Balancing innovation and security within the embedded finance landscape

As the embedded finance landscape continues to evolve, the delicate balance between innovation and security will be the key to unlocking its full potential. By addressing emerging risks and challenges, organizations can create a secure and trusted environment for their customers, fostering long-term growth and success in the embedded finance ecosystem.

Embedded finance landscape – overview

Embedded finance refers to the smooth integration of financial services into non-financial platforms, such as e-commerce websites, mobile apps, or IoT devices. This is made possible by two key technologies: Application Programming Interfaces (APIs) and Inline Frames (iFrames).

APIs allow different software applications to communicate and interoperate, enabling third-party services to access specific functionality or data from a primary service. iFrames, on the other hand, allow an HTML document to be embedded within another HTML document, making it possible to integrate various financial services directly into a website or application.

Securing APIs

APIs are the foundation of embedded finance. They are the key to the secure and frictionless exchange of data and transactions. Securing APIs is a complex problem that requires a multi-faceted approach:

• SSL/HTTPS encryption. Enforce SSL (Secure Socket Layer) and HTTPS (HyperText Transfer Protocol Secure) on all API calls. This is the base layer of API security. Any data sent over the internet is encrypted so it can’t be accessed or modified by anyone else.
• Rate limiting. Rate limiting limits the number of API calls from a single IP address in a given time frame to prevent Denial-of-Service (DoS) and Distributed Denial-of-Service (DDoS) attacks. With rate limiting, you can ensure legitimate users still have access to services even during an attack.
• Access Control Limits (ACLs). Strong Access Control Limits (ACLs) provide a structured way to manage permissions, defining exactly which users or systems have access to what data or functionality. This is especially important to minimize the damage that can be done if an API key is compromised.
• Penetration testing and API hardening. Regular penetration testing and API hardening (input validation and output encoding) is crucial to find and fix vulnerabilities before they can be exploited by bad actors. Continuous testing and hardening ensures APIs stay secure as they grow and scale.

Securing iFrames

While APIs enable financial services integration, iFrames enable those services to be embedded directly into a website or application. Securing iFrames is just as important to ensure the overall transactional security of the embedded finance ecosystem.

• iFrame sandbox and isolation. The sandbox attribute allows website owners to restrict iFrames, isolating them from other elements on the page. This isolation ensures that even if the iFrame has malicious code, it can’t harm the main website or its visitors.
• Limiting rendering domains. To prevent Clickjacking attacks where attackers trick users into clicking hidden elements within an iFrame, you need to control which websites can render your iFrames. Using HTTP headers like X-Frame-Options and Content-Security-Policy can limit rendering to trusted domains or even restrict it to the same origin.
• Input validation and sanitization. Validation and sanitization of user input is crucial to prevent Cross-Site Scripting (XSS) attacks where attackers inject malicious scripts through input fields. Using modern browser features like the MessageChannel interface allows for secure two-way communication between the iFrame and the parent document.

A proactive, collaborative, and adaptive approach to transactional security will be essential for embedded finance providers to stay ahead of the curve, navigate the regulatory landscape, and maintain the trust of their customers. The embedded finance industry can continue to transform the way we manage our financial lives and usher in a new era of convenience, accessibility, and trust by prioritizing security alongside innovation.

We invite you to read more on embedded finance from Dave McKenzie, Finance Director at Fiat Republic.

(Devdiscourse's journalists were not involved in the production of this article. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)