Today, the Consumer Financial Protection Bureau (CFPB) stands as the foremost defender of consumers within the financial marketplace as a regulator and rulemaker. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 created the CFPB and has remained the backbone guiding its mission.
In recent years, the Bureau has turned its attention to a specific directive—rulemaking on Section 1033 of the Dodd-Frank Act. This rulemaking unlocks the potential of open banking by mandating the sharing of financial data with consumers and third-party providers in a secure, permissioned, and automated manner. This movement is not just redefining banking; it is reimagining how institutions interact within the digital ecosystem through application programming interfaces or APIs.
Understanding CFPB’s rules on Section 1033.
The CFPB’s rulemaking on Section 1033 is a decisive step toward empowering consumers in a data-driven economy. Financial institutions now find themselves obliged to provide consumers with access to transaction and account information, which they may wish to share with third parties through data transfer mechanisms which are predominantly Application Programming Interfaces (APIs).
CFBP’s vision of financial empowerment.
CFPB’s intent with Section 1033 is to create a financial environment that is not only secure but also one where the consumer has complete control over their financial data. By making it easier to switch between banks or financial services, the consumer is given the leverage to tailor their financial interactions to suit their individual needs.
CFPB stated in its news release that its goals for rulemaking are to provide the framework that empowers consumers to:
- Get their data free of junk fees
- Have a legal right to share their data
- Walk away from bad service
The rulemaking would also protect consumers and financial firms through:
- Robust protections to prevent unchecked surveillance and misuse of data
- Meaningful consumer control
- A move away from risky data collection practices
- Fair industry standard-setting
Navigating regulatory compliance.
CFPB’s new API-focused regulations intend to promote a secure and competitive environment. However, for financial institutions, navigating the maze of compliance, especially in terms of API development and data sharing, is a daunting task. The good news is that this challenge presents an opportunity. Banks and FinTech firms can leverage this mandate to create innovative products and deepen customer relationships.
Previous open banking initiatives.
The Consumer Financial Protection Bureau has examined several international models of open banking as benchmarks for compatibility.
In the European Union, the Payment Services Directive 2 (PSD2) serves as a cornerstone for the concept of open banking. Further developments such as NextGenPSD2, the STET Standard, the Slovak Banking API, and PolishAPI all contribute to a more integrated and efficient financial ecosystem.
In the United Kingdom, the principles of PSD2 have been extended through the efforts of Open Banking Limited, enhancing the framework for secure and consumer-friendly financial services.
Australia is advancing consumer rights in the digital economy through the Consumer Data Right, ensuring that citizens have control over their personal data and can benefit from customized financial solutions. These efforts underscore consumer privacy regulators’ collective commitment to promoting transparency, security, and innovation in the financial sector, benefiting consumers and the economy at large.
Beyond compliance: The role of APIs in financial services.
The introduction of Section 1033 is fostering a seismic shift in financial services—encouraging the development of more APIs. But how does this surge in API creation and increased API functionality translate to real-world applications, and does it come with unmitigated risks?
Amplified access and services through APIs.
Open banking and the surge in API access are transforming the financial services sector by enabling secure and seamless data sharing between institutions and consumers. This ground-breaking shift not only fosters innovation but also empowers consumers with more control and visibility into their financial lives. By breaking down traditional data silos, open banking paves the way for a wide array of services that cater to diverse consumer needs, enhancing both the functionality and accessibility of financial ecosystems. Here are some of the types of services that open banking and API access support:
- Personal financial management: Tools that help users track spending, set budgets, and manage their finances more effectively.
- Enhanced credit scoring: More comprehensive data enables better assessment of creditworthiness, potentially opening credit to more people.
- Streamlined payments: Facilitates easy, fast, and secure online and in-app payment solutions, improving the convenience for consumers.
- Personalized financial products: Offers customized financial products based on the user’s unique financial behavior and needs.
- Fraud detection and security: Sophisticated algorithms analyze transaction patterns in real time to detect and prevent fraudulent activity.
- Wealth management: Provides users with insights and recommendations to optimize their investments and savings.
- Marketplace banking: A platform approach that allows consumers to access a variety of financial services from different providers in one place.
Increases in functionality increase exposure and risk.
While APIs expand the realm of possibilities for consumers and institutions alike, they also increase the risk of cyberattacks. With each increase of functionality added to a public API, a financial provider’s attack surface increases. There is simply more available to attack. Striking the right balance between accessibility and security is paramount in this new era of financial digital transformation.
Enhanced API security with UltraAPI.
To move forward with confidence into this API-enriched financial landscape, it is crucial for institutions to deploy security measures alongside their new APIs. This is where Vercara’s UltraAPI steps in—a comprehensive solution designed to manage the security of financial APIs in an open banking world.
Most information security teams find themselves under-resourced when facing the challenge of supporting a large rollout of new APIs. This limitation not only involves staffing hours but also the technical capabilities of staff. The rapid development and deployment of APIs require specialized monitoring and protection tools that many teams currently lack.
Traditional security measures often fall short in addressing the unique vulnerabilities that APIs present, such as application security, business logic, and data exposure risks. For example, a Web Application Firewall (WAF) can enforce HTTP protocol enforcement and detect some classes of attacks, but typically cannot understand APIs. Consequently, this creates a pressing need for API protection solutions.
These solutions specialize in securing APIs from both common and sophisticated cyber threats, offering features like real-time monitoring, automated threat detection, and response mechanisms tailored to protect the sprawling API ecosystem. Without such augmentation, the security and integrity of the digital financial framework could be compromised, endangering both consumer trust and the stability of the financial system.
Discovering API assets, endpoints, and schemas.
The first line of defense is knowing what assets, functionalities, and data need protection. With the increase in API development and deployment mandated by CFBP’s rules on Section 1033, maintaining a complete and accurate inventory of an organization’s API assets poses a significant challenge for Information Security Teams. This difficulty stems from several key factors:
- Rapid development cycles: The agile and iterative nature of modern software development means new APIs are constantly being created and deployed, often outpacing the documentation process.
- Decentralized architecture: With the advent of microservices architecture, APIs are spread across numerous services and locations, making them harder to track.
- Lack of standardization: Without a unified method for documenting and registering APIs, different teams within an organization might use their own conventions, leading to inconsistencies and gaps in the inventory.
- Shadow APIs: Sometimes, APIs are developed or used without the approval of the Information Security Team, resulting in undocumented and potentially insecure endpoints.
- Mergers and acquisitions: When organizations merge or acquire new companies, integrating and accounting for the acquired APIs into the existing inventory becomes a complex task.
These challenges emphasize the need for tools like UltraAPI Discover that provide the ability to discover and manage API assets efficiently, ensuring comprehensive protection and compliance.
Ensuring API compliance.
Deploying APIs to allow users and other service providers to access their own data while maintaining compliance with other data protection standards like the Gramm Leach Bliley Act (GLBA) and the Payment Card Industry Data Security Standard (PCI-DSS) can be incredibly complex.
In the financial sector, adhering to regulatory standards is a critical aspect of maintaining trust and integrity. Compliance ensures that sensitive data types are adequately protected against breaches and misuse.
Understanding the landscape of financial data subject to regulation is the first step in fortifying your security posture. UltraAPI Comply aids organizations in not only pinpointing these sensitive data types within their systems but also in identifying and applying the necessary controls to safeguard them. Here are the key financial data types that UltraAPI Comply can be instrumental in protecting:
- Personal Identifiable Information (PII): This includes account numbers, Social Security Numbers, and addresses. UltraAPI Comply helps identify where PII is transmitted or stored and assesses the implementation of encryption and access control measures.
- Financial transactions: UltraAPI Comply can spot transaction data, including amounts, dates, and parties involved and ensure they are protected during transfer and storage.
- Account details: Information like account numbers, balances, and user credentials. UltraAPI Comply enables the detection of this data across systems and evaluates the security policies in place to prevent unauthorized access.
- Credit information: Credit scores and history, which are highly confidential. UltraAPI Comply assists in identifying how this information is managed and ensures that only authorized personnel can access it in compliance with applicable laws and regulations.
- Investment data: UltraAPI Comply helps to map where details of investments, holdings, and investor profiles reside and verifies that it is adequately encrypted and segregated.
By providing a comprehensive overview of where sensitive data is located and the current controls in place, UltraAPI Comply empowers organizations to enhance their compliance posture effectively and efficiently.
Blocking API attacks and bots.
UltraAPI Bot Manager is our innovative security solution designed specifically to guard your APIs against a wide array of attacks and abuses. It acts as inline security control, ensuring that your users’ financial data and other PII remains safe, and your operations run smoothly.
UltraAPI Bot Manager provides controls against many classes of attacks, including:
- Unauthenticated access: Ensures that every access request is authenticated, preventing unauthorized users from accessing sensitive data.
- Schema enforcement: Validates requests against the defined API schema to block malformed or maliciously crafted requests.
- Automated scraper bots: Protects against bots designed to scrape data without permission, preserving the integrity and confidentiality of your information.
- Vulnerability scanners: Defends against automated tools that scan for vulnerabilities within your API ecosystem, ensuring that potential security gaps are identified and closed by your team before they can be exploited.
- OWASP API Top 10: Protects against the most critical security risks to APIs as identified by the Open Web Application Security Project (OWASP).
- Business logic vulnerabilities: Safeguards against exploits that manipulate the logic of an application to achieve unauthorized outcomes.
With UltraAPI Bot Manager, you can confidently conduct your business, knowing that your API infrastructure, endpoints, and data fields are safeguarded against a broad spectrum of cyber threats.
Protect your open banking APIs with UltraAPI.
Financial institutions need not face the API revolution and its increased risks alone. UltraAPI arms them with the tools to not only meet the demands of CFPB’s Section 1033 and open banking but to also carve out a competitive edge in the evolving landscape of financial openness and innovation.
Contact us to discover how UltraAPI can support your institution’s compliance and security needs in the face of open banking and the burgeoning API ecosystem. Empower your team to deliver sophisticated financial services that are both accessible and impenetrable. With UltraAPI, you are not just keeping pace with the revolution; you are leading it securely.
