Why Trade Finance Testing Needs Domain Experts Who Know Testing

Around 20 years ago, when I was still early in my career—neither a Trade Finance operations expert nor a seasoned tester—my manager was very clear about one thing: Trade Finance testing must be done by domain experts, not by generic testers. At the time, I did not fully understand his insistence. Other departments were comfortable using generalist testers, and Trade Finance seemed to be the only area where domain expertise was treated as non-negotiable.

Over the years, as I spent more time in Trade Finance operations and gradually moved deeper into technology and system implementation, that insistence began to make sense. What felt like rigidity back then was actually rooted in experience.

This blog reflects that realisation—why testing Trade Finance systems is fundamentally different from testing other banking platforms, and what quietly goes wrong when this difference is ignored.

Why Trade Finance Is Not Like Other Banking Products

Most of us have personal experience with retail banking. We operate savings accounts, use credit cards, go through KYC, and sometimes take personal or home loans. Even without working in a bank, we broadly understand how these products behave and what to expect from them.

Because of this familiarity, testing common banking products does not always require deep domain expertise. A capable functional tester can validate flows, calculations, and outcomes using requirements, logic, and expected behaviour.

Trade Finance is very different.

Along with Treasury, Trade & Supply Chain Finance sits at the most complex end of banking products. These are not services most customers interact with daily. Even many corporates and SMEs struggle to fully understand how they work inside a bank. Much of the complexity lies in internal workflows, risk handling, accounting treatment, and regulatory interpretation.

When the business itself is this specialized, testing the systems that support it cannot be generic.

Understanding the End-to-End Flow of a Trade Finance Instrument

In most lending products, the transaction flow is relatively predictable. Take a personal loan: after disbursement, EMIs are collected monthly. There may be partial prepayments or interest rate changes, but the lifecycle remains largely linear.

Now consider an Import Letter of Credit.

Once an LC is issued, the number of possible paths it can take becomes extremely large. The lifecycle is not linear; it is a combination of events, decisions, and exceptions—many of which occur out of sequence.

For example:

• LC Issued → Expired → Closed

• LC Issued → LC Amended → Closed

• LC Issued → LC Utilised Partially → Closed

• LC Issued → LC Utilised Partially → LC Amended → LC Utilised Again

• LC Issued → LC Amended → LC Utilised

• LC Issued → LC Amended requiring beneficiary consent → Beneficiary rejects amendment → LC Utilised under original terms

Even the most comprehensive test suites cannot predefine every possible sequence. This is where domain expertise becomes critical. During test execution, a Trade Finance practitioner observes system behaviour and instinctively identifies additional scenarios that need to be tested—scenarios that were never explicitly documented but can expose incorrect behaviour.

Test Cases Are Not Written From Documents — They Are Written From Operations Reality

When banks provide requirements to software vendors, they rarely document every operational expectation. Many behaviours are considered implicit—understood by anyone familiar with Trade Finance operations.

For testing to be effective, the tester must interpret these requirements in the same way the bank and the product team do. Without domain expertise, that alignment is difficult to achieve.

This challenge is compounded by the fact that Trade Finance workflows differ widely across banks. Some operate with only front and back offices, while others have distinct front, middle, and back office structures.

Even within the same Trade Finance system:

• One bank may check limits at the processor level

• Another may check limits only at the signatory stage

• A third may perform limit checks in the middle office

A Trade Finance practitioner recognises these differences during workshops and operational discussions. That understanding directly shapes test scenario design. When this understanding is missing, UAT may complete successfully—but production workflows immediately feel misaligned to operations.

Accounting Entries

Accounting is one of the most sensitive areas in Trade Finance testing.

A generic tester may know that issuing an LC creates contingent liability and that changes in LC value affect exposure. What is often missed is that the accounting treatment depends on how the LC value changes, not just that it changes.

• If an LC is utilised through document presentation, the contingent liability is reversed at utilisation.

• If the LC amount is reduced through an amendment, the contingent liability is not reversed at amendment—it is reversed only when the beneficiary accepts the amendment.

These nuances have a direct impact on exposure reporting, income recognition, and reconciliation. They are subtle, but operationally critical. This is also where many banks discover, post go-live, that operational exposure reports no longer reconcile with accounting.

Trade Finance Testing Is Cross-Module by Nature

Trade Finance transactions do not live in isolation within a single system. They cut across limits, accounting, charges, margin, Nostro/Vostro, and compliance systems.

When an LC is issued, testing is not limited to verifying that issuance is successful in the Trade Finance system. It must also confirm that:

• Limits are reduced correctly

• Margin is blocked or collected as per policy

• Charges are posted at the right stage

• Exposure is reflected correctly as off-balance

Similarly, when an LC is cancelled or utilised, reversal logic must work consistently across all these modules. Many issues that surface after go-live are not Trade Finance system defects, but cross-module inconsistencies that were never tested together.

SWIFT Messages

Generic SWIFT testing often focuses on message structure and mandatory fields.

Trade Finance SWIFT testing focuses on when a message should be generated—and when it must not be generated.

For example:

• When an LC is settled by crediting a vostro account, an MT202 should not be generated

• When settlement is done by debiting a nostro account, an MT202 is expected

Similarly:

• For clean export LC documents where reimbursement is allowed, an MT742 is generated

• If no reimbursing bank is nominated, that message must not be generated

These distinctions are intuitive to Trade Finance practitioners and are critical to test correctly. Incorrect SWIFT triggers are rarely caught during UAT, yet they carry significant operational and reputational risk in production.

Venzo Perspective

Everything described above comes from our experience over the decades.

Trade Finance systems rarely fail because screens or validations are wrong. They fail because the consequences of actions were never tested the way Trade Operations actually experience them.

You can train a Trade Finance professional in testing techniques relatively quickly.

You cannot train a generic tester to develop Trade Finance operational judgement through documents and test scripts.

That is why Trade Finance UAT needs domain experts who know testing.

Not as a preference.

Not as a best practice.

But because in Trade Finance, UAT often looks successful—

and the real failures appear only after operations takes over.