Do you find yourself fascinated with new apps offering financial services as well? Such as a ride-sharing app that whisks you to your destination, and deducts your fare from your wallet? These actions take place within seconds, displaying quick functionality. However, what if you receive an urgent call from your bank telling you that your digital wallet has been compromised, and your account is drained?

This scenario sheds light on the intricacies linked with the security of embedded finance platforms. This article discusses the why, and how of securing embedded finance platforms, and their impact on our everyday lives.

The importance of embedded finance security in the broader financial sector

Embedded finance refers to the practice of embedding financial services within existing digital ecosystems. Instead of relying solely on standalone mobile banking apps or websites, users can access financial products and services directly through the platforms they already use. For instance, think of a ride-sharing app with a digital wallet or an online shopping service with a Buy Now, Pay Later facility. 

As with all applications today, embedded finance products also need to be created with advanced security features, and transparent data privacy practices. This is because, cyber attacks have become all the more common, making data security an ever-growing concern.

Components of embedded finance platforms – The architecture underneath

Before understanding the practices that go into securing embedded finance platforms, it is crucial to understand their components and architecture. The technological backbone of these platforms includes; 

  • APIs 
  • iFrames 
  • Cloud computing 
  • Artificial intelligence and machine learning 
  • Blockchain technology
  • Biometric security 
  • Regulatory technology (RegTech)

How to secure embedded finance platforms?

A few important ways to enhance security in embedded finance platforms include:

Data encryption

Employ strong encryption protocols for data at rest and in transit. This protects sensitive information from unauthorized access and breaches, ensuring that data intercepted during transmission remains unreadable to attackers.

Strong authentication and authorization

Implement multi-factor authentication (MFA) and robust authorization mechanisms to verify the identities of users. Consider using biometrics, one-time passwords, and security tokens for stronger authentication.

Advanced fraud detection systems

Utilize machine learning and artificial intelligence to monitor financial transactions and user behaviors for identifying and preventing fraudulent activities. 

Compliance with regulatory standards

Adhere to relevant financial regulations and standards, such as PCI DSS for payment security, GDPR for data protection, and regional banking regulations. Regulatory compliance helps in building trust and avoiding legal and financial penalties.

Third-party vendor management

Since embedded finance often relies on third-party services and application integrations, it’s important to manage and assess the security practices of all vendors. This involves conducting regular security audits of third-party vendors and ensuring they meet the required security standards.

Network security measures

Protect the network infrastructure through firewalls, intrusion detection systems (IDS), and intrusion prevention systems (IPS). This safeguards against unauthorized access and cyber-attacks. Also, consider employing secure network protocols like TLS/SSL for data transmission.

Securing APIs

  • SSL network encryption

To enhance the security of API communications, organizations should prioritize two critical steps: 

  • Enforcing SSL (Secure Socket Layer)

Ensure all communication between clients and servers is encrypted using SSL/TLS protocols, enhancing security and protecting data in transit.

  • Adopting HTTPS (HyperText Transfer Protocol Secure)

Implement HTTPS on your website by acquiring an SSL certificate, which encrypts data exchange between users and your server, ensuring privacy and trustworthiness.

By implementing these measures, data transmitted over the internet becomes encrypted, making it alien to unauthorized parties. This proactive approach significantly reduces the risk of Man-In-The-Middle attacks, where malicious actors could intercept, access, or manipulate data during transmission.

  • Request rate limiting

Rate limiting is a vital security measure that restricts the number of API calls from a specific IP address within a defined time window. This practice is essential to prevent Denial-of-Service (DoS) and Distributed Denial-of-Service (DDoS) attacks, where malicious actors flood the system with excessive traffic, rendering it unresponsive. 

By implementing rate limiting, organizations ensure that legitimate users can still access services even during an ongoing attack, preserving overall functionality and user experience. It is crucial to remember that rate limiting enhances security and contributes to cost savings by preventing unnecessary processing of excessive requests. 

  • Access control limits (ACLs)

Access Control Limits (ACLs) offer a structured way to manage permissions. By configuring granular ACLs, organizations can precisely determine which users or systems can access specific data or functionalities.

ACLs become crucial in mitigating potential harm if an API key is ever compromised. Following the “least privilege” principle, where systems and users are granted only the essential access levels, organizations can substantially minimize security risks. Granular access control also ensures a more efficient and focused approach to data protection and governance.

  • API hardening and penetration testing

With the evolving nature of APIs and the addition of new features, penetration testing is evermore crucial now. By simulating cyber attacks, organizations can identify vulnerabilities before hackers do. 

API hardening strategies include input validation and output encoding. Couple these with continuous testing to ensure that APIs remain secure even as they evolve and scale.

Securing iFrames

  • iFrame sandbox and isolation

Sandbox is an attribute that allows website owners to impose restrictions on iFrames, which isolates them from other elements present on the page. With this isolation, the website and its visitors remain unaffected even if the iFrame contains malicious code. 

Site owners can customize the level of access granted to iFrames for browser functions, such as accessing the DOM, running scripts, and submitting forms. This provides an additional layer of security. 

The sandbox attribute looks like this:





  • Setting website limits on rendering iFrames

Guarding against Clickjacking attacks is crucial. These attacks involve deceiving users into clicking concealed elements within an iFrame. To mitigate this risk, consider managing which websites can display your iFrames. You can achieve this by leveraging HTTP headers such as X-Frame-Options and implementing a Content-Security-Policy. These measures restrict rendering to trusted domains or even confine it to the same origin.

  • Input validation and 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 with special meanings in HTML, JavaScript, or SQL, thereby reducing the risk of code injection attacks.

With great financial services comes a greater need for securing embedded finance platforms

Financial institutions need to stay abreast of emerging cybersecurity threats and follow the best practices for optimizing security in embedded finance platforms. This can be done by partnering with a fintech solutions provider that understands the importance of unique security concerns related to APIs, and iFrames, and earning SOC2 Type II attestation. 

VentureDive is one such firm with expertise in building fintech apps with the necessary security measures. Discover how, on top of fintech consulting, we can design, develop, and deploy fintech apps keeping security at the forefront.