Open banking allows you to share specific banking data, such as your balance and transaction history, with other financial providers or services you choose.
In this way, it’s revolutionised financial services by enabling data sharing through API’s, and eliminated the hassle of lengthy back and forth between bank and consumer. However, these digital gateways also create significant security vulnerabilities.
APIs serve as direct pathways to sensitive financial data and services, making them prime targets for cybercriminals seeking access to customer information, transaction details, and banking infrastructure.
Security failures in open banking APIs can lead to debilitating consequences: regulatory violations resulting in hefty fines, severe reputational damage that erodes customer trust, and substantial financial losses from both direct costs and business disruption.
This blog explores comprehensive API security testing strategies specifically designed for regulatory compliance, helping fintech companies protect their financial products while meeting critical regulatory requirements in the open banking ecosystem.
The regulatory landscape: What does Open Banking demand?
Before we dive into the need for API security testing, it’s important to outline the open banking regulations currently enforced in the UK, to enforce robust security measures and minimise the risk of data breaches. Here are some key ones to know:
The Payment Services Directive 2 (PSD2)
The Payment Services Directive 2 (PSD2) revolutionised European banking by mandating that banks open their systems via APIs while upholding rigorous security standards.
PSD2’s Regulatory Technical Standards (RTS)
PSD2’s Regulatory Technical Standards (RTS) enforce Strong Customer Authentication (SCA), which requires users to prove their identity using multiple factors like passwords, mobile phones, and biometrics when logging into customer accounts.
If you’ve ever logged into a banking or budgeting app, you’ll recognise these familiar multi-factor authentication requests for memorable passwords, PIN codes, or Face ID on your smartphone. Financial service providers must also ensure secure communication between systems using encryption and digital certificates.
Safekeeping Financial Data: Meet the Financial Conduct Authority
In the UK, the Financial Conduct Authority (FCA) has maintained equivalent standards post-Brexit, requiring Account Servicing Payment Service Providers (ASPSPs) to maintain robust API security frameworks.
The FCA emphasises that open banking APIs must demonstrate an unwavering commitment to four critical security pillars: confidentiality (protecting data from unauthorised access), integrity (ensuring data accuracy and completeness), availability (maintaining service reliability), and traceability (comprehensive audit trails for all transactions).
What makes API security testing different?
API security testing differs significantly from traditional software testing by focusing on vulnerabilities that could expose sensitive financial data or allow unauthorised access to banking systems.
What to expect from API testing
- Authentication flaws – Testing whether login mechanisms can be bypassed or compromised
- Authorisation bypasses – Ensuring users can only access data and services they’re permitted to use, and enforcing data privacy.
- Rate limiting and brute-force protections – Verifying systems can prevent automated attacks that guess passwords or overwhelm services.
- Sensitive data exposure – Checking that confidential information like account numbers or account balances isn’t accidentally leaked.
- Broken object-level authorisation (BOLA) – Ensuring customers cannot access other users’ accounts or transactions by manipulating API requests.
Key security testing methods for Open Banking APIs
Open banking APIs require consistent and thorough testing to ensure the security of bank accounts, banking transactions, and financial information. Various testing methods can be employed, often in combination, to provide a comprehensive assessment of your financial institution’s security posture. Below are some of the main testing approaches used:
Automated vulnerability scanning
Automated vulnerability scanning is a swift and effective method of detecting outdated components, misconfigured headers, or common vulnerabilities. While it’s not recommended for in-depth or complex probing of your organisation’s security posture, services like OnSecurity’s Scan offer fast, repeatable vulnerability scanning services, proving highly useful for early-stage threat detection and continuous security monitoring.
API-specific penetration testing
Our API penetration testing utilises both black-box and grey-box methodologies to simulate realistic attacker scenarios to test the security of your open banking solution. Black-box testing mirrors external threats with no prior system knowledge, whilst grey-box testing combines insider threat perspectives with partial system access.
These approaches reveal vulnerabilities that automated tools (like vulnerability scanners) miss, providing more in-depth security assessments that reflect actual attack vectors cybercriminals use against financial institutions.
To learn more about API security testing, check out our blog.
Fuzz testing
Fuzz testing involves sending unexpected, malformed, or random data to APIs to identify how they handle edge cases. This technique helps uncover logic flaws, unhandled errors, and unexpected system behaviours that manual testing might miss.
By bombarding APIs with invalid inputs, such as oversized data packets or special characters, fuzz testing reveals vulnerabilities where systems fail or expose sensitive information through error messages, ensuring robust error handling in production environments.
Static and Dynamic Analysis
Static Application Security Testing (SAST) examines source code without executing programmes, identifying vulnerabilities like hardcoded secrets and insecure coding patterns during development. Dynamic Application Security Testing (DAST) tests running applications, simulating real-world attacks to uncover runtime vulnerabilities and configuration issues.
Combining both approaches provides comprehensive coverage: SAST catches early development flaws whilst DAST reveals deployment and operational security gaps that only emerge during execution.
Security Misconfiguration Checks
Security misconfigurations are particularly common in fast-paced fintech development environments where speed often takes precedence over security hardening. Common issues include exposed debug tools in production, overly permissive Cross-Origin Resource Sharing (CORS) policies, excessive API permissions, default credentials, and unencrypted data transmission.
These seemingly minor oversights can provide attackers with easy entry points, making systematic misconfiguration checks essential for maintaining a robust API security posture.
The consequences of failing API security testing
The consequences of failing API security testing can be extremely damaging for any organisation operating open banking systems.
Given the volume of sensitive information, including banking data, exchanged back and forth, inadequate API security testing can permanently damage customer trust, ruin mutually beneficial partnerships between fintech companies and traditional financial institutions, and lead to costly fines and legal penalties.
Here are just a few of the potential consequences:
Regulatory penalties
Financial institutions face severe penalties for API security failures under multiple regulatory frameworks. GDPR violations can result in fines up to €20 million or 4% of annual global turnover, whichever is higher.
The FCA imposes substantial penalties for data breaches and security lapses, whilst Open Banking mandate violations can lead to regulatory censure and operational restrictions. Non-compliance compounds financial damage through legal costs, regulatory investigations, and potential suspension of banking licences.
Loss of banking licenses or partnerships
Banks and third-party providers are likely to terminate relationships if open banking APIs prove to be insecure. This is because many traditional banks can’t risk the legal, financial and operational repercussions of a breach, leading them to seek other partners with proven robust security measures.
Customer data exposure and reputational damage
Because financial data is so highly sensitive, users will abandon your organisation at the first sign of insecurity. The customer experience is essential to the success of any organisation, and a breach of your user base’s most sensitive data is certainly not the way to build a positive brand image.
Fintech breaches are also notorious for making headlines due to the potential damage of leaked financial information.
Having your organisation plastered all over the news for failing security testing and risking customer data is certainly no good for business. Check out this blog to read more about the true cost of a data breach for businesses.
Best practices for testing and securing APIs
- Shift Left Security Testing – Integrate security scans, vulnerability assessments, and threat modelling early in development cycles rather than post-deployment
- Regular Third-Party Penetration Testing – Schedule quarterly assessments with certified providers like OnSecurity to identify vulnerabilities in applications and third-party integrations
- Maintain Current API Inventories – Document all APIs, endpoints, and third-party connections with regular audits to prevent shadow IT and unauthorised access points
- Implement Role-Based Access Controls – Enforce the principle of least privilege with granular permissions, multi-factor authentication, and regular access reviews
- Establish Secure Coding Practices – Mandate code reviews, static analysis tools, dependency scanning, and security training for development teams to prevent common vulnerabilities
How OnSecurity helps fintechs stay compliant
OnSecurity specialises in open banking security with expert API penetration testing designed for financial services. We deliver fast turnarounds, developer-friendly reports, and ensure your compliance readiness for regulatory requirements.
Contact us today to discuss your API security assessment needs and protect your customers’ financial data.
