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What is a Penny Test?

Popular in the banking and finance world, penny tests are a simple way to verify the validity of a bank account or bank integration, prior to a large finance transaction taking place.

A penny test (also called smoke testing or small value testing or penny drop testing) is a simple way to test the validity of a bank account by depositing a small amount of money—usually a penny as the name suggests—into the bank account. Penny tests can also be run as debits, withdrawing a penny from an account instead of depositing it.

By depositing or withdrawing a real, but small, amount of money it is possible to verify that the transaction route from payer to payee works as expected in advance of other, larger transactions.

A penny test can also be used to test an integration to a bank—not just to verify transactions between two bank accounts. Penny tests are also a reliable way for businesses who utilize bank integrations to ensure that those integrations have been successfully set up. For businesses using Modern Treasury, we always recommend penny testing to ensure that transactions will be able to be completed as expected, after setting up a new banking integration. Find more information on how to penny test with Modern Treasury here.

Penny tests are a good practice for all businesses, but especially for businesses that transact with a large volume or customers, vendors, or other entities.

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