Partner Content Open banking has revolutionized financial services, empowering consumers to share their financial data with third-party providers, including fintech innovators.

This collaborative ecosystem has unlocked numerous benefits: simplified account switching, tailored financial advice, and expanded access to credit and other financial products. By opening up previously siloed data, financial institutions are creating richer, more personalized experiences for their customers.

Yet, this connectivity also comes with significant risks. As sensitive data flows through a growing network of APIs, the threat landscape expands, challenging financial institutions to secure their ecosystems against emerging vulnerabilities.

APIs are the backbone of open banking, enabling seamless data exchange across platforms. However, their widespread use also makes them a prime target for cyberattacks. In the Asia-Pacific region, incidents involving APIs are increasing at an alarming rate, underscoring the need for robust security measures.

Common API vulnerabilities include:

– Broken object-level authorization: Failing to validate user permissions can allow attackers to access, manipulate, or delete sensitive data. For example, an Indian fintech suffered a breach where attackers accessed customer loan records by exploiting weak authorization protocols.

– Weak user authentication: Poor authentication mechanisms can enable unauthorized access. In one Southeast Asian payment gateway breach, attackers bypassed weak API authentication to expose sensitive payment data.

– Injection attacks: Malicious code injected into APIs can lead to data breaches, system corruption, or unauthorized access. A global bank in Singapore faced significant losses when attackers used SQL injection to extract customer account data.

– Excessive data exposure: APIs often return more data than necessary, inadvertently exposing sensitive information. An Australian bank revealed partial credit card numbers in and – improperly designed API used for customer support.

By addressing these vulnerabilities through secure coding practices, regular testing, and robust API management, financial institutions can strengthen their defenses and ensure the integrity of their open banking ecosystems.

The supply chain problem in open banking

Modern API ecosystems are vast, spanning on-premise and cloud environments, and often involving thousands of interconnected APIs. Banks now regularly connect to hundreds of third-party providers, ranging from fintech startups to established financial platforms. Each of these connections represents a potential vulnerability, as the security of the ecosystem is only as strong as its weakest link.

Ensuring the security of these third parties is a significant challenge. Verizon’s most recent Data Breach Investigation Report (DBIR), published in early 2024, found that 15 percent of data breaches in the APAC region in 2023 involved a third party, including data custodians, third-party software vulnerabilities, and other direct or indirect supply chain issues. That figure represents a 68 percent increase from the previous period described in the 2023 DBIR. Similarly, the FS-ISAC annual Global Intelligence Office report, Navigating Cyber 2024, highlighted the growing vulnerability of the financial services supply chain.

To understand the risks, consider these real-world scenarios: A financial institution suffered a breach due to a compromised supply chain partner with weak API security, exposing sensitive customer data. In another case, a vulnerability in third-party software enabled attackers to redirect transaction data and leak customer information. Shadow APIs, left undocumented and unsecured, have also become entry points for attackers to extract sensitive data. Similarly, inconsistent security standards and misconfigured APIs have exposed customer and transaction details in financial integrations. Lastly, inadequate zero-trust measures have allowed attackers lateral access to systems through compromised third-party providers, leading to significant operational and reputational damage.

Mitigating these challenges requires banks to establish rigorous processes for vetting third-party providers, enforce standardized security requirements through clear contracts, and continuously monitor third-party activity for anomalies. Periodic audits and penetration tests are essential to uncover vulnerabilities, while adopting a zero-trust approach ensures only verified entities access sensitive systems. By implementing these measures, banks can reduce supply chain risks and maintain compliance with increasingly stringent regulatory requirements in countries like India, Singapore, and Japan.

Strengthening API security in open banking

While the risks are substantial, financial institutions can implement robust strategies to secure their APIs and protect their ecosystems:

– Authentication and authorization: Enforce multi-factor authentication (MFA) and object-level authorization to validate every API request. These measures ensure that only authorized users and systems access sensitive data.

– Mitigating injection attacks: Deploy input validation mechanisms to prevent malicious code from exploiting APIs. Regular security testing can help identify and fix vulnerabilities early.

– Minimizing data exposure: Filter and validate API responses to ensure only essential information is shared. Schema validation can further reduce exposure by limiting the data returned.

– Comprehensive API management: Use API management platforms to catalog and monitor APIs, including shadow and third-party endpoints. These platforms provide centralized visibility and enforce security standards across the supply chain.

– Adopting Zero-Trust architecture: Implement a zero-trust model to continuously verify the identity and permissions of all entities accessing the network. This enforces least-privilege access policies, minimizing exposure to unauthorized users.

Balancing innovation and security

Open banking is reshaping the financial services landscape, offering unprecedented opportunities for growth and personalization. Nowhere is this transformation more evident than in the Asia-Pacific region, where open banking has driven financial inclusion, fostered innovation, and strengthened collaboration between traditional banks and fintech disruptors.

In countries like Singapore, India, and Australia, open banking has enabled underserved populations to access financial services more easily, bridging gaps in credit availability and empowering individuals with tools for better financial management. Fintechs and startups, leveraging open banking frameworks, have introduced innovative products tailored to local markets, such as microloans, real-time payment solutions, and AI-powered wealth management tools. For banks, open banking has created new revenue streams, improved customer retention, and reinforced their relevance in an increasingly digital world.

However, the full potential of open banking can only be realized with a commitment to robust API security. Financial institutions must adopt proactive measures to address vulnerabilities, comply with evolving regulations, and maintain customer trust.

Security is not a barrier to innovation but a foundation for sustainable growth. By prioritizing API security, financial institutions in the Asia-Pacific region can confidently embrace the transformative potential of open banking, continuing to drive innovation while safeguarding their customers and ecosystems.

Contributed by F5.