflows.

PSD2 testing verifies that payment approvals, account access, consent management, and integrations with enterprise financial systems function correctly while meeting security and compliance requirements.

Payment providers

Payment providers process thousands of transactions every day through open banking APIs.

Testing helps ensure payment initiation, transaction processing, authentication, and communication with partner banks remain reliable, even during periods of high transaction volume.

Fintech platforms

Many fintech applications depend on PSD2 APIs to retrieve account information, initiate payments, or provide financial insights.

Comprehensive testing ensures these integrations remain compatible with different banking APIs while delivering a secure and consistent customer experience.

Open banking ecosystems

Modern financial services often involve multiple organizations working together through connected APIs.

PSD2 testing validates complete end-to-end customer journeys across banks, payment providers, fintech applications, and other third-party services, ensuring data flows securely and reliably between every participant in the ecosystem.

How to implement PSD2 testing

Building an effective PSD2 testing strategy requires more than validating individual APIs. QA teams need to test complete customer journeys while continuously adapting to evolving applications and regulatory requirements.

Identify critical customer journeys

Start by identifying the workflows that have the greatest impact on customers and the business.

Typical high-priority journeys include customer authentication, payment initiation, account information retrieval, consent management, and third-party onboarding. These should receive the highest level of test coverage and be included in every regression cycle.

Build realistic API test environments

Reliable testing depends on realistic environments that closely resemble production.

Where possible, integrate with representative banking APIs and third-party provider sandboxes. Simulating realistic customer data, authentication flows, and transaction scenarios helps uncover issues that may not appear in isolated test environments.

Automate high-risk payment flows

Manual testing alone cannot keep pace with frequent releases and regulatory updates.

Automating high-risk workflows, such as payment initiation, authentication, consent management, and API integrations, enables teams to detect regressions quickly and maintain consistent quality across releases.

Include security and performance testing

Functional testing should be complemented with security and performance validation.

Regularly test authentication mechanisms, authorization controls, API security, encryption, and system behavior under realistic traffic conditions. This helps identify vulnerabilities while ensuring banking services remain responsive during periods of high demand.

Continuously monitor regulatory changes

PSD2 continues to evolve through updated regulatory guidance, technical standards, and implementation requirements.

QA teams should regularly review test suites to ensure they reflect the latest compliance requirements. Incorporating regression testing into every release cycle helps identify issues early and reduces the risk of non-compliance as banking systems evolve.

Test compliance. Protect customer trust.

PSD2 testing is about more than meeting regulatory requirements. It's about ensuring customers can authenticate securely, initiate payments confidently, and trust that their financial data is protected every time they use a digital banking service.

As banking ecosystems become increasingly connected, QA teams need to test far more than individual applications. Every release can impact APIs, third-party integrations, authentication flows, consent management, and payment journeys across multiple systems. Comprehensive testing helps reduce compliance risks, improve software quality, and deliver the reliable experiences customers expect.

At the same time, not every workflow carries the same level of risk. A defect in a payment initiation flow or authentication process can have far greater business and regulatory consequences than a minor issue elsewhere in the application.

That's where TestResults' QA Risk Agent can help. Rather than treating every test equally, it analyzes your application to identify the customer journeys, payment flows, and business processes that carry the highest risk. This allows QA teams to prioritize testing where it matters most, improve risk coverage, and release with greater confidence.

Want to focus your testing on the payment flows that matter most? Join the QA Risk Agent waitlist and discover how risk-based testing can help your team deliver secure, compliant, and reliable banking software.