Regulated environments raise the stakes when it comes to API governance. Juggling data protection, operational resilience, and fraud risk within a context of complex and ever-evolving compliance requirements is not for the faint of heart.
However, the right approach to your API ecosystem can ensure that innovation and rapid digital transformation in banking, financial services, and insurtech don’t come at the cost of non-compliance. Indeed, well-considered design can support not just security but scalability, meaning you can deliver outstanding customer journeys even as you comply with strict regulations such as GDPR, PCI‑DSS, PSD2, and GLBA.
If you’re keen to innovate while protecting customer data and maintaining operational resilience against fraud and cyberattacks, you’re in the right place.
Key considerations for secure, scalable systems
Is it FAPI‑compliant OAuth2 flows, mTLS, FIPS, PSD2, Open Banking standards or some other regulatory and compliance requirement that’s troubling you? Whatever it is, you’re not alone.
The key point here is that compliance should be baked into your API design from the outset, not tacked on as an afterthought. Standards and obligations relating to secure access, data encryption in transit and at rest, data minimization, breach notifications, and so on are table stakes. Designing your API systems in line with these frameworks enables you to level up your security and minimize your risk of breaches, as well as of the associated financial penalties and reputational damage.
One means of achieving this is to adopt a zero-trust security model. Instead of applying perimeter defenses only, you can embed multiple security layers: at the edge, through your API gateway, and throughout internal services. Role-based authorization, token-based access, mutual TLS, and schema validation all help, ensuring no request is trusted by default.
In terms of API development, embedding DevSecOps practices can help your teams shift left on security, addressing potential vulnerabilities before your APIs go live.
API governance, visibility and auditability
As regulated industries require more than just secure APIs, you’ll need to think about your ecosystem from a governance and visibility perspective. Being able to see into what’s happening and why, through clear tracing and logging, is essential, including for any AI-driven systems you’re adding into the mix.
You can use a centralized governance model to achieve this, defining and enforcing templated policies consistently across all APIs. When designing such a system, ensure you bring your people along for the ride, to maximize its chances of success.
A centralized model means you can embed features such as audit trails, fine-grained role-based access control, and region-specific controls through your policies. These are critical for maintaining compliance across different jurisdictions while still enabling teams to innovate at a local level.
Effective governance can also support discoverability and collaboration. You can publish APIs through your developer portal to achieve this, along with documentation, sandbox environments, and other self‑service access elements – all without sacrificing security.
Designing for scale
Another challenge of designing banking, finance and insurance API ecosystems is that compliance is only part of the story. You also need to design for scale, in an environment where customers and partners expect always‑available services that perform under high transaction volumes.
This requires you to think of APIs as products. Doing so will support you to design for growth, embracing microservices architectures, horizontal scaling, robust orchestration, and observability. These will help you maintain performance – and thus customer trust – as you scale. Observability also levels up your anomaly detection capabilities, enabling a proactive approach to tackling any issues that arise.
Security-focused API design tips
Let’s dive into a bit more detail in terms of designing APIs that are both secure and scalable. Consider the following as you embed regulatory and compliance considerations into your API design framework:
Secure access and authentication
Financial APIs must enforce modern standards such as OAuth 2.0 with FAPI profiles, JWT tokens, and OpenID Connect. Mutual TLS and certificate‑bound access tokens help guarantee that clients and servers are authenticated securely within a closed public key infrastructure environment. For particularly sensitive operations, integrate multi‑factor or biometric authentication for additional security, balancing it with a user-friendly experience.
Payload validation and threat mitigation
APIs are frequent targets for injection attacks, server-side request forgery (SSRF) attempts, and malformed payloads. Organizations should therefore enforce strict JSON schema validation, rejecting requests that don’t conform to expected formats. Specific protections, such as blocking requests with localhost URIs, can prevent SSRF attacks. For GraphQL APIs, use schema introspection controls and depth limiting to avoid abuse through overly complex or nested queries, and separate internal or admin GraphQL flows from client‑facing ones to reduce the attack surface.
Governance and audit automation
Use templated policies and automatic enforcement through CI/CD pipelines for standards like PCI, SOC2, and ISO. This means you’re not only delivering a seamless compliance journey, but also a superior developer experience.
Superior visibility
Real‑time audit dashboards provide visibility into compliance status and access patterns, reducing the manual reporting burden. As you mature, governance evolves from tactical (reactive and ad‑hoc) to strategic (automated and measurable). Use KPI dashboards and developer self‑service portals to enforce consistency and accelerate delivery without sacrificing security.
Unified analytics
Implement unified analytics that cover REST, GraphQL, and event‑driven traffic to detect unusual usage spikes or suspicious access patterns. Integration with enterprise monitoring platforms, central logging solutions, and automated alerting ensures potential issues are flagged quickly. Having a well‑defined incident response plan tied to these allows for faster mitigation when risks arise, ideally before your customers notice anything is wrong.
Reliability and resilience
Treating APIs as products means designing them to deliver long‑term reliability and resilience. Versioning ensures backward compatibility, while sandbox environments and API mocking allow developers to test integrations safely before going live. Clear service-level agreements (SLAs) help set performance expectations.
On the infrastructure side, deploying APIs across multiple regions or hybrid cloud environments helps enhance resilience. Techniques such as load balancing and intelligent caching further improve performance reliability, even under heavy loads.
A quick word on Open Banking
Open Banking regulations such as PSD2 mean that APIs need to securely expose financial data to trusted third parties, adding a further dimension to the complexity of modern API security and governance. Doing so demands adherence to FAPI standards, the use of certificate‑bound tokens, and strong consent frameworks that clearly define delegation scopes. Audit logging is also crucial, as you’ll need to demonstrate compliance and transparency into when and how customer data is accessed.
Designing for context
Other security design considerations will depend on the use case of the API in question.
Payment APIs, for example, are especially sensitive to fraud and abuse, meaning strict rate limiting, anomaly detection, and robust identity checks are essential for their protection. Data masking and encryption in transit ensure that payment details remain protected throughout their lifecycle, while strong authentication mechanisms help ensure that only authorized transactions are processed. All of this contributes to a reduced risk of fraud and other abuse.
Another example of such specific requirements is insurtech APIs that involve aggregating large volumes of personally identifiable information (PII) across multiple partners. This requires a zero‑trust approach with mTLS, strict data schema validation, and consent-driven frameworks. Audit trails provide a reliable record of data access, helping with both compliance and customer trust.
Find out more at LEAPxFinance
Designing APIs for highly regulated environments means delivering on strict compliance obligations, balancing this with operational efficiencies while leaving plenty of room for innovation. As outlined above, the key elements of this are regulatory-first design, zero‑trust layered security, centralized governance, scalable product-based APIs, and robust observability and resilience. All molded around your specific use case.
Achieving all this can ensure you not only stay compliant but enable faster innovation and stronger customer trust.
Organizations at the forefront of doing so will be sharing their success stories at the LEAPxFinance online conference on October 16, 2025. Attendance is free, so bring your colleagues along and join 100+ financial services tech leaders and practitioners in discovering real-world API excellence. Find out more and register here!
