TLDR Key Takeaways
Open banking represents a huge opportunity for banks and other financial institutions looking for innovative ways to grow their revenue. The open banking system started in Europe, but consumer demand for fast, easy, personalized banking services is driving rapid expansion in the U.S. and Canada.
74% of consumers in the U.S. and Canada are willing to adopt open banking, and many people (especially young adults) have already used at least one open banking service.
One of the keys to the success of open banking is security. As the name suggests, open banking involves the open exchange of financial data — making tight security absolutely necessary.
Let’s explore how you can boost your API security to maintain secure APIs and a safe, open banking environment for your customers.
Open banking APIs are a type of software that allows banks and other financial organizations to share data with financial technology firms and other partners.
APIs power the open banking system via a network of accessible API endpoints that allow banks, lenders, FinTech firms, and other financial institutions to request and exchange the data they need to run their apps and services.
Think of it this way: in the same way a user interface allows users to interact with an application, open banking APIs allow financial applications to interact and exchange data with each other.
Read More: What is API Security and Why It's Important
We’ve already mentioned how open banking helps consumers by enabling convenient and personalized digital banking, but what about the banks?
No need to worry — there are big benefits for banks, too. Let’s look at the top three.
Open banking relies on mutually beneficial partnerships between traditional financial institutions like banks and modern FinTech companies.
For banks, one of the biggest benefits is the opportunity to create new revenue streams. The potential payoff is huge, with experts predicting that open banking will create $416 billion in new revenue over the next several years.
Here are just a few of the additional revenue opportunities available to you as part of the open banking ecosystem:
As part of the open banking network, you have access to new distribution channels and groups of customers who might never have encountered your bank otherwise.
To help you better appreciate the exciting possibilities of this expanded reach, let’s look at two examples:
With the help of data exchanged through open banking APIs, you can gain valuable insight into customer behavior and expectations.
This allows you to improve your customer experience and provide personalized financial services based on each individual’s spending patterns, saving habits, and personal preferences.
Read More: Why APIs are Your Biggest Security Risk
Whether you build your own APIs or get them from third-party providers, it’s important to make sure your APIs are protected from common cyber attacks.
Here are some banking API security best practices to get you started in the right direction.
Hackers use bots to attack exposed API endpoints. Bots are automated and extremely versatile, meaning cybercriminals can use them to launch DDoS attacks, manipulate HTTP calls, introduce malware, steal customer information, and cause data breaches.
There are several ways to combat bot attacks on APIs. Three of the most effective solutions include:
Users want to access their bank accounts quickly and without a complex authorization process. Unfortunately, hackers also want to access customer accounts.
You need advanced access management controls that satisfy your users AND keep cybercriminals out.
The best way to strengthen your authorization and authentication protocols is to implement a combination of multi-factor authentication, OAuth 2.0, OpenID Connect, and mTLS.
Each of these security protocols helps verify that users are who they claim to be and are authorized to have the access they’re requesting. When used together, they protect your API at different levels and provide a reliable defense against identity theft attacks.
Read More: What Is OWASP API Security Top 10 & Why It's Important
Open banking technology depends on numerous APIs — all with multiple endpoints. Each endpoint represents a potential security vulnerability, and it’s impossible to test them all effectively using traditional techniques.
APIsec offers a comprehensive automated API testing solution. Using our unique platform, you can thoroughly test every aspect of your APIs as often as needed.
APIsec empowers organizations to identify and correct security flaws before hackers find and exploit them — giving you and your customers peace of mind when it comes to the security of your open banking environment.
Get in touch with our team to schedule a free vulnerability scan or set up a time to talk about how we can boost your API security measures.