Many of us use innovative products like Mint, Currensea, or Venmo without realizing they are built on Open Banking APIs. But what exactly is driving this trend, and what are the implications for consumers and financial institutions?
What’s Driving Open Banking?
Open banking is a movement fueled by regulatory changes, rapid advancements in financial technology, and consumer demand for greater control over their data. Regulations are compelling traditional financial institutions to open access to their customer data to third parties via APIs. This shift is both a significant threat and a substantial opportunity for traditional banks. Fintech companies, leveraging this access, are creating new and innovative products, offering consumers more choices than ever before.
How Open Banking Works
In traditional banking, customer data is tightly controlled by the parent bank. Open Banking changes this control by securely exposing customer data to Third Party Providers (TPPs) via APIs, but only with the customer’s consent.
The Security Challenge
Gartner predicted that by 2022, API attacks would become the most frequent attack vector, causing data breaches for enterprise web applications. The challenge of API security requires comprehensive threat coverage, easy integration, and complete visibility for both documented and undocumented APIs. By 2026, more than 30% of the increase in demand for APIs will come from AI and tools using large language models (LLMs).
Potential Risks of Open Banking APIs
Before Open Banking, many fintech providers used screen-scraping to access customer data, including user credentials, often without the parent bank’s knowledge. Open Banking APIs aim to streamline the legal sharing of customer credentials and information through APIs, consent, and regulatory oversight. However, APIs also introduce risks such as service disruptions, trust issues, a broader attack surface, AI-assisted bot attacks, zero-day attacks, and data theft due to vulnerable or unprotected APIs.
Survey Insights
A recent survey by Radware, Application Security In A Multi-Cloud World 2023, found that organizations use an average of 15.9 third-party APIs in each of their web applications. Nearly all organizations (99%) make extensive use of third-party APIs, with 68.3% using more than 11 third-party APIs per web application. This dependence on third-party APIs can lead to unintended service disruptions if API services are unavailable due to security, network, or application configuration errors, DoS attacks, or infrastructure outages.
The Need for Robust API Security
Because threats vary, API security requires a combination of security controls, including:
- API access controls for authentication, authorization, and access management
- Protection against excessive permissions, entitlements, and malicious activity
- Prevention of bot attacks on APIs
- Detection and prevention of API manipulations
- Protection from distributed denial-of-service (DDoS) and availability attacks
- Protection from embedded attacks
- Protection from API vulnerabilities
- Prevention of PII data leakage and excessive data exposure
- Protection from fraud and phishing scams
- Client-side protections from compromised embedded third-party APIs
Limitations of Traditional API Gateways
Traditional API gateways often fall short in providing the comprehensive protection needed to address all these threats, leaving organizations exposed across one or more threat vectors. For an attack to be successful, it only needs to find the weakest line of defense. Therefore, financial institutions offering open banking services must ensure they implement quality, comprehensive protection for open APIs to safeguard against these varied and evolving threats.
Securing Open-Banking APIs with Radware
Comprehensive protection of open banking APIs requires a multilayered approach combining several technologies. Radware provides an integrated, comprehensive solution comprised of several components that deliver frictionless, multilayered protection against the wide array of threats on open banking APIs.
Radware’s application protection solution is designed to secure APIs from denial of service, application and bot attacks; protect APIs against vulnerabilities and manipulations, and prevent service disruptions while addressing trust and security concerns of customers migrating to a multi-cloud or hybrid deployment. For more details, visit Cybersecurity Solutions For Open Banking | Radware
Conclusion
Open Banking is transforming the financial landscape, offering both opportunities and challenges. As we embrace these innovations, it’s crucial to address the security concerns to protect consumer data and maintain trust in these new financial technologies.