Testing the system in isolation to ensure that system functionality is verified in line with the business requirements. This form of testing is performed while the system components are built and before they are integrated with downstream systems. Usually involves using appropriate stubs to mimic downstream systems. 

Benefits – System Testing helps to identify defects at an early stage hence minimizing the cost. A defect identified at a later stage of the life cycle (during integration / UAT / production) involves much higher cost to remediate.