Finance and API openness escalate security challenges

Finance and API openness escalate security challenges

In the rapidly evolving world of finance, Open Finance is reshaping how consumers manage their financial lives, offering a more seamless and accessible experience. However, the success of Open Finance hinges on maintaining security at every point of contact, particularly when it comes to APIs.

Leading financial institutions are recognising this need and are investing in real-time API discovery to surface undocumented or forgotten interfaces. As a result, they are rethinking their approach to API security, adopting best practices that cater to the unique challenges of this new ecosystem.

One such best practice is designing APIs with security as a foundation. This involves conducting threat modeling and risk assessment at the design stage to minimize the attack surface. Exposing only necessary data and functionalities, performing data classification, and applying secure coding practices like input validation are key to preventing common attacks such as injections.

Robust authentication and authorization measures are also essential. Financial institutions are moving away from static keys and towards token-based or certificate-based mechanisms, ensuring that each API client accesses only what they are authorized to.

Zero trust principles are another cornerstone of API security in Open Finance. Never implicitly trusting any request or user, even those inside the network perimeter, is crucial. Authenticating and authorizing every access attempt thoroughly is key to maintaining security.

Securing data in transit and at rest is another critical aspect. Encrypting API payloads and communications using TLS or equivalent methods helps prevent data interception or tampering.

Continuous monitoring, testing, and auditing are equally important. Regular security audits, vulnerability assessments, penetration testing, and code reviews help detect and fix security gaps early. Monitoring API usage patterns and anomalies can help institutions detect attacks or breaches in progress.

Managing third-party risks carefully is also crucial. Open Finance APIs often integrate with multiple third parties, and a shared-responsibility model helps clearly define data exchange boundaries, security responsibilities, retention policies, and transmission paths.

Reducing the attack surface by delivering APIs on demand can mitigate risks like distributed denial-of-service (DDoS) attacks. Leveraging cloud platforms that can dynamically spin APIs up or down rather than running them always-on can help achieve this.

Adhering to industry standards and governance is another best practice. Aligning API security efforts with established standards and fostering a culture of security awareness and clear governance frameworks are key to maintaining a secure Open Finance ecosystem.

The importance of API security in Open Finance cannot be overstated. API incidents can lead to increased scrutiny from internal leadership, loss of trust, reputational damage, fines, productivity loss, and customer churn. Despite this, only 28.5% of financial institutions have a full inventory of APIs and know which return sensitive data.

The gaps in API security detection are a concern, as modern threats evolve faster than weekly and monthly testing. The open model is accelerating the shift toward API-driven ecosystems in financial institutions, and machine learning and behavioral analysis are being used to monitor for deviations in API behavior, helping institutions detect emerging threats and enable faster containment.

According to Akamai's 2025 API Security Report, 88.7% of financial services firms experienced an API-related security incident in the past year, and the average cost per incident exceeded $830,000 in the U.S. Secure integration with cloud platforms and infrastructure partners is critical for financial institutions building and scaling Open Banking services in hybrid and multi-cloud environments.

Regulatory alignment is a major benefit, as controls must demonstrate compliance with evolving frameworks like PSD2, DORA, and the CFPB's Section 1033 rule without slowing innovation. The complexity of financial data-sharing demands controls that can scale across partners, geographies, and compliance mandates.

The new model for financial data security emphasizes proactive, embedded, and adaptive controls to support innovation without sacrificing trust. Visibility gaps, architectural sprawl, and legacy defenses are major drivers of these attacks. Compliance is no longer a checkbox; it's a capability and a competitive advantage for institutions that can demonstrate proactive API governance, strong consumer protections, and rapid incident response.

Financial institutions must treat API security as a strategic imperative, moving beyond periodic scans and reactive policies toward continuous, adaptive protection that evolves alongside digital services. Financial institutions are increasingly adopting strong identity and access controls, such as mutual TLS and programmable authorization rules, to govern even trusted third-party connections.

Despite these efforts, over a quarter of firms said their network firewall and API gateway failed to catch the last attack. Nearly nine in 10 financial organizations have already experienced the downside of insufficient API protection, and these numbers are expected to climb as the ecosystem grows. Regulatory mandates like PSD2 in Europe and the U.S. CFPB's Section 1033 rule are driving this shift.

In conclusion, the success of Open Finance depends on maintaining security at every point of contact. Financial institutions must adopt best practices like designing with security in mind, robust authentication and authorization, implementing zero trust principles, securing data in transit and at rest, continuous monitoring, managing third-party risks, reducing attack surface, adhering to industry standards, and treating API security as a strategic imperative. By doing so, they can ensure a secure and trustworthy Open Finance ecosystem.

Sources: - API Security Checklist (2025) - NinjaOne, 8 Best Practices for Securing APIs (2025) - Complete Guide to API Security (2025) - BizTech Magazine, How Banks Can Secure Open APIs (2025) - Akamai's 2025 API Security Report

1. Leading financial institutions are investing in real-time API discovery to address security issues, particularly regarding APIs.
2. Designing APIs with security as a foundation is a best practice, involving threat modeling, minimizing attack surfaces, and using secure coding practices.
3. Robust authentication and authorization measures, such as token-based mechanisms, are essential for securing APIs in Open Finance.
4. Zero trust principles, continuous monitoring, testing, and auditing are key to maintaining security in the Open Finance environment.
5. Managing third-party risks carefully and reducing the attack surface can help mitigate risks like distributed denial-of-service (DDoS) attacks.
6. Securing data in transit and at rest is crucial for preventing data interception or tampering, with encryption methods like TLS often used.
7. By adopting best practices like those mentioned and treating API security as a strategic imperative, financial institutions can ensure a secure and trustworthy Open Finance ecosystem.

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