Securing Banking APIs with Business Observability

In today’s digital economy, Application Programming Interfaces (API) are the backbone of Open Banking. In Open Banking where sharing of data with third-party solutions, payment gateways, customers etc. is key, by providing seamless connection APIs have redefined how Banks operate. With APIs, errors and delays caused by manual interventions have reduced making the Banks more efficient. Added to this, the most important advantage of interoperability that API brings, Banks are able to deliver a wide range of financial services from partners services / solutions faster and seamlessly to its customers. Customers can now manage their financial needs easily from a single platform providing total visibility and confidence.

Whilst APIs provide numerous benefits to Banks, their use increases security challenges for Banks as these APIs expose critical data and services to external parties. However, they may be misused when their customers or external parties share them with another party. Additionally given that sensitive data is shared, they become prime targets for fraudsters and cyber criminals.

Without proper monitoring and protection, APIs can serve as entry points for data breaches, fraud and service disruptions. The severity of these breaches is always high as it leads to theft of sensitive customer personal information, payment or credit card details, account information, Aadhaar/Identification number, login credentials or access to Bank’s systems. With access to such data, fraudsters can execute fraudulent transactions, causing Banks to incur huge financial loss due to penalties for non-compliance by the RBI, revenue loss and most importantly loss of customer trust and reputational damage.

Causes of Data Breaches and Frauds in APIs

The primary cause of data breaches and frauds is the exploitation of API vulnerabilities. Some of the most common vulnerabilities include:

• Weak Authentication & Authorization – Poorly implemented security measures allow unauthorized access.
  
  
• Insecure API Gateways & Poor Security Practices – Misconfigurations and weak enforcement expose sensitive data.
  
  
• Weak API Keys & Human Errors – Easily compromised credentials lead to unauthorized access.
  
  
• Insecure Data Handling & Weak Encryption – Lack of strong encryption for data shared via APIs increases risks.
  
  
• Third-Party Vulnerabilities – APIs connected to external services inherit security risks.
  
  
• Lack of Security in Mobile & Web Apps – Exposed APIs in applications can be exploited if not secured properly.
  
  
• Insecure API Development Practices – Poor coding and security flaws create exploitable loopholes.

Banks are often unaware of breaches due to poor API governance and monitoring. This makes them slow to respond, allowing attackers to exploit vulnerabilities before action is taken.

As banks expand API usage for digital transactions, open banking, and third-party integrations, the risks increase exponentially. A multi-layered security approach is essential to ensure safe and secure API usage.

Ensuring Safe Usage of APIs for Banks

To safeguard APIs exposed by banks and mitigate threats, the following best practices should be implemented:

• Adopt OAuth 2.0 and strong authentication mechanisms for API security.
  
  
• Restrict API usage with quotas and allow access only from approved IPs.
  
  
• Enforce RBAC, ABAC, and least privilege access to control permissions.
  
  
• Monitor API traffic to detect anomalies, abuse patterns, and potential threats.
  
  
• Encrypt data in transit and at rest using strong encryption standards.
  
  
• Regularly patch vulnerabilities and update security policies.
• Conduct penetration testing and security audits to identify weaknesses.
  
  
• Educate customers, employees, and external parties on cyber threats.
  
  
• Establish rapid incident response and recovery mechanisms.

Beyond these fundamental security measures, a real-time API Observability solution can further protect and govern APIs by providing insights into usage patterns, enforcing policy compliance and ensuring accountability through audit trails and access insights.

Enhance API security with vuSmartMaps™

VuNet’s Business Observability platform, vuSmartMaps™ delivers API observability providing comprehensive visibility into the performance, availability and safety of APIs in real-time. With vuSmartMaps™, banks can proactively safeguard their APIs, ensuring policy compliance, controlled access, and risk mitigation—all while delivering a secure and seamless digital experience for customers. Here’s how:

1. Ingest API metrics, logs and traces from multiple API gateways

• Ingest heterogenous API metadata and logs in real-time (timestamps, endpoints, request method, status codes, request volume, IP address, geo-location, user information, user device info and response status) from API gateways.
  
  
• With OTel, fetch raw RED metrics (Rate, Error and Duration data of APIs) from trace data to gain critical insights into API health and performance.
  
  
• Seamlessly integrate with API gateways (such as AWS API Gateway, Apigee, Kong, Azure API Management etc.) with pre-packaged Observability Sources (O11ySources) available in VuNet’s platform.

2. Transform API Data for insights into their performance

• Stream API data into vuSmartMapsTM data pipeline for enrichment using platform’s domain-specific adaptors.

• Correlate API data with transaction logs acquired from downstream systems such as payment switch, CRM or CBS etc. to

• • Detect mismatched or unauthorized requests
  • Requests bypassing the API gateway
  • Missing or malformed auth tokens
  • Compare against allowlists

3. AI-Powered Anomaly Detection for Fraud Prevention

• The platform’s MLOps engine analyses the API data and delivers intelligent insights into API performance with alert correlation, anomaly detection, automated RCA, predictive API failures and fraudulent API behaviours. Examples include
  
  
  • Unusual transaction volumes
  • Multiple failed authentication attempts
  • Unusual API response times
  • New access locations or devices

4. Real-Time Alerts for Suspicious API Activity

• Trigger automated alerts with pre-defined and programmable threshold alerts, when security anomalies are detected. Examples include – access requests from blacklists, access attempts direct to backend services or old endpoints etc.
  
  
• With compound alerts reducing alert noise, focus on priority alerts and act instantly.
  
  
• Notify security teams of unauthorized API access in real-time, helping prevent breaches before they escalate.

5. Security Dashboards for Continuous Monitoring

• Visualize API security trends, fraud attempts, and risk assessments in interactive dashboards delivered in real-time.
  
  
• Gain a comprehensive view of API performance and security with business metrics (such as API response times, error rates, throughput etc.), storyboards and detailed reports.
  
  
• Role-based access to insights and share with external parties.
  
  
• Seamlessly integrate with incident management tools for remediation.

Fig 1: Sample dashboard showing API insights

6. Pre-launch API testing to identify weak points and minimize risks

• Track API behavior to identify anomalies, errors, or usage spikes.
  
  
• Simulate edge cases to test API performance under stress.
  
  
• Validate security controls such as authentication and authorization.
  
  
• Continuous testing against evolving policies during API development.

By implementing vuSmartMaps™, banks can protect and add an additional layer of security of APIs by monitoring usage in real time, preventing fraud, ensuring adherence to access policies, and minimizing financial risks—thereby delivering a secure and compliant digital banking experience.

Want to see vuSmartMaps™ in action? Request a tailored walkthrough of how the platform can safeguard your APIs.