API Security Testing for Payment Systems: PSD2 and Open Banking Requirements

Payment APIs power trillions of dollars in transactions annually. A single security flaw can expose customer financial data, enable fraud, or result in regulatory penalties exceeding millions. Most security teams test payment gateways like standard APIs, missing critical vulnerabilities specific to financial systems.

Why Payment Gateway Testing Is Different

Payment systems operate under strict regulatory frameworks. PSD2 in Europe and Open Banking standards globally mandate specific technical controls with legal consequences for non-compliance.

Attackers targeting payment systems exploit race conditions in transaction processing, manipulate authentication tokens, probe for business logic flaws automated scanners cannot detect, and target multi-party authentication flows unique to financial systems.

Banking API security requires verifying regulatory compliance, testing complex authentication workflows, and simulating attack scenarios specific to financial fraud.

PSD2 Security Requirements for Payment APIs

PSD2 establishes mandatory security standards for electronic payments across the European Economic Area. According to the European Banking Authority, penalties for non-compliance reach up to €5 million or 4% of annual turnover, whichever is higher.

PSD2 Compliance Impact:

Metric	Impact	Source
Financial institutions with API incidents	82%	Verizon, 2023
Maximum penalty	€5M or 4% turnover	EU PSD2 Directive
Card fraud with SCA vs without	10x lower	ECB/EBA, 2024

Strong Customer Authentication (SCA) requires at least two independent authentication factors from different categories. According to the ECB and EBA joint report, SCA-authenticated transactions display significantly lower fraud rates, with card fraud rates ten times higher outside the EEA, where SCA is not required.

Dynamic Linking prevents attackers from authenticating a $1 transaction and modifying it to $10,000. Authentication codes must be cryptographically bound to specific transaction amounts and payee details.

Secure Communication standards mandate TLS 1.2 or higher with certificate pinning. Testing should include downgrade attacks and certificate validation bypass attempts.

Open Banking API Security Standards

The U.S. Consumer Financial Protection Bureau finalised rules in October 2024 requiring financial institutions to provide secure API access to consumer data. The UK reports that over 7 million consumers now use Open Banking services with 12 million daily API calls.

OAuth 2.0 Authorisation testing should verify proper token issuance with short expiration times, token validation on every request, secure token revocation mechanisms, and protection against authorisation code interception.

Mutual TLS (mTLS) is mandated for all payment initiation requests. Testing should verify certificate validation on both the client and server sides and attempt certificate pinning bypass.

Scope Enforcement ensures tokens with read-only access cannot initiate payments. Testing must confirm that scope escalation is impossible.

Rate limiting prevents brute force attacks and credential stuffing. According to IBM's Cost of a Data Breach Report 2024, the average breach cost in financial services is $6.08 million.

Payment Gateway Security Testing Checklist

Testing Coverage by Category:

Category	Critical Tests	Priority
Authentication	SCA implementation, factor independence, bypass attempts	Critical
Authorization	BOLA, privilege escalation, session management	Critical
Transaction	Dynamic linking, race conditions, replay attacks	Critical
Communication	TLS enforcement, certificate validation, downgrade attacks	High
Data Exposure	Excessive data, filtering bypass, and log masking	High

Authentication and Authorisation Testing:

Test SCA implementation across all transaction types
Verify authentication factor independence
Attempt authentication bypass through direct API endpoint calls
Test for broken object-level authorisation
Attempt privilege escalation by manipulating user roles

Transaction Security Testing:

Verify dynamic linking between authentication codes and transaction details
Submit simultaneous requests to test for race conditions
Attempt transaction amount manipulation after authentication
Test for replay attack vulnerabilities
Verify idempotency key implementation prevents duplicate charges

Communication and Data Security Testing:

Verify TLS 1.2 or higher enforcement across all endpoints
Attempt TLS downgrade attacks
Test certificate pinning implementation
Test for excessive data exposure in API responses
Verify sensitive data masking in logs and error messages

How to Test Payment Gateway APIs

Automated Security Scanning

Automated tools identify technical vulnerabilities across API endpoints. Focus on tools that test for OWASP API Top 10 vulnerabilities specific to payment systems, covering authentication flaws, injection vulnerabilities, security misconfiguration, sensitive data exposure, and insufficient logging.

Integration into CI/CD pipelines catches vulnerabilities before production deployment.

Manual Business Logic Testing

Automated tools cannot detect business logic flaws. Manual testing scenarios are essential:

Transaction amount manipulation: Submit a transaction for $1.00, intercept the API call, modify the amount to $0.01, and verify the system charges the original amount.

Authentication bypass: Attempt to submit transactions by directly calling payment API endpoints without completing required authentication flows.

Race condition exploitation: Submit multiple simultaneous transactions for the same account to test whether the system properly prevents double-charging.

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Common Payment API Vulnerabilities

Broken Object Level Authorisation (BOLA)

Financial services face 3.6 billion API attacks monthly. BOLA is the most exploited vulnerability in financial APIs. Payment APIs frequently expose endpoints returning transaction history or account information. When the API fails to verify that the authenticated user has permission to access the requested resource, attackers can view or manipulate other users' financial data.

Testing approach: Authenticate as User A, capture legitimate API requests, modify transaction IDs to User B's values, and verify the API denies access appropriately.

Mass Assignment

Attackers inject parameters that should not be user-controllable. Adding a "transaction_fee: 0" parameter to a payment request might bypass processing fees if the API blindly accepts all input parameters.

Testing approach: Capture legitimate API requests, add unexpected parameters like "is_verified: true" or "discount: 100", and verify they are properly rejected.

Insufficient Rate Limiting

Without proper rate limiting, payment systems enable credential stuffing attacks, brute force attacks on authentication codes, and automated fraud attempts.

Testing approach: Submit authentication attempts at high volume (100+ requests per second) and verify rate-limiting triggers appropriately.

Integrating Security Testing into Development

Shift-left security practices enable teams to catch issues before they reach production.

Development Phase: Provide developers with security testing tools in development environments. Early detection prevents security issues from reaching later stages, where fixes are more expensive.

CI/CD Integration: Run automated security tests on every commit and pull request. Failed security tests should block the deployment pipeline.

Pre-Production Testing: Conduct comprehensive penetration testing in staging environments to simulate realistic attack scenarios.

The Cost of Payment API Vulnerabilities

Financial Impact:

Cost Category	Average Impact
Data breach in financial services	$6.08 million
PSD2 non-compliance penalty	€5M or 4% annual turnover

Finding vulnerabilities in production costs significantly more than proactive testing. Breaches trigger mandatory reporting, investigation costs, customer compensation, and lasting reputational damage.

Understanding fintech cybersecurity risks and challenges helps financial institutions prioritise security investments appropriately.

Automated Testing for Payment APIs

Financial institutions need tools that continuously test for vulnerabilities while adapting to evolving threats.

APIsec provides automated security testing specifically designed for payment APIs. The platform continuously tests for BOLA, broken authentication, mass assignment, and business logic flaws. Integration with CI/CD pipelines ensures every payment API change undergoes security verification before production deployment.

Conclusion

Payment gateway security testing requires specialised approaches combining regulatory compliance verification, automated vulnerability scanning, and manual business logic testing. Financial institutions must implement continuous testing throughout the development lifecycle to catch vulnerabilities before production deployment. Proactive testing costs substantially less than breach response, which averages $6.08 million in financial services, while protecting customer data and maintaining regulatory compliance.

Secure your payment APIs before attackers exploit them. Start your free trial with APIsec to discover vulnerabilities in your payment gateway. Test for PSD2 compliance, BOLA, authentication bypass, and business logic flaws with AI-powered continuous testing.

Key Takeaways

Payment gateway testing requires PSD2 and Open Banking compliance verification beyond standard API security approaches.
Strong Customer Authentication significantly reduces fraud rates, with card fraud ten times higher without SCA protection.
Combine automated vulnerability scanning with manual business logic testing to identify complex fraud scenarios.
Proactive testing costs significantly less than breach response, which averages $6.08 million in financial services

FAQs

What is the most critical security test for payment gateways?

Testing for Broken Object Level Authorisation (BOLA) prevents unauthorised access to other users' transactions and financial data, the most exploited vulnerability in payment APIs.

How often should payment gateway APIs be security tested?

Run continuous automated testing with every code change, conduct quarterly comprehensive manual testing, and perform annual compliance verification when regulations change.

What makes PSD2 compliance testing different from standard API security testing?

PSD2 testing verifies compliance with specific regulatory requirements, including Strong Customer Authentication, dynamic linking, and secure communication protocols, with legal penalties of up to €5 million or 4% of annual turnover for non-compliance.

Can automated tools fully test payment gateway security?

Automated tools effectively test technical vulnerabilities but must be combined with manual business logic testing to identify transaction manipulation, authentication bypass, and race-condition vulnerabilities that require human expertise.

What authentication testing is required for Open Banking APIs?

Test OAuth 2.0 token issuance and validation, mutual TLS certificate authentication, scope enforcement, preventing privilege escalation, and verification that authentication codes cannot be bypassed or reused across different transactions.