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How to Implement Banking APIs Securely: 2025 Practical Guide

  • Writer: WAU Marketing
    WAU Marketing
  • Jun 3
  • 5 min read

Api Bancaria

In 2023 alone, banking APIs processed over $57 billion in global transactions, proving their pivotal role in today’s financial ecosystem. These interfaces power everything from cloud-based services to microservices and IoT, enabling seamless integration between economic systems. However, APIs can expose highly sensitive financial, personal, and even medical data without proper protection.


In this article, we’ll explore a banking API, how it connects to a core banking system, and best practices for securely implementing APIs for transfers and reconciliations. With growing threats like broken object-level authorization (BOLA), institutions must apply standards like OAuth 2.0 to safeguard sensitive data.


This 2025 guide covers the technical fundamentals, continuous monitoring, and regulatory requirements, especially those mandating that customer data is shared only with explicit consent. At WAU, we’re experts in this field and can help you transform your Core Banking System and APIs securely and efficiently. Visit us at www.wau.com.


What is a Banking API and How Does It Connect to the Core?


A banking API is a technology interface that allows financial institutions to expose core functions—such as payments, account management, or data exchange—to external partners. It acts as a bridge between developers and banking systems.


The core banking system is the heart of daily transaction processing. When an API connects to the core, it enables:

  • Real-time access to financial data

  • Secure transaction initiation from external apps

  • Identity verification and user authentication

  • Compliance monitoring


This secure connection relies on specialized integrations that preserve data integrity. Europe’s open banking market reached $6.14 billion in 2020 and is projected to hit $48.3 billion by 2030, with a 23.18% annual growth rate—underscoring the critical importance of these technologies.


Image Source: DashDevs



Why API Security Is Essential in Finance


APIs handle sensitive financial information, making them a top target for cyberattacks. Financial services ranked as the third most attacked sector in EMEA, facing nearly 10% of all API and web app attacks between January 2022 and June 2023.


Key security controls include:

  • Multi-factor authentication (MFA)

  • Strong encryption for data in transit and at rest

  • Role-based access control (RBAC)

  • Real-time monitoring and anomaly detection


Regulations like PSD2 in the EU enforce secure API usage, requiring strong authentication and open yet safe communications. Secure APIs are not just a tech requirement—they’re essential to earning customer trust and staying compliant.


The Most Common API Security Risks


1. Code Injection & Poor Input Validation


When attackers inject malicious code into an API request, they exploit weak input validation to manipulate backend systems. SQL injection and cross-site scripting (XSS) are the most common forms.

To counter this, financial APIs must implement strict validation rules that reject invalid or unexpected input before it reaches core systems.


2. Lack of Encryption


Unencrypted data transmissions are among the most dangerous vulnerabilities. Man-in-the-middle attacks can expose:

  • Personally identifiable information (PII)

  • Bank account numbers and transaction history

  • Core banking credentials


Protocols like TLS with 128-bit encryption should be standard, and all sensitive data must be encrypted both in transit and at rest.


3. Misconfigured Endpoints


APIs with default settings, overly permissive CORS policies, or improper HTTP headers invite exploitation. Exposed endpoints are gateways for unauthorized access, brute-force attacks, or logic abuse, which is especially dangerous in reconciliation APIs.


Alarmingly, 59.2% of organizations allow write access to at least half of their APIs, significantly increasing the attack surface.



Secure-by-Design APIs: Building Security into the Lifecycle


Security should be embedded from the start, not bolted on later.



Image Source: Medium


Secure SDLC Practices


Transform your development lifecycle (SDLC) into a Secure SDLC (SSDLC) by:

  • Defining security requirements during planning

  • Conducting secure code reviews

  • Using static code analysis (SAST)

  • Managing secrets securely (e.g., key vaults)


Fixing vulnerabilities early is up to 100x cheaper than fixing them in production.


Automated Testing in CI/CD


Integrate automated tests into your CI/CD pipeline to detect vulnerabilities in real-time, including:

  • Unit and integration tests

  • Dynamic security testing (DAST)

  • Fuzz testing


Organizations using automated testing detect 61% more vulnerabilities than those relying on manual checks.


Documentation and Version Control


Use tools like OpenAPI to maintain up-to-date documentation. Clear documentation ensures secure API consumption and smooth collaboration.


Version control is also critical. Ensure backward compatibility, clearly communicate breaking changes, and support secure version deprecation.


Essential Technical Controls for 2025


Image Source: Simform


Multi-Factor Authentication + OAuth 2.0


Paired with OAuth 2.0, MFA is a gold standard for secure access control. OAuth uses tokens to prevent direct credential sharing and includes:

  • Client app

  • Resource owner

  • Authorization server

  • Resource server


It allows granular access control and token revocation without affecting the entire system.


Role-Based Access Control (RBAC)


RBAC ensures users only access the data they need. Benefits include:

  • Smaller attack surface

  • Easier audit trails

  • Scalable permission management


By 2025, advanced RBAC will offer row/column-level access filtering for increased precision.


Rate Limiting and DoS Protection


Limit how many API requests each user can make per minute. Adaptive algorithms adjust thresholds dynamically and help:

  • Prevent abuse

  • Detect anomalies

  • Protect server performance


This is especially vital for reconciliation APIs involving large transaction data volumes.


Monitoring, Detection & Threat Response


Behavior Analytics


Machine learning helps detect behavioral anomalies in real time. For example:

  • Autoencoders identify out-of-pattern transactions

  • Traffic analysis monitors baseline behaviors

Used by central banks and regulators to detect fraud and liquidity risks.


Shadow and Zombie API Detection


  • Shadow APIs: undocumented or partially hidden interfaces

  • Zombie APIs: outdated endpoints are still accessible


These pose significant risks. To uncover hidden APIs, scan source code, inspect network traffic, and use discovery tools.


Real-Time Alerts and Automated Response


Adequate API security includes:

  • Instant alerts on suspicious activity

  • Automated incident response

  • Correlated logs to reduce false positives


Early detection drastically reduces exposure time and potential impact.


Governance and Compliance Checklist


OWASP API Top 10


Top risks in the 2023 OWASP API Security list include:

  • BOLA (Broken Object-Level Authorization)

  • Broken authentication

  • Unrestricted resource consumption


Institutions must conduct continuous assessments and automated tests aligned with OWASP to stay compliant and protect core systems.


Internal and External Audits


Regular audits are essential. SWIFT and PSD2 both mandate them.


Audits should verify:

  • Vulnerability scan consistency

  • Proper system isolation

  • Password and access policy enforcement


A data breach can result in significant financial losses and reputational damage.


Credential and Secret Management


  • Store secrets in encrypted vaults (e.g., Azure Key Vault)

  • Rotate tokens frequently

  • Enforce least privilege access


Automated credential rotation and regular permission reviews reduce unauthorized access risk.


Conclusion


Banking APIs are foundational to digital finance, but their benefits come with responsibilities. Secure design, ongoing monitoring, and strict governance are no longer optional—they’re essential.


WAU helps banks and fintechs implement secure, scalable APIs tailored to their regulatory and operational needs. We bring technical expertise, industry best practices, and a commitment to data protection.


Ready to secure your core banking APIs? Contact WAU today.


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