Securing Open Banking: How Fintechs Can Defend Against Automated Fraud & API Abuse – Source: securityboulevard.com

Open Banking is transforming the way consumers manage their finances, but it’s also changing the way attackers operate. Every new API, login, and third-party integration introduces fresh opportunities, not just for innovation, but for abuse. 

While regulations like PSD2 and the CFPB’s 1033 rule are driving progress on consumer rights and data access, they also expose financial institutions to a wave of automated threats that legacy defenses were never built to handle.

Today’s fintechs are moving fast to deliver frictionless digital experiences. But they’re doing so under the pressure of regulatory scrutiny, thin margins, and evolving attack techniques. As a result, security teams are often left playing catch-up—especially those supporting modern architectures with limited in-house resources.

Understanding where Open Banking is most exposed

Nearly half of financial institutions—46%, according to a 2024 PYMNTS study—believe that the risks of Open Banking outweigh the benefits, largely due to concerns around fraud. That level of concern reflects the reality security teams are facing on the ground.

The move to Open Banking has shifted the perimeter. In the past, user authentication and fraud detection could live inside a single bank-owned app. Now, data flows across third-party apps, aggregators, and embedded finance platforms—many of which introduce new risk. Open Banking API call volumes are projected to surge 427% to 720 billion globally by 2025, dramatically expanding the attack surface. Meanwhile, nearly 60% of banks, fintechs, and credit unions experienced more than $500,000 in fraud losses last year, with a quarter reporting losses over $1 million.

Credential stuffing and account takeover

Credential stuffing is a persistent and damaging threat. Attackers test leaked usernames and passwords against login endpoints in bulk, hoping to hijack real accounts. It’s a low-cost, high-yield tactic, and Open Banking increases its potential surface: not only bank portals but budgeting apps, neobanks, and payment interfaces can all be targeted. A successful login often means access to linked accounts, stored payment credentials, and sensitive financial data.

Fake account creation and synthetic identities

Fraudsters are also taking advantage of rapid onboarding workflows by creating fake or synthetic accounts, at scale. These accounts are used to exploit promotions, funnel stolen funds, or establish a foothold for more complex fraud schemes. In an ecosystem that relies on trust and real-time decision-making, that’s a serious problem.

API abuse and scraping

Even when authentication flows are solid, the APIs behind them can become a liability. High-volume scraping, logic abuse, and application-layer DDoS attacks can all disrupt services or expose data. Aggregators, often connecting to multiple banks and fintechs, represent a uniquely attractive target: a compromise in one can cascade across many institutions.

Compliance is changing: why security teams need to act now

The EU’s PSD2 framework has forced banks to implement strong customer authentication and secure API protocols. But even in this more mature market, Open Banking attacks persist. In the U.S., where the CFPB’s 1033 rule is just beginning to take shape, the onus of security falls heavily on each provider. Industry standards like FDX offer guidance, but implementation varies widely.

That variability is where attackers thrive. Inconsistent authentication, poorly configured APIs, and limited bot detection can all open the door to fraud. And in a highly competitive landscape, a breach or service disruption can do more than hurt your bottom line—it can erode trust with users who are increasingly aware of data privacy and security risks.

A better defense for Open Banking ecosystems

To stay resilient, security teams need a modern threat posture that protects both the infrastructure powering Open Banking and the accounts operating within it. Our platform defends against over 4 billion threats annually across the web, applying the same intelligence fintechs need to protect every login, session, and exposed endpoint. That means going beyond firewalls and static controls to actively detect and mitigate abuse in real time.

This is where multi-layered, AI-powered protection makes the difference. At the edge, purpose-built bot protection can intercept automated threats before they ever hit your infrastructure. Inside the session, behavioral analytics can detect unusual account activity and shut down in-progress fraud. And at the API level, intelligent rate limiting and anomaly detection prevent abuse without degrading performance.

That’s the model DataDome brings to fintech. Our Bot Protect, Account Protect, and DDoS Protect solutions work in tandem to defend login portals, sign-up flows, and exposed APIs, automatically and at scale. No noise. No slowdowns. Just clean traffic and real signals.

What’s next: emerging risks in the Open Banking era

As Open Banking continues to evolve, so do the tools available to both innovators and attackers. The next wave of fraud will evolve basic credential stuffing or scraping to be faster, smarter, and harder to detect.

AI-powered bots and autonomous agents are already being used to mimic human behavior more convincingly than ever before, making it tougher for traditional detection methods to distinguish between real users and malicious actors.

Blockchain-based fintech applications bring decentralization, but also new forms of risk, including smart contract exploits and identity spoofing in crypto wallet interactions.

As more financial decisions are handled by AI systems and embedded finance platforms, the risk of exploitation grows. Tactics such as injecting bad data into models, tricking systems with deceptive inputs, or bypassing automated decision logic are becoming more common.

Defending Open Banking ecosystems means anticipating threats. That’s why DataDome continuously updates its defenses using machine learning that adapts over time, insights from user behavior, and threat data from billions of signals across the web—so fintechs can block advanced attacks without disrupting legitimate users.

Open Banking should fuel growth—not expose you to risk

Open Banking APIs are being targeted at scale, with credential stuffing, scraping, and session hijacking campaigns increasing across fintech apps. Whether you’re building a budgeting platform, a neobank, or a payment solution, your exposed endpoints are under pressure.

DataDome was built to stop large-scale automated abuse, exactly the kind of pressure fintech APIs now face.. Our platform stops automated abuse at the edge with Bot Protect, detects in-session fraud with Account Protect, and keeps fintech infrastructure online during Layer 7 attacks with DDoS Protect. Together, these solutions provide precise, adaptive protection that doesn’t compromise performance.

If your growth depends on APIs and frictionless experiences, your security should keep pace. Talk to a specialist to see how DataDome protects high-risk fintech environments without adding complexity.