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Understanding Test Automation ROI in the Payments Ecosystem

Photo: Paragon Application Systems

November 13, 2024

In the payments industry, testing automation has become an essential part of the operations toolkit for any financial institution managing high transaction volumes.

With the rise in EMV contact and contactless technology, automation has emerged as a powerful tool, especially for institutions involved in transaction acquisition from point-of-sale (POS) terminals and ATMs.

Automation promises a reduction in both time and cost, but what does this really mean in practical terms? And, crucially, how do we assess the return on investment (ROI) of these automation solutions?

What Does Automation Mean in the Context of Testing?

Testing automation solutions can vary widely based on how they’re built and deployed. Broadly, automated testing solutions can fall into three main categories:

Home-Grown Solutions: Built and maintained in-house, these solutions are often tailored specifically to the organization’s needs. While this can offer a high degree of customization, it also requires ongoing support and maintenance from experienced internal resources.
One-Off Solutions by Third Parties: In this model, organizations engage a third-party provider to design a customized solution. While it may save internal resources initially, it could become challenging and expensive to maintain or adapt as business needs evolve.
Off-the-Shelf Customizable Solutions: These products are readily available and adaptable to meet wide a range of requirements. They often come with vendor support for updates, making them a viable, long-term option with flexibility for future growth.

Each solution has pros and cons, and selecting the right one depends on factors like ease of use, coverage of testing requirements (such as EMVCo qualification, POS, ATM, and contactless payments), real-time feedback, ease of maintenance, and adaptability to future needs. A well-chosen solution will thoroughly address each of these needs, paving the way for a meaningful ROI assessment.

Key Considerations Before Moving to Automated Testing

Before diving into ROI calculations, it’s important to ensure that any chosen solution will meet both current and foreseeable future needs. Consider the following criteria as you evaluate automation solutions:

Usability: Will the system be intuitive enough for a range of users with different technical skill levels? Usability is crucial for maximizing user adoption and minimizing training time.

Coverage: Does it comprehensively address all testing needs, including EMV, POS, and ATM testing, as well as emerging payment methods like contactless?

Feedback: Real-time feedback on testing results can reduce delays and enhance efficiency, speeding up the resolution of issues.

Maintenance and Flexibility: Is the solution easy to maintain, and can it evolve with your institution’s growing demands? Solutions that are hard to maintain or lack adaptability may soon become obsolete, reducing long-term value.

Once a solution aligns with these considerations, organizations can turn their focus to ROI.

Breaking Down ROI: Hard Costs, Soft Costs, & Payback Period

In calculating ROI, it’s essential to look beyond initial expenses and evaluate the total financial impact, which includes hard costs, soft costs, and the payback period. Here’s a closer look at each component:

Hard Costs: These are direct costs associated with implementing automation, such as:

Purchase Costs for an off-the-shelf or third-party solution.
Maintenance Costs to ensure the system runs efficiently.
Resource Costs for staff involved in setup, training, or ongoing system oversight.
Decommissioning Costs related to retiring outdated systems or redundant manual processes.

Soft Costs: Less easily quantifiable, soft costs nonetheless play a significant role in automation’s value. Examples include:

Employee and Customer Satisfaction as workflows become more efficient and seamless.
Faster Time to Market as projects and timelines are expedited by automated processes.
Reduced Risk from decreased human error and rework, leading to more accurate testing and consistent results.

Payback Period:
This is the point at which the cumulative savings or profits offset the initial investment in automation. Typically measured over one to five years, a shorter payback period indicates a quicker, more impactful ROI.

Calculating ROI is straightforward once these elements are defined. The formula is as follows:

- ROI = [(Profit from Investment – Cost of Investment) / Cost of Investment] x 100

The result is expressed as a percentage. Positive ROI means the investment is profitable, while a higher ROI percentage indicates a more efficient or effective investment.

Expected ROI: What’s Realistic?

The expected ROI for testing automation can vary considerably based on the extent of automation capabilities that are deployed. Research suggests that automation can substantially reduce both hard and soft costs depending on the scope - from partially automated processes to fully automated systems.

Additionally, Paragon’s clients report significant operational improvements from using Web FASTest for host, ATM, POS, and EMV testing, citing time savings, faster project and release cycles, as well as reduced business risk as key benefits.

So, is Testing Automation Worth it?

Testing automation has the potential to transform the way financial institutions handle their payment systems, leading to increased productivity, improved accuracy, enhanced organizational agility, and perhaps most importantly material cost savings.

However, maximizing ROI depends on choosing a solution that aligns with an institution’s unique needs, both now and in the future. When approached thoughtfully, testing automation isn’t just an operational enhancement but a strategic investment with clear and lasting returns.

Interested in learning more about the ROI of testing automation? Contact the Paragon team today. Our payment testing and automation experts would love to answer any questions that you may have.

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Paragon ATM simulation tools provide the features, functions and flexible automation options so that you can run more tests in less time - improving quality, shortening delivery cycles, reducing costs, fostering collaboration, and increasing channel profitability.

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