API Security 101: Why Open Banking and Connected Apps Are the New Attack Surface

APIs are the connective tissue behind open banking, mobile apps, and third-party integrations, which makes them an increasingly attractive target for attackers.

7/21/20264 min read

API Security 101: Why Open Banking and Connected Apps Are the New Attack Surface

Quick answer: APIs are the connective tissue behind open banking, mobile apps, and third-party integrations, which makes them an increasingly attractive target for attackers. Strong API security requires authenticating and authorizing every request, rate-limiting to prevent abuse, validating all input data, encrypting data in transit, and continuously monitoring API traffic for unusual patterns that could indicate an attack in progress.

Modern applications rarely function as a single, self-contained system. Instead, they connect to dozens of external services through APIs — payment processors, identity verification tools, banking data providers, and more. This connectivity powers convenient customer experiences like open banking, but it also creates a rapidly expanding attack surface that many organizations haven't fully secured.

As API adoption accelerates, especially in financial services, understanding the fundamentals of API security has become essential for any business exposing data or functionality through these interfaces.

Why APIs Have Become a Prime Target

Unlike traditional web applications with a single user-facing interface, APIs often expose direct access to underlying data and business logic, making a successful attack potentially far more damaging.

Open banking regulations have specifically driven a surge in financial APIs, connecting banks, fintech apps, and payment processors, which means a vulnerability in one API can potentially expose sensitive financial data across an entire connected ecosystem.

Many APIs are also built and deployed quickly to support rapid product development, sometimes without the same level of security review applied to more visible, customer-facing applications.

Common API Security Vulnerabilities

Broken Authentication

Weak or improperly implemented authentication allows attackers to impersonate legitimate users or gain unauthorized access to API endpoints.

Excessive Data Exposure

APIs that return more data than a specific request actually requires can inadvertently expose sensitive information, relying on the client application to filter what's displayed rather than restricting it at the source.

Lack of Rate Limiting

Without proper rate limiting, attackers can send excessive requests to brute-force credentials, scrape data, or overwhelm systems with traffic.

Broken Object-Level Authorization

This occurs when an API fails to properly verify that a user is authorized to access a specific piece of data, allowing attackers to access other users' information simply by modifying request parameters.

Insufficient Input Validation

APIs that don't properly validate incoming data are vulnerable to injection attacks and other exploits that can compromise the underlying system.

Best Practices for API Security

Authenticate and Authorize Every Request

Every API call should verify both who is making the request and whether they're specifically authorized for that exact action or data, not just a general system-level check.

Implement Strong Rate Limiting

Setting reasonable limits on how many requests a user or application can make within a given time period helps prevent abuse and reduces the impact of automated attacks.

Validate and Sanitize All Input

Every piece of data received through an API should be validated against expected formats and sanitized before processing, preventing injection-based attacks.

Encrypt Data in Transit

All API traffic should use strong encryption to protect data as it moves between systems, preventing interception even if network traffic is compromised.

Apply the Principle of Least Data Exposure

APIs should return only the specific data fields required for a given request, rather than exposing complete data objects and relying on the client to filter results.

Monitor API Traffic Continuously

Real-time monitoring can detect unusual traffic patterns, such as a sudden spike in requests or access attempts from unexpected locations, that may indicate an active attack.

API Security in Open Banking Specifically

Open banking APIs connect sensitive financial data across multiple institutions and third-party applications, which means a security gap in any single participant can have ripple effects across the broader ecosystem.

Financial institutions are increasingly required to meet specific regulatory standards for API security, including strong customer authentication and detailed audit logging, reflecting the heightened risk associated with this category of data.

Building an API Security Testing Program

Regular, dedicated API security testing should be treated as distinct from general application security testing, since APIs have unique vulnerability patterns that generic web application scanners can miss.

  • Maintain a complete, up-to-date inventory of every API endpoint, including those used internally or by third parties

  • Conduct regular penetration testing specifically targeting API authentication and authorization logic

  • Review API documentation for accuracy, since outdated documentation can obscure undocumented or forgotten endpoints

  • Test for broken object-level authorization specifically, since it remains one of the most common and damaging API vulnerabilities

Vendor and Third-Party API Risk

Every third-party API integration introduces risk that extends beyond your own infrastructure, since a vulnerability in a partner's API can potentially expose data you've shared with them.

Vetting third-party API providers for their own security practices, and limiting the scope of data shared to only what's necessary for the integration to function, helps contain this risk.

Frequently Asked Questions

Are APIs inherently less secure than traditional web applications?

Not inherently, but they often expose more direct access to data and business logic, which means security gaps can have a larger impact if not properly addressed.

What is API rate limiting, and why does it matter?

Rate limiting restricts how many requests a user or system can make in a given time period, helping prevent abuse, brute-force attacks, and denial-of-service scenarios.

Do small businesses using third-party APIs need to worry about API security?

Yes. Even if you're not building the API yourself, how you authenticate, store, and handle data from third-party APIs directly affects your overall security posture.

What regulatory standards apply to open banking APIs?

Requirements vary by region, but many jurisdictions mandate strong customer authentication, detailed logging, and specific security certifications for institutions participating in open banking ecosystems.

Final Thoughts

As APIs become the primary way applications and financial systems connect, securing them properly is no longer optional — it's foundational. Businesses that treat API security with the same rigor as their customer-facing applications are far better protected against this rapidly growing attack surface.

Ashsoft IT Solutions conducts API security assessments and helps businesses implement authentication, monitoring, and data protection standards that keep connected systems secure without slowing down integration and development.


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