How to optimize security in embedded finance

This article was originally published on Finextra on August 31, 2023

Embedded finance has emerged as a critical component in today's fintech ecosystem, offering an agile, seamless, and consumer-centric way to deliver financial services. This integration transforms many platforms, from online marketplaces to mobile apps, into hubs for financial transactions. While the opportunities are promising, the security of these financial technologies remains a paramount concern. In this post, we will explore the two cornerstone technologies—APIs and iFrames—that enable embedded finance and discuss best practices for securing them.

What is Embedded Finance?

Embedded finance refers to the seamless integration of financial services into platforms and applications outside of the traditional financial sector. This integration is facilitated primarily through two technologies: Application Programming Interfaces (APIs) and Inline Frames (iFrames).

Application Programming Interface (API)

APIs act as the intermediary that allows two different software applications to communicate and interact. They enable third-party services to access specific functionalities or data of a primary service provider. For example, APIs are crucial for integrating payment gateways, investment platforms, or insurance services into embedded finance ecosystems.

Inline Frame (iFrame)

iFrames allow the embedding of an HTML document within another HTML document. This technology enables the integration of various financial services—like secure payment forms or loan applications—directly into a website. Despite its occasionally negative reputation for being associated with ads and phishing schemes, when deployed correctly, iFrames can serve as a secure and effective tool for integrating complex financial functionalities.

Securing Embedded Financial Technologies

Securing APIs SSL Network Encryption

Enforcing SSL (Secure Socket Layer) encryption and HTTPS (HyperText Transfer Protocol Secure) protocols for all API calls is the foundational step in securing API communications. This encryption ensures that any data transmitted over the internet is encrypted, rendering it unintelligible to unauthorized third parties. By doing so, organizations can substantially mitigate the risks associated with Man-In-The-Middle attacks, where an attacker could intercept, read, and potentially modify the data during transmission.

Request Rate Limiting

Rate limiting restricts the number of API calls from a particular IP address within a given time frame. This is crucial for protecting against Denial-of-Service (DoS) and Distributed Denial-of-Service (DDoS) attacks, where attackers attempt to flood the system with traffic to make it unresponsive. By implementing rate limiting, organizations can ensure that legitimate users still have access to services even when an attack is taking place, thereby preserving functionality and user experience.

Robust Access Control Limits (ACLs)

Access Control Limits (ACLs) provide a structured approach to managing permissions. Granular ACLs can be set up to define precisely which users or systems have access to specific types of data or functionalities. This is particularly important for minimizing the potential damage that can be done if an API key is compromised. By adhering to the principle of "least privilege," wherein systems and users are given the minimum levels of access—or permissions—they need to perform their functions, organizations can significantly reduce security risks.

Penetration Testing & API Hardening

As APIs evolve and new features are added, it's crucial to regularly perform penetration testing. These tests simulate cyber-attacks to find vulnerabilities before malicious hackers can exploit them. Continuous testing, coupled with API hardening strategies such as input validation and output encoding, ensures that APIs remain secure even as they scale and evolve.

Securing iFrames

iFrame Sandbox & Isolation

The sandbox attribute allows website owners to impose restrictions on iFrames, thus isolating them from other elements on the page. This isolation ensures that even if the iFrame contains malicious code, it cannot easily impact the main website or its visitors. Owners can customize the level of access the iFrame has to various browser functions, such as running scripts, submitting forms, or accessing the DOM, providing an additional layer of security.

<iframe 

src="iframe_origin.html" 

sandbox="allow-forms"

/>

Limiting Which Websites Can Render an iFrame

To prevent Clickjacking attacks—where attackers trick users into clicking hidden elements within an iFrame—it's essential to control which websites can render your iFrames. Using HTTP headers like X-Frame-Options and setting Content-Security-Policy can limit the rendering to trusted domains or even restrict it to the same origin.

Content-Security-Policy: frame-ancestors pipe.com;

Input Validation & Sanitization

Validation and sanitization of user input are vital for preventing Cross-Site Scripting (XSS) attacks, where attackers inject malicious scripts through input fields. Utilizing modern browser features like the MessageChannel interface allows for secure two-way communication between the iFrame and the parent document.

Moreover, sanitization techniques should be applied to strip out or neutralize characters that have special meanings in HTML, JavaScript, or SQL, thereby reducing the risk of code injection attacks.

Conclusion

The integration of financial services into various platforms through embedded finance offers unparalleled convenience and functionality. However, the security of these integrations cannot be compromised. By understanding the unique security concerns related to APIs and iFrames, organizations can implement effective strategies to protect against vulnerabilities and potential attacks.

Security isn’t just a feature —it’s a core foundational element of embedded finance. Every strategic decision must be calibrated with the safety and privacy of a customer’s data as a top priority.

Earning SOC2 Type II attestation is a significant milestone that demonstrates a commitment to data protection and maintaining customer trust. Like the penetration testing mentioned earlier, SOC2 attestation invites external testing and scrutiny of a company’s controls and safety measures and serves as concrete evidence that it is meeting industry-leading standards in safeguarding customer data and maintaining a secure operational environment.

As embedded finance continues to evolve, keeping security at the forefront will be key to fostering trust and facilitating seamless user experiences. With robust security measures in place, embedded finance can indeed become a secure and invaluable asset in the evolving digital landscape.