Securing API Ecosystems in Banking: A Critical Review of Cyber Risks, Control Frameworks, and Future Trends

The rapid evolution of open banking and digital financial services has fueled the widespread adoption of Application Programming Interfaces (APIs) across the banking sector. While APIs enable real-time payments, embedded finance, and seamless integration with third-party platforms, they simultaneously introduce critical cybersecurity risks including misconfigurations, excessive data exposure, broken authentication, and weak access controls. This review critically investigates the cyber threat landscape of financial APIs by synthesizing academic literature, industry frameworks, and real-world breach reports. It evaluates the practical effectiveness of controls such as the OWASP API Security Top 10, Financial-grade API (FAPI) standards, and Zero Trust Architecture, and explores the emerging role of AI-driven security models including machine learning, deep learning, and Bayesian attack graph modeling. The key findings reveal persistent implementation gaps despite available standards, with real-world breaches like Twilio and Dell highlighting the high-risk exposure of unsecured APIs. The review also uncovers fragmented regulatory maturity between jurisdictions: while the EU leads with structured mandates like PSD2, the US and UK adopt more market-driven, inconsistent approaches posing challenges for global financial compliance. Furthermore, the study identifies underexplored threat vectors such as insider misuse, unmanaged shadow APIs, and third-party abuse areas rarely addressed in existing frameworks. Most importantly, it emphasizes a critical lack of integration between technical controls, regulatory policies, and lifecycle security implementation in real-world banking environments. This paper concludes with forward-looking recommendations to enhance API resilience through layered defenses, global regulatory alignment, AI-enhanced threat detection, and embedding security within software development pipelines.