Ultimate Guide to API Encryption Standards

API encryption is essential for keeping financial data safe during transmission. With financial institutions experiencing an average of 125,000 cyberattacks daily, robust encryption methods are critical to prevent breaches, protect sensitive data, and meet regulatory requirements.

Key Takeaways:

• TLS 1.3: The gold standard for secure API communication.

• Symmetric & Asymmetric Encryption: Combines speed (AES-256) with secure key exchanges (RSA/ECC).

• mTLS (Mutual TLS): Adds two-way authentication for extra protection.

• Key Management: Use tools like AWS KMS and HashiCorp Vault for secure, automated key handling.

• Regulatory Compliance: Adhere to PCI DSS, SOX, GLBA, and FFIEC standards to avoid penalties and ensure data security.

Quick Summary:

This guide provides everything you need to know about securing APIs in the financial sector, from encryption protocols to compliance rules. Ready to dive deeper? Let’s get started.

How can an API gateway handle encryption and decryption of sensitive information?

API Encryption Protocols

Keeping financial data secure during transmission is a top priority, and encryption protocols play a critical role in achieving that. Below, we dive into the essentials of TLS/HTTPS, hybrid encryption, and mTLS - key methods that safeguard data exchanges.

TLS and HTTPS Security

Transport Layer Security (TLS) is the backbone of secure API communication. As the modern replacement for SSL, TLS 1.3 offers stronger encryption and a more efficient handshake process. When paired with HTTPS - using TLS/SSL certificates to verify server identity - it forms a secure channel for transmitting sensitive information.

Here are some standout features of TLS that bolster security:

For financial APIs, adopting TLS 1.3 is non-negotiable. Older versions like TLS 1.0 and TLS 1.1 were officially deprecated in 2021 due to their vulnerabilities.

Encryption Types: Symmetric and Asymmetric

Financial APIs often rely on a hybrid encryption model, blending symmetric and asymmetric encryption to optimize both security and performance. This approach can significantly lower the financial damage caused by data breaches - by more than $240,000 on average.

• Symmetric Encryption: Protocols like AES-256 are used for bulk data transfers due to their speed and efficiency.

• Asymmetric Encryption: Public-private key pairs enable secure key exchanges and authentication, ensuring that sensitive data remains protected during transmission.

mTLS Authentication

Mutual TLS (mTLS) takes security to the next level by requiring both the client and server to verify each other's identities using digital certificates. This two-way authentication is especially critical for financial APIs, where unauthorized access can have serious consequences.

Top-tier platforms use mTLS to secure service-to-service communication. For example, financial services provider Synth Finance employs mTLS to meet regulatory requirements and protect real-time financial data. The protocol effectively counters threats such as:

• On-path attacks

• Credential stuffing

• Spoofing

• Malicious API requests

• Brute force attempts

To maximize mTLS effectiveness, ensure proper certificate management, including regular rotations, and work with trusted Certificate Authorities.

API Encryption Implementation Steps

Once you’ve established the key protocols, the next step is to implement encryption measures that are both secure and efficient. For financial APIs, this requires careful planning, especially around managing encryption keys, optimizing performance, and protecting sensitive data at various levels.

Encryption Key Management

Managing encryption keys effectively is a cornerstone of secure API operations. According to a survey, 59% of IT professionals consider key management critical for their businesses, and over half use at least five different key management solutions across multiple environments.

"Financial institutions should employ encryption to mitigate the risk of disclosure or alteration of sensitive information in storage and transit." - Federal Financial Institutions Examination Council (FFIEC)

To start, establish clear policies for key generation, rotation, and retirement. Avoid the risky practice of hard-coding encryption keys into your source code. Instead, document the full lifecycle of your keys and use dedicated tools like Hardware Security Modules (HSMs) or key management systems such as AWS KMS, HashiCorp Vault, or Azure Key Vault. These tools centralize key management while automating processes like rotation, reducing the likelihood of human error. Always apply the principle of least privilege, ensuring that only authorized systems and personnel have access to encryption keys.

Key rotation schedules should align with your risk assessments, and regular audits are essential for identifying compromised keys. Additionally, a solid disaster recovery plan ensures your operations can continue even if key-related issues arise.

For enhanced performance, consider hardware-based solutions.

Hardware-Based Encryption Speed

Hardware-based encryption uses specialized processors to enhance cryptographic performance, making it a practical choice for high-demand financial APIs.

Technologies like AES-NI (Advanced Encryption Standard New Instructions) can significantly speed up symmetric encryption tasks. Similarly, Elliptic Curve Cryptography (ECC) offers an efficiency advantage: a 256-bit ECC key delivers the same security level as a 3,072-bit RSA key. This means faster operations with less computational strain, which is especially important for APIs handling real-time market data or payment processing. The result? Better user experiences and lower infrastructure costs.

When adopting hardware-based encryption, consider your deployment environment. Whether your APIs operate in the cloud or on-premises, these solutions can maintain high security standards without sacrificing performance.

Encryption performance is critical to keeping up with the demands of secure, high-volume financial transactions.

Data Field Encryption

Field-level encryption adds another layer of security, ensuring sensitive data remains protected even if a database is breached.

Start by classifying your data based on its sensitivity. Highly sensitive information, such as payment card details, Social Security numbers, or account credentials, should receive the strongest encryption. For example, encrypting credit card numbers with AES-256 and using unique keys for each data type is a strong approach.

"Encryption safeguards data by transforming it into an unreadable format; only authorized entities with the appropriate decryption key can convert the data back into a readable format."

To further enhance security, combine encryption with strict input validation to guard against injection attacks and maintain data integrity. This is particularly important given the rising costs of data breaches, which averaged $4.88 million in 2024 - a 10% increase from the previous year. Field-level encryption not only protects critical information but also helps reduce the financial fallout of potential breaches.

Monitoring access to encrypted fields is equally important. Unusual decryption activity or simultaneous access to multiple sensitive fields could signal a security issue. Implement logging systems that track encryption and decryption events without exposing the actual data.

U.S. Financial API Security Rules

Adhering to U.S. API encryption standards is no small task. Strict compliance with these frameworks is not just a recommendation - it's a necessity. The stakes are high, with financial institutions facing cyberattack risks 300 times greater than other industries, costing an average of $18.5 million per incident. Below, we break down how PCI DSS, SOX/GLBA, and FFIEC standards shape API encryption requirements.

PCI DSS Payment Security

The Payment Card Industry Data Security Standard (PCI DSS) sets precise rules for organizations handling credit card information. APIs must employ encryption, tokenization, and data masking to protect stored cardholder data, as required by PCI DSS. This is especially crucial given that payment card data is involved in 37% of breaches.

"PCI will state that 4.0 is the biggest change to PCI in a long time. It's one of the biggest releases of the standard in a while."
– Christopher Strand, PCIP (Strategic Advisor, Thoropass)

The PCI DSS 4.0 update brings stricter API security measures. These include mandatory use of strong cryptographic protocols like TLS 1.2 or higher and tokenization for sensitive payment data, reducing the compliance burden while improving security.

SOX and GLBA Requirements

The Sarbanes-Oxley Act (SOX) and the Gramm-Leach-Bliley Act (GLBA) impose distinct encryption standards. SOX, originally focused on financial reporting, now addresses cybersecurity risks tied to financial data. APIs handling this data must implement robust security controls across IT systems.

On the other hand, GLBA emphasizes customer data protection and requires financial institutions to clearly disclose their data-sharing practices. APIs must include safeguards to ensure customer information remains secure and intact. Together, SOX and GLBA create a security framework that protects financial reporting and customer privacy.

The financial consequences of non-compliance are steep. In 2022, the average data breach cost for financial services reached $5.97 million, with web application and API attacks increasing by 257%.

FFIEC Security Guidelines

The Federal Financial Institutions Examination Council (FFIEC) provides a detailed framework for API security. Its guidelines outline operational controls to manage risks tied to API usage.

"Financial institutions should employ encryption to mitigate the risk of disclosure or alteration of sensitive information in storage and transit."
– FFIEC

The FFIEC framework addresses critical areas such as authentication, encryption, audit and monitoring, secure development, incident response, and third-party risk management. For API encryption, the FFIEC mandates that data be encrypted both in transit and at rest. Strong authentication methods, like multi-factor authentication (MFA), are essential for verifying API users. With most financial institutions connecting to customers through an average of three APIs, these measures are vital.

Continuous monitoring is another key requirement. Maintaining audit logs and having a well-defined incident response plan are essential to staying compliant with FFIEC standards.

These frameworks are essential for building a strong API security strategy. At Synth Finance, we incorporate these best practices into our API security solutions, ensuring compliance and safeguarding financial data while maintaining customer confidence in an ever-evolving threat landscape.

API Encryption Examples

Here’s a look at how encryption is applied in financial APIs to safeguard sensitive data. These examples showcase specific encryption techniques and their real-life applications in modern fintech systems.

Currency Exchange API Security

Currency exchange APIs deal with highly sensitive financial data, making strong encryption protocols a must. A commonly used method is AES-GCM with 128- or 256-bit keys, which offers robust protection.

For example, Synth Finance secures currency exchange transactions using TLS v1.2 and AES256 encryption. This approach adheres to industry norms. In fact, companies like Airwallex confirmed in January 2025 that they also rely on TLS v1.2 and AES256 to safeguard personal and financial data.

Another key practice is regular key rotation, which helps maintain security over time. Let’s move on to how transaction data is protected with similar rigor.

Transaction Data Protection

Transaction enrichment APIs often handle critical data such as personally identifiable information (PII), payment account details, and primary account numbers. To secure this information, many use Message Level Encryption (MLE).

Visa’s API, for instance, applies MLE with RSA OAEP (2048-bit keys) and JSON Web Encryption to ensure end-to-end security for transaction data.

For an extra layer of protection, selective field encryption can be applied to transaction metadata. The Druid AI Platform offers an "Encrypt Data" feature, allowing developers to encrypt specific fields before transmission. This includes "secure encryption with salt", which adds a random 64-bit salt to the data before encrypting it.

Next, let’s examine how encryption protects market data.

Market Data Security

Stock market APIs rely on HTTPS/TLS as the foundational security layer, often enhanced by mTLS (mutual TLS) and certificate pinning to prevent man-in-the-middle attacks.

These methods are essential, especially considering that API security breaches can cost organizations an average of $6.1 million. At Synth Finance, these encryption standards are applied to secure both real-time and historical market data. This ensures that stock ticker details, exchange data, and institutional information are protected during both transmission and storage.

Conclusion

Securing APIs in the financial sector is a balancing act between safety, compliance, and performance. The challenges are significant - 92% of financial services companies reported security issues with their production APIs in 2023, and a staggering 84% of attacks came from authenticated users who seemed legitimate.

Key Security Measures

To tackle these challenges, certain steps are essential:

• Use TLS 1.3 (or newer) and AES-256 encryption: These protocols ensure strong protection for sensitive data, both in transit and at rest.

• Strengthen authentication with OAuth 2.0 and MFA: These measures can help block automated attacks, which is critical given that human error is behind more than 85% of breaches.

• Implement strict key management and role-based access control (RBAC): Regularly rotating keys and using hardware-based security modules add extra layers of defense.

• Adhere to PCI DSS, SOX, and GLBA standards: Incorporating these regulations into daily operations not only ensures compliance but also helps avoid costly penalties.

These steps provide a solid foundation for a more detailed implementation strategy.

Implementation Guide

Start with an API security audit to identify all endpoints and assess current practices. Many organizations struggle with incomplete visibility into their API environments, making this discovery phase crucial.

Follow up with continuous monitoring by collecting data from API gateways, content delivery networks, and cloud provider logs. Use behavioral analytics to establish normal usage patterns and quickly detect anomalies that may signal threats.

Invest in developer training on secure coding practices - this can reduce incidents by up to 70%. Additionally, establish clear protocols for incident response to ensure readiness in case of a breach.

Take Synth Finance as an example. The platform secures its financial data APIs by implementing TLS 1.3 with AES-256 encryption for currency exchange data. By applying rigorous security measures to both real-time and historical data endpoints, Synth Finance ensures compliance with regulations while maintaining high performance for fintech applications.

Finally, integrate penetration testing and vulnerability assessments into your CI/CD pipeline. This proactive approach helps identify and fix security gaps early, which is especially important given that API breaches can cost organizations an average of $6.1 million.

FAQs

What’s the difference between symmetric and asymmetric encryption, and why is a hybrid approach best for financial APIs?

Symmetric vs. Asymmetric Encryption in Financial APIs

Symmetric encryption uses a single key for both encryption and decryption. Its simplicity makes it lightning-fast and well-suited for processing large amounts of data efficiently.

In contrast, asymmetric encryption works with two keys - a public key for encryption and a private key for decryption. This approach offers an added layer of security but comes at the cost of being slower and more resource-heavy.

A hybrid encryption model blends the strengths of both methods, making it a go-to choice for financial APIs. Symmetric encryption methods like AES handle data processing quickly and securely. Meanwhile, asymmetric encryption techniques such as RSA ensure the safe transmission of the symmetric key. This combination strikes the perfect balance between speed and security, which is crucial for protecting sensitive financial transactions without compromising performance.

What is Mutual TLS (mTLS), and how does it improve the security of financial APIs?

Mutual TLS (mTLS) boosts the security of financial APIs by requiring both the client and server to authenticate each other through digital certificates. This two-way authentication ensures that only trusted users and systems can access the API, effectively blocking unauthorized access and guarding against man-in-the-middle attacks. On top of that, mTLS encrypts all data exchanged between the client and server, keeping sensitive financial information safe from interception or tampering.

To set up mTLS successfully, prioritize robust certificate management, routinely update and test your configuration to address potential vulnerabilities, and make sure all involved parties are well-versed in the nuances of mutual authentication. When paired with a Zero Trust architecture, mTLS can further reinforce security by operating under the principle that no device or user is automatically trusted, reducing risks across your network.

What steps should financial institutions take to secure their APIs and comply with encryption standards like PCI DSS, SOX, and GLBA?

To protect their APIs and ensure adherence to standards like PCI DSS, SOX, and GLBA, financial institutions should focus on these essential practices:

• Encrypt sensitive data: Use strong encryption methods, such as TLS 1.2 or higher, to safeguard data during transit and while stored. For instance, PCI DSS requires encryption or tokenization of cardholder data to prevent unauthorized access.

• Perform regular audits: Conduct frequent risk assessments and security audits to uncover vulnerabilities and confirm that encryption practices align with the latest standards.

• Enforce strict access controls: Restrict access to sensitive information using role-based permissions, and maintain comprehensive logs of data access. This is particularly important for SOX and GLBA compliance, which prioritize the protection of customer information.

• Keep up-to-date: Stay informed about changes to encryption protocols and compliance rules. Regularly train staff to ensure they follow current best practices.

By prioritizing these measures, financial institutions can strengthen API security and maintain compliance, safeguarding both their infrastructure and customer data.

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• Building Scalable Fintech Apps: API Integration Guide

• Common Financial API Integration Issues and Solutions