API-driven financial services face critical security challenges in today’s interconnected world. This article presents essential strategies to address key risks in securing these vital systems. Drawing on insights from industry experts, it offers practical approaches to enhance API security and protect sensitive financial data.

  • Implement Rule Engine for Fraud Detection
  • Secure Multi-System Communication with Encryption
  • Discover and Protect Shadow APIs
  • Enhance Authentication with Multi-Layered Security
  • Automate Token Lifecycle Management
  • Ensure Compliance with Data Privacy Regulations
  • Implement Defense in Depth for APIs
  • Enforce Strict Server-Side Authorization
  • Mitigate Token Sprawl with Least-Privilege Access
  • Prioritize Advanced Authentication in API Gateways
  • Strengthen Auth Token Lifecycle Management
  • Rotate Short-Lived Tokens Automatically

Implement Rule Engine for Fraud Detection

One of the biggest security challenges I encountered in a fintech startup was fraud detection. While analyzing logs, we noticed unusual behavior from a few users in the production environment. Since this was happening live, we had to act quickly. Our first step was to improve logging and monitoring, which gave us deeper insights but also resulted in many false positives and lacked overall user context. To address this, we introduced a rule engine that analyzed each transaction within the broader context of the user’s activity and allowed comparisons with the behavior of other users. Over time, as we collected more data, we refined this system further by incorporating historical statistics, which significantly improved accuracy and reduced false positives.

Sebastian DruciakSebastian Druciak
Java Developer, Pragmatic Coders

Secure Multi-System Communication with Encryption

One of the most critical security considerations we’ve encountered with API-driven financial services is ensuring the protection of sensitive payment and customer data during every stage of a transaction. Because our platform processes supplier payments via credit card, we knew from the outset that maintaining compliance with PCI DSS standards and implementing strong encryption was non-negotiable. Beyond the basics, the challenge lies in securing the communication between multiple systems — card networks, banks, and accounting software — without creating friction for the end user.

To mitigate these risks, we designed Lessn’s architecture with security woven in from the ground up. All data transmitted through our APIs is protected with end-to-end encryption, tokenization of card details, and multi-layered authentication for both partners and users. We also conduct regular third-party penetration testing and security audits to identify vulnerabilities before they can be exploited. This approach allows us to maintain the speed and convenience businesses expect, while ensuring their financial data remains safe and compliant.

David GrossmanDavid Grossman
Founder & Chief Growth Officer, Lessn

Discover and Protect Shadow APIs

As cybersecurity consultants, our job is to identify issues around web apps, underlying/associated APIs, and API gateways in financial and fintech organizations. One of the most critical API security issues we’ve encountered with financial services clients is “shadow APIs,” i.e., undocumented APIs that developers create for internal use but forget to secure or even document properly. These often handle sensitive financial data without proper authentication or logging, creating massive compliance gaps.

In this case, the challenge isn’t just technical; it’s organizational as firms have no complete inventory of their deployed API versions, making it impossible to secure what they don’t know exists. The breakthrough came from leveraging existing Web Application Firewall (WAF) capabilities that financial organizations already have, rather than purchasing expensive API discovery platforms. Most organizations already have WAF solutions like Cloudflare that can identify API endpoints through application layer traffic analysis, essentially turning their current security infrastructure into an API discovery engine. You can define workers at the WAF level for this purpose.

The practical solution involved three steps:

1. Using existing WAF analytics to map actual API traffic versus documented endpoints

2. Implementing input validation rules directly in the WAF to prevent mass assignment attacks where attackers manipulate input values by adding restricted fields to requests

3. Establishing rate limiting and request filtering based on API sensitivity using existing WAF policies

We had a situation where a client discovered 8 undocumented APIs handling external provider-linked data. We supported this customer by helping them extend their existing WAF engine rather than rebuilding application code from scratch.

The harsh reality is that financial services often focus on securing the APIs they know about, while completely missing the ones developers create informally. Your existing WAF likely contains several application security logging and monitoring tools needed to discover and protect shadow APIs, but only if you shift from “document first, secure later” to “discover everything, then prioritize protection.”

Harman SinghHarman Singh
Director, Cyphere

Enhance Authentication with Multi-Layered Security

When working with API-driven financial services, one of the most critical security considerations encountered is the risk of unauthorized access through compromised API keys or poorly implemented authentication. In one project involving high-volume payment processing, the potential for credential theft and man-in-the-middle attacks was significant.

To mitigate this, multi-layered security was implemented — rotating API keys frequently, enforcing mutual TLS for encrypted communication, and integrating OAuth 2.0 with granular scopes to ensure each key had the minimum necessary permissions. Additionally, real-time anomaly detection was set up to flag suspicious activity, allowing for rapid response. This proactive combination of authentication hardening, encryption, and continuous monitoring significantly reduced the attack surface while maintaining the system’s performance and reliability.

Anupa RongalaAnupa Rongala
CEO, Invensis Technologies

Automate Token Lifecycle Management

I’ve seen how API security becomes critical when integrating multiple financial systems. We handle sensitive financial data across dozens of integrations — from QuickBooks to payroll systems — so API authentication failures can expose everything from bank reconciliations to payroll data.

The biggest risk I encountered was with token expiration and refresh cycles. We had a client whose accounting software API tokens weren’t rotating properly, creating a window where expired tokens were still accepting requests but logging them incorrectly. This meant financial transactions were being recorded in staging environments instead of production systems.

We immediately implemented automated token lifecycle management and added real-time monitoring dashboards. Every API call now gets logged with environment verification, and we set up alerts for any token that’s within 48 hours of expiration. The monitoring catches discrepancies within minutes instead of during month-end reconciliation.

The fix cost about $3K in development time, but catching phantom transactions early saved our client from a potential $50K discrepancy that would have surfaced during their Series A due diligence. When your financial data feeds investor reports and board presentations, API security isn’t just about preventing breaches — it’s about maintaining data integrity that can make or break funding rounds.

Maurina VenturelliMaurina Venturelli
Head of Gtm, OpStart

Ensure Compliance with Data Privacy Regulations

The biggest security hurdle we have faced when designing APIs for our financial service solutions has been ensuring airtight compliance with data privacy regulations like CCPA and GDPR. This process begins with protecting sensitive financial payloads both in transit and at rest. In our recent paytech software project, we implemented TLS 1.3 with forward secrecy for data in motion and layered encryption for stored payloads to balance security with high transaction performance. We also encrypted the entire API response body (not just sensitive fields) to eliminate the risk of partial data leaks during transmission.

Identity and access management was equally critical. We integrated our authentication and authorization flows with Okta to adhere to industry-standard protocols like OAuth 2.0 and OpenID Connect. The integration allowed us to enforce multi-factor authentication, adaptive risk-based access, and centralized role-based controls. Together, these measures dramatically reduced the attack surface.

Mary ZayatsMary Zayats
Head of Technology and Competence Coe, ScienceSoft

Implement Defense in Depth for APIs

After 17 years in IT and a decade specializing in cybersecurity, I’ve seen countless API vulnerabilities, but the scariest was during a HIPAA compliance audit for a medical client. Their payment processing API was transmitting patient billing data without proper endpoint authentication – basically, anyone with the right URL could access sensitive financial records.

The real kicker was their third-party payment processor was caching transaction data for “performance optimization” without encryption at rest. We found this during our penetration testing partnership, where thousands of patient payment records were sitting exposed in temporary storage for up to 72 hours.

We immediately implemented certificate pinning and mutual TLS authentication between their systems and the payment gateway. Every API call now requires both client certificates and server validation, plus we set up real-time monitoring through our EDR systems to flag any unusual API traffic patterns.

The lesson from our regulatory compliance work: financial APIs need defense in depth, not just token validation. We now mandate encrypted data transmission AND storage for any client handling payment data, because PCI compliance isn’t optional when your business license depends on it.

Ryan MillerRyan Miller
Managing Partner, Sundance Networks

Enforce Strict Server-Side Authorization

From my experience working with API-driven financial services, the most critical security consideration is Broken Object Level Authorization (BOLA). I believe this is at the top of the list because a successful attack can be catastrophic. In a financial context, an attacker can simply change an account number in an API request and gain unauthorized access to another customer’s sensitive financial data, such as their account balance, transaction history, or even perform fraudulent transfers.

To mitigate this risk, we implemented a multi-layered approach centered on strict server-side authorization enforcement. My belief is that you can’t trust anything that comes from the client.

First, we ensured every single API request involving sensitive data was not only authenticated but rigorously authorized. We used an OAuth 2.0 authorization server to issue JSON Web Tokens (JWTs) that contained granular claims about a user’s access rights. For example, a token would explicitly state that a user is authorized to “read” their own “account:123,” but not “account:456.”

Second, and this is the most critical step, our API backend now performs a secondary, server-side validation. When a request comes in for a specific account, the system first retrieves the authenticated user’s ID from their secure JWT. It then uses this ID to query the database for all accounts legitimately associated with that user. The requested account ID from the API call is then cross-referenced against this retrieved list. If the account ID does not match the user’s authorized list, the request is immediately denied, even if the user is otherwise authenticated. This approach completely decouples the user’s access from any potentially tampered object ID in the request, ensuring they can only interact with objects they truly own. It’s a fundamental security principle that I believe is non-negotiable for protecting financial data.

Paul BakaPaul Baka
Director, SSLTrust

Mitigate Token Sprawl with Least-Privilege Access

One risk is token sprawl: over-scoped, long-lived API credentials leaking into tools, logs, and repositories.

We moved to short-lived, least-privilege tokens via OIDC, stored in a vault, automatically rotated, and bound to mTLS and IP allowlists.

We signed webhooks, enforced idempotency keys, and blocked replay attacks with nonce-timestamp checks and deny-by-default gateways.

Audit trails, hashed payload logs, and alerts on unusual scopes or volumes allow us to revoke access quickly.

Hillel ZafirHillel Zafir
CEO and Co-Founder, incentX

Prioritize Advanced Authentication in API Gateways

When working with API-driven financial services, robust authentication mechanisms have proven to be a critical security consideration in my experience. While evaluating API gateway solutions for our financial services platform, we discovered that standard authentication protocols were insufficient for the sensitive nature of financial data transactions. To mitigate this risk, we implemented a comprehensive technical evaluation process that prioritized gateways offering multi-factor authentication, fine-grained access controls, and advanced rate limiting capabilities.

We also conducted thorough security assessments of potential gateway solutions, ensuring they could integrate seamlessly with our existing containerized environment while maintaining strict security standards. This methodical approach allowed us to select and implement an API gateway that significantly reduced our vulnerability surface while maintaining the performance requirements essential for financial services operations.

George FironovGeorge Fironov
Co-Founder & CEO, Talmatic

Strengthen Auth Token Lifecycle Management

In my experience with APIs in financial services, we see that unauthorized access via poor auth token management is a major security issue. As APIs that expose sensitive client information and transaction features go live, we observe that weak auth token lifecycle management, which includes the use of long-term tokens and failure to properly revoke them, presents a significant opportunity for attackers.

To mitigate this risk, I implemented OAuth 2.0, which includes token expiration. We also incorporated multi-factor authentication (MFA) and restricted API access through IP whitelisting and role-based permissions. Additionally, I established continuous monitoring and automated alerts for abnormal API usage, which in turn identified and contained threats before they escalated.

Nathan BarzNathan Barz
Financial Advisor, Management Expert, SEO Founder and CEO, DocVA

Rotate Short-Lived Tokens Automatically

One critical security challenge I faced was API token management. In large, distributed teams, tokens were sometimes reused or stored insecurely, creating potential vulnerabilities. To mitigate this, we implemented short-lived tokens with automatic rotation, strict access scopes, and centralized monitoring. This way, even if a token was compromised, the attack surface remained minimal.

Irina TitovaIrina Titova
Head of Pmo It