Fintech API Security Checklist: Avoid Disaster

The information age is upon us. Every day, more and more of the world’s data moves to digital formats—from financial transactions to medical records.

But with this transition comes new risks: By 2025, cyberattacks are projected to cost businesses $10.5 trillion per year globally.

One major attack can cripple an entire organization for years to come, not just in terms of finances but also in customer trust and brand reputation.

With APIs powering the entire financial sector, many companies have started adopting API security strategies.

This article will discuss the role of APIs in financial services, some of the most common threats faced by APIs today, and how the FinTech industry can take proactive steps to fight back against cybercriminals.

What Is an API and Why It’s Important for the Financial Sector?

An API, or application programming interface, is a type of interface that allows data to be shared with other applications.

Think of it as a server at a restaurant that acts as a middleman between the customer and the kitchen, helping serve food faster while enhancing operational efficiency for the chef.

For fintechs, how to ensure reliable bank api connectivity is not just a performance question but also a security concern, since unstable connections can expose sensitive data and transactions.

By the same token, APIs often provide a more streamlined way for businesses to interact with an organization's services.

These APIs can be used to programmatically create, read, update, and delete database records, allowing organizations to run complex process chains within seconds - by the time the money you sent to your friend reaches their account, the transaction may have gone through dozens of APIs.

APIs are important for the financial sector because they allow for the easy sharing of financial data between different banks, FinTech services, and other institutions.

Most of the major banks and financial services firms in the US have an API available for public use. In fact, 78 percent of banks rely on banking APIs to provide a better customer experience and develop new revenue streams.

The most common example of an API is the Stripe API, which makes its data easily accessible for third-party apps and services.

With unprecedented monetization opportunities, implementing APIs is becoming more and more popular in the financial sector.

A good example may be a bill-paying service offered at many banks that can now be integrated directly into other banking sites utilizing APIs rather than requiring users to log into the bank's site and initiate usage of the service from there.

This integration eliminates intermediaries or potential points of vulnerability when sharing highly sensitive information between banking entities.

The biggest concern with APIs is security. With a solid security strategy in place, APIs are relatively safe compared to using direct web services calls or other methods of data exchange because they provide a layer of abstraction between both ends of the connection.

APIs also provide an easier way to filter out traffic that should not be allowed to access specific resources on either end.

A comprehensive fintech API security checklist should address the broader landscape of cybersecurity in fintech, from identity theft to DDoS attacks.

Suppose someone wants to implement check imaging into their application but doesn't want other applications calling it directly. In that case, they can create a rule in the authentication scheme that requires applications to be authenticated via the API to access that resource.

In this way, APIs can provide faster data exchange while still being relatively simple and easy to use for developers.

The 7 Most Common Types of Attacks Against APIs

Unfortunately, the rise of APIs and open banking did not go unnoticed by hackers - APIs are projected to become the main attack vector in 2022.

API attacks come in many different forms, but they all have one common goal - to steal or manipulate data.

Below, we explore some of the most common types of API attacks that can cripple financial institutions and lead to disastrous reputational and financial losses.

1. DoS & DDoS Attacks

One of the most common clusters of API attacks is an application-level denial of service (DoS) and distributed DoS (DDoS) attacks.

In this type of attack, the hacker sends a massive number of requests to the API to overwhelm it and prevent legitimate users from accessing it.

Using this approach, the attacker tries to overload your API with requests until it's unable to handle them and shuts down.

There are several ways to protect your API against DDoS attacks, including using a load balancer or an intrusion prevention system.

2. SQL Injection Attacks

In a SQL injection attack, the attacker tries to gain unauthorized access to databases by injecting malicious code into database requests.

To protect your API against SQL injection attacks, you should use parameterized queries and ensure that all requests to your API are authorized, authenticated, and validated.

3. XML External Entity (XXE) Attacks

When an XXE attack occurs, the hacker tries to access files on the server or other external services using specially crafted XML documents.

You can prevent your API from being exploited with XXE attacks by configuring your XML parser correctly.

4. Cross-site Scripting (XSS) Attack

Another common type of API attack is a cross-site scripting (XSS) attack.

In an XSS attack, the attacker tries to inject malicious scripts to steal sensitive data or gain unauthorized access to the functionalities of your APIs.

You can protect your API against XSS attacks by configuring it to use X-Frame headers and Content Security Policy (CSP) headers.

5. Brute Force Attacks

A brute force attack entails using automated tools to try different username/password combinations until they guess the correct one and gain unauthorized access to the system.

To protect your API from brute force attacks, you should use rate limiting and IP address restrictions on your API.

6. Cross-site Request Forgery (CSRF) Attacks

A CSRF attack occurs when the attacker tricks authenticated users into clicking a specially crafted link to make unauthorized requests to your API on behalf of the attacker.

To protect against this, you can use a CSRF Protection library and custom tokens in your requests.

7. Man-in-the-middle (MITM) Attacks

A man-in-the-middle (MITM) attack occurs when the bad agent intercepts traffic between two parties to access private information.

An easy way to defend against MITM attacks is to ensure that your connections are secure using SSL/TLS encryption.

Another option is enforcing client authentication - when both the user and the API request certificates from a trusted third party before exchanging data.

This stops MITM attacks from occurring because both parties have been validated by an authority figure, blocking unauthorized requests from getting through in between.

How to Protect your FinTech Business Against API Attacks

While these tips are helpful to cover some of the loopholes in API security, it’s nowhere near enough to provide a safe space for your customers.

Let's cover the building blocks of any API security strategy to empower you to tackle this issue systemically.

1. Zero in on Business Logic Flaws

Business logic flaws, the practice of abusing the legitimate functionalities of an API to reach a malicious goal, are the #1 security risk in apps and APIs.

This cluster of vulnerabilities is the most dangerous and the most difficult to detect.

Hackers might exploit a business logic flaw to access your API's back-end systems, leading to a data breach or other nefarious activity.

Some examples of business logic flaws include:

Hardcoded credentials: This involves storing usernames and passwords within the source code, making it easy for anyone to access login credentials.
Insecure direct object references: This occurs when an application identifies an object by its primary key rather than using an ID from an associated table, giving more context about the model being used.
Dynamic SQL statements: This entails using dynamic SQL queries to query databases or other back-end systems. Hackers can exploit it if your application uses dynamic SQL statements without first parameterizing all user input.
Loosely Defined Business Processes: Without proper security measures, anyone who knows how to act within the bounds of a loosely defined process can use it in a way unintended by developers to access sensitive information.

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2. Use Strong Authentication and Authorization Mechanisms

Authorization and authentication vulnerabilities took the top spots of the OWASP API Security Top 10 list, making them the most common types of API vulnerabilities.

That’s why enforcing robust authentication and authorization mechanisms should be a top priority for both traditional financial institutions and innovative FinTech startups alike.

Things like Basic Authentication (using the standard combination of a login and password to authenticate users) and hardcoded credentials should be banished from your APIs - forever.

Instead, use OAuth or OpenID to validate the identity of your users and add an extra layer of security with two-factor authentication (2FA) like Google Authenticator to drastically reduce the likelihood of a successful API attack.

SMS forms of 2FA can be used in a pinch, but it’s not very secure as it’s easy to bypass.

As an added benefit, proper authentication and authorization will keep your FinTech business safe from identity thieves looking to gain access using social engineering.

3. Keep Your Data Separate & Safe

Many applications make it easy for hackers to find and steal data because they keep everything together in one extensive database rather than segregating sensitive data into different entities.

That means a hacker only has to compromise one database to get access to all of your data.

It's a lot easier to secure a system if you can compartmentalize different parts – for example, if you have an account management app and a banking app, make sure they're entirely separate.

Restricting access to sensitive information is one of the best things you can do to protect your API from being hacked, which entails creating security groups with limited permissions on what they are allowed to see based on their job functions.

Lastly, whenever possible, make sure only trusted APIs can access your APIs so that you know who's behind API requests and to make it easy to flag suspicious activity for an audit.

4. Enforce the Secure Socket Layer (SSL) Encryption Security Protocol

SSL communication adds another layer of security by ensuring no unauthorized third parties can read communication - even if it's intercepted.

Your customer will first connect to a server controlled by you, which uses a certificate to synchronize a secret key with your customer's browser.

This means that all communication is encrypted, and no one can hijack data in transit.

There's also HTTPS encryption, which makes sure that any information sent between your site and customers is encrypted as well as authenticated using SSL certificates.

5. Invest in Cyber Security Training for Employees

Employees should be educated on how to identify an API attack and what steps they can take to prevent one from happening.

Ensure that your employees are aware of the dangers of API attacks and how to protect themselves.

This could be something as easy as flagging any suspicious activity for a security audit or removing compromised accounts from your system immediately.

Another great way to prepare is to implement cybersecurity tabletop exercises that include the most common API scenarios.

They should also be aware of the consequences of a successful API attack. This way, they'll know what to do if or when an API attack occurs.

6. Have a Contingency Plan in Place in Case of an Attack

But even with all this protection, you still need to remember that no matter how many firewalls and authentication procedures you have in place, API attacks are almost impossible to safeguard yourself against completely.

This means it's also important to know what needs to be done when an attack does occur immediately to mitigate the damage caused to your organization.

It can be something as simple as notifying your customers that their login credentials have been compromised to help them take proactive steps until it's too late.

As FinTech continues to gain popularity, the threat of API attacks will only grow unless businesses take steps like these necessary to keep themselves safe from hackers who want access to their data.

7 Use API Security Testing Solutions to Ensure Full Coverage

API security is a critical issue for the financial services industry. As we have seen from the news, API breaches can have severe consequences for consumers, businesses, and third-party providers.

To ensure the safety of your data, it is vital to take steps to protect your APIs from hackers.

Using automated API security platforms can make all the difference in protecting your business from data breaches and other cyber threats, allowing your to ensure continuous and comprehensive API security testing around the clock for a fraction of the cost of hiring a cybersecurity specialist.

APIsec is one of the best API security testing solutions available on the market.

While this claim might be a bit biased (only slightly), here's what separates APIsec from everybody else:

On top of continuously monitoring your APIs across a massive list of known vulnerabilities, our AI-based platform is the only solution that can automatically write and execute thousands of test cases generated based on the unique architecture of your APIs.

If you are in the financial industry, APIsec is your best choice for API security.

For more information on the benefits of using APIsec to secure your APIs, reach out to our team today for a free vulnerability assessment.

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FAQs

1. What is HTTP verb tampering, and why is it a risk for APIs?‍

HTTP verb tampering manipulates request methods (GET, POST, PUT, DELETE) to bypass validation or authorization rules, which aligns with the risks described in the HTTP verb tampering analysis. APIs that don’t enforce method-specific logic may reveal data or perform unintended actions.

2. How do insecure default HTTP verb configurations expose APIs to attacks?‍

APIs that automatically accept unused or unvalidated verbs allow attackers to trigger hidden behaviors, which is explained through misconfiguration patterns in the HTTP verb tampering breakdown. Misconfigured servers often accept methods developers never intended to expose.

3. What are common methods attackers use to exploit HTTP verb tampering vulnerabilities?‍

Attackers swap verbs (e.g., using PUT instead of POST), send method overrides, or probe for undocumented verbs to bypass access controls and retrieve or modify protected data.

4. How can automated API security testing detect and prevent HTTP verb tampering?‍

Automated testing evaluates every supported verb, checks method-specific permissions, and flags endpoints that respond incorrectly to alternate or unexpected verbs, which can be fully covered through a continuous API security testing platform.

5. What best practices can developers follow to secure HTTP verbs in API endpoints?‍

Developers should explicitly allow only required verbs, validate method-specific behaviors, and enforce consistent authorization across all supported methods.

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