ISO 27001 Controls for PSD3 and Open Banking API Security

Open banking has changed how financial institutions, payment service providers, fintech companies, and third-party providers exchange financial information. APIs sit at the centre of this model, allowing authorised services to connect with payment accounts, exchange data, initiate transactions, and deliver digital financial services.

This growing connectivity also increases exposure to identity attacks, unauthorised access, data leakage, API abuse, service disruption, and third-party security risks. For organisations operating across Europe, strengthening information security around these connections is therefore an important part of meeting regulatory and business expectations.

ISO/IEC 27001 provides a structured Information Security Management System (ISMS) framework for managing information security risks. The standard does not replace PSD3 or automatically establish compliance with payment services legislation. Instead, an appropriately scoped ISO 27001 ISMS can provide a systematic basis for addressing many of the security risks associated with PSD3 and open banking API environments.

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What Are PSD3 and Open Banking API Interconnections?

PSD3 Overview

PSD3 is the proposed successor to PSD2 within the European Union's payment services reform. The European Commission proposed PSD3 together with a Payment Services Regulation as part of a broader effort to modernise the EU payment services framework, strengthen consumer protection, improve security, and address developments in digital payments.

The proposed framework places significant attention on payment security, operational risks, authentication, fraud prevention, data access, and relationships between payment service providers and other participants in the payments ecosystem.

As PSD3 remains part of the EU legislative process, organisations should distinguish between the proposed requirements and obligations that are already legally applicable. The final legal text and applicable implementation timelines should be assessed when planning regulatory compliance activities.

Open Banking API Interconnections Explained

Open banking APIs allow authorised third parties to interact with financial institutions and payment accounts through defined technical interfaces. Depending on the service, these connections can involve account information, payment initiation, authentication, transaction data, and other sensitive financial information.

An API connection may involve several parties. A bank or payment service provider may expose an API, while an account information service provider or payment initiation service provider connects to it. Identity providers, cloud platforms, technology suppliers, fraud detection systems, and other external services can also become part of the technical environment.

This interconnected structure means that security cannot be limited to the API endpoint itself. Authentication, authorisation, encryption, application security, network controls, monitoring, supplier security, incident management, and business continuity all influence the overall security of the connection.

Why API Interconnections Need Security Controls

APIs provide a direct communication path between systems. If an API is incorrectly configured, inadequately protected, or compromised, attackers may gain access to sensitive information or misuse legitimate functionality.

Common risks include stolen credentials, excessive privileges, weak authentication, insecure API endpoints, injection attacks, exposed tokens, poor encryption, insufficient logging, vulnerable third-party components, and abuse of trusted connections.

For financial organisations, the consequences can extend beyond a technical incident. A security failure can affect customer trust, payment operations, regulatory obligations, contractual relationships, and business continuity.

This is why API security needs to be addressed as part of a broader information security risk management framework rather than treated only as an application development concern.

PSD3 API Security Requirements

Core PSD3 Security Controls for API Connections

Security controls for PSD3-related API environments should address the confidentiality, integrity, and availability of information and payment services.

Key areas include strong authentication, appropriate access privileges, secure communication channels, protection of authentication information, monitoring of security events, vulnerability management, incident response, and resilience of critical services.

The proposed EU payment services framework specifically addresses operational and security risk management and the need for appropriate mitigation measures and control mechanisms. It also includes requirements relating to incident management and the assessment of operational and security risks.

The exact controls required will depend on the organisation's role, services, systems, risks, and applicable legal obligations. ISO 27001 can provide a risk-based structure for determining which information security controls are relevant to the organisation's API environment.

Open Banking API Security Controls Expected by Regulators and Partners

Regulators and financial-sector partners increasingly expect organisations to demonstrate that security risks are identified, controlled, monitored, and reviewed.

For open banking APIs, this can involve controls covering authentication and authorisation, encryption, secure software development, vulnerability management, logging, incident response, third-party relationships, and service availability.

Security expectations may also extend beyond an organisation's own infrastructure. An API connection with a third-party provider creates dependencies that need to be evaluated as part of the organisation's overall information security risk management process.

How ISO 27001 for PSD3 Compliance Works

Role of the ISMS in Securing API Interconnections

ISO 27001 establishes requirements for an Information Security Management System. Rather than focusing on a single application or technology, the standard takes a broader risk-based approach to information security.

For an organisation operating open banking APIs, the ISMS can bring together security policies, risk assessment, control selection, responsibilities, monitoring, internal evaluation, corrective actions, and continual improvement.

The value of this approach is that API security becomes part of the organisation's wider information security governance. Security requirements can be connected to business risks, regulatory obligations, technical assets, suppliers, employees, and operational processes.

ISO 27001 for Open Banking Security

ISO 27001 can be relevant to open banking security because its control framework covers areas that directly affect API environments.

These areas include identity and access management, cryptography, network security, secure development, logging and monitoring, vulnerability management, supplier relationships, incident management, and business continuity.

ISO/IEC 27001:2022 is the current published edition of the standard and defines requirements for an ISMS. ISO also identifies ISO/IEC 27002:2022 as the related standard covering information security controls.

For European financial organisations, the key is not to treat ISO 27001 as a substitute for payment services regulation. Instead, the ISMS and selected controls can be aligned with the organisation's applicable PSD3-related security obligations and other regulatory requirements.

What ISO 27001 Certification Does and Does Not Cover for PSD3

ISO 27001 certification demonstrates conformity of a defined ISMS scope with the requirements of ISO/IEC 27001. It does not mean that an organisation automatically complies with every requirement of PSD3.

PSD3 is a regulatory framework with requirements that depend on the organisation's role and activities. ISO 27001 is an information security management system standard.

The two can therefore be aligned, but they remain separate frameworks.

An organisation should identify its applicable PSD3 obligations, determine the information security risks associated with its payment and API environment, and assess how its ISO 27001 ISMS and selected controls address those risks.

ISO 27001 Mapping to PSD3

Mapping PSD3 Security Requirements to ISO 27001 Clauses

Mapping PSD3 security requirements to ISO 27001 begins with identifying the regulatory requirement and then determining which ISMS processes address the relevant risk.

For example, requirements concerning security risk management can be considered alongside the organisation's information security risk assessment process. Requirements concerning security responsibilities can be connected with organisational roles and governance. Incident-related obligations can be considered alongside the organisation's incident management processes.

This mapping creates traceability between regulatory expectations and information security processes. It can also make it easier to identify areas where additional controls or evidence may be required.

Mapping PSD3 Security Controls to ISO 27001 Annex A

ISO 27001 Annex A provides a set of reference information security controls that organisations can consider when determining appropriate controls for identified risks.

For open banking environments, relevant areas may include access control, identity management, authentication information, cryptography, network security, secure coding, logging, monitoring activities, supplier security, incident management, and ICT readiness for business continuity.

The selection of controls should be based on the organisation's risk assessment and the defined ISMS scope. Not every Annex A control will necessarily apply to every organisation or API environment.

ISO 27001 Controls for PSD3

Access Control and Identity Management

API environments require strict control over who and what can access payment systems and data.

Access controls should distinguish between users, applications, services, administrators, and third-party systems. Privileges should be assigned according to business and security requirements, with unnecessary access removed.

Identity management is particularly important for service-to-service API connections. Authentication credentials, tokens, certificates, and other authentication information should be protected throughout their lifecycle.

Strong authentication mechanisms can reduce the risk associated with stolen credentials and unauthorised access to sensitive payment services.

Cryptography and Secure Data Transmission

Open banking APIs frequently transmit sensitive financial and personal information between systems. Cryptographic controls therefore play an important role in protecting information during transmission and, where applicable, while stored.

Secure transport protocols should be configured appropriately, while encryption keys, certificates, and other cryptographic information require controlled management.

The objective is to prevent unauthorised parties from intercepting or altering information as it moves between connected systems.

Network Security and Secure API Connectivity

Network security controls can limit how API services communicate with internal systems, external providers, cloud environments, and other networks.

Segmentation, secure network architecture, traffic controls, firewall configurations, and restricted connectivity can reduce unnecessary exposure.

API gateways and related security technologies may also provide controls for authentication, traffic management, request validation, rate limiting, and monitoring. These technical measures should operate within the organisation's broader information security framework.

Secure Development and Application Security

API security begins during application development rather than after an API has been deployed.

Secure development practices can address common weaknesses such as broken authentication, excessive permissions, injection vulnerabilities, insecure configurations, exposed credentials, inadequate input validation, and vulnerable dependencies.

Code review, security testing, vulnerability management, change control, and secure development requirements can reduce the likelihood of security defects reaching production API environments.

Logging, Monitoring and Incident Detection

API environments can generate valuable security information, including authentication attempts, access events, administrative activity, failed requests, unusual traffic patterns, and system errors.

Appropriate logging and monitoring allow organisations to identify suspicious behaviour and investigate security incidents.

Logs should be protected against unauthorised modification and retained according to applicable legal, regulatory, contractual, and business requirements.

Monitoring should also consider abnormal API activity, repeated authentication failures, unexpected data access, unusual request volumes, and other indicators of potential misuse.

Supplier and Third-Party Relationship Security

Open banking ecosystems commonly involve external providers. These may include cloud service providers, technology vendors, API platforms, security providers, payment processors, and other third parties.

Third-party security risks should therefore form part of the organisation's information security risk assessment.

Contracts and supplier security requirements should address relevant responsibilities, access, data protection, incident notification, security expectations, and service continuity.

The organisation should also evaluate whether changes in third-party services could affect the security or availability of critical API connections.

Incident Management and Business Continuity

A security incident affecting an API can interrupt payment services or expose sensitive information. Organisations therefore need defined processes for detecting, assessing, responding to, and recovering from security incidents.

Business continuity planning is equally important where APIs support critical payment services. Recovery arrangements should consider system dependencies, communication channels, backup capabilities, third-party dependencies, and recovery objectives.

Regular testing can provide evidence that response and recovery arrangements remain suitable for the organisation's risk profile.

ISO 27001 Open Banking API Security

Authentication and Authorisation Controls for APIs

Authentication establishes whether a user, application, or service is legitimate. Authorisation determines what that authenticated entity is permitted to access or perform.

For open banking APIs, these controls should be designed around the sensitivity of payment and account information. Access should be limited to the functions and data required for the specific service.

Token management, credential protection, session controls, privilege management, and authentication monitoring can all contribute to stronger API security.

API Data Protection and Privacy Safeguards

Open banking APIs may process financial information and personal data. Security controls therefore need to address both information security and applicable privacy obligations.

Data should be collected, transmitted, processed, stored, and retained according to defined requirements. Unnecessary exposure of sensitive information through API responses, logs, error messages, or development environments should be avoided.

Where personal data is involved, organisations should also consider applicable GDPR and national data protection obligations alongside their information security requirements.

API Monitoring, Testing and Vulnerability Management

API security requires ongoing monitoring because vulnerabilities and attack techniques change over time.

Security testing can identify weaknesses in authentication, authorisation, input validation, business logic, configuration, session management, and API endpoints.

Vulnerability management should establish processes for identifying, assessing, prioritising, and addressing relevant weaknesses based on their potential impact.

Monitoring should complement testing by identifying suspicious activity that may occur after an API enters production.

Securing Third-Party Provider Connections

Third-party API connections should be assessed according to their access, data exposure, operational importance, and security risk.

Organisations should understand which external services can access their systems and information, what permissions those services have, and how security responsibilities are divided.

Supplier security controls should also consider incident notification, access management, service availability, security testing, contractual requirements, and termination of access when a relationship ends.

PSD3 Requirements vs ISO 27001 Controls

A practical mapping between PSD3-related security expectations and ISO 27001 can focus on the underlying security objective rather than treating the two frameworks as identical.

For operational and security risk management, the organisation can map relevant requirements to its ISMS risk assessment and risk treatment processes. For API access security, identity and access controls can be mapped to applicable ISO 27001 Annex A controls. For secure communications, cryptographic and network security controls can be considered.

Incident-related requirements can be connected with incident management controls, while resilience requirements can be considered alongside business continuity and ICT readiness controls. Third-party API relationships can be mapped to supplier relationship security controls.

The resulting mapping should be specific to the organisation's services, API architecture, regulatory role, risks, and ISMS scope. A generic mapping should not be treated as evidence of regulatory compliance by itself.

Applying ISO 27001 Controls for PSD3 and Open Banking APIs

Defining Scope for API Interconnections

The first consideration is determining which systems, services, information, locations, people, suppliers, and API connections fall within the ISMS scope.

For an open banking environment, the scope may include API gateways, payment platforms, account information systems, authentication services, cloud infrastructure, development environments, monitoring platforms, and relevant third-party connections.

A clearly defined scope creates a stronger basis for assessing security risks and determining applicable controls.

Risk Assessment for PSD3 and Open Banking APIs

The risk assessment should consider threats and vulnerabilities affecting API connections and the information they process.

Potential scenarios include credential theft, unauthorised API access, data exposure, malicious requests, compromised third-party services, denial-of-service attacks, insecure software components, configuration errors, and failures of critical supporting systems.

Risk assessment results should influence the selection and prioritisation of information security controls.

Selecting and Applying Annex A Controls

ISO 27001 does not require organisations to automatically apply every Annex A control. Controls should be selected based on identified risks, requirements, and the organisation's circumstances.

For PSD3 and open banking environments, relevant controls may relate to identity management, access rights, authentication information, cryptography, network security, secure coding, vulnerability management, logging, monitoring, supplier relationships, incident management, and business continuity.

The selected controls should be supported by appropriate processes and evidence demonstrating how they operate within the ISMS.

Statement of Applicability for API Security

The Statement of Applicability records the controls selected for the ISMS and explains their applicability.

For an organisation with extensive open banking API connections, the Statement of Applicability can provide a clear reference for understanding which information security controls are relevant to the API environment and why.

It can also establish a connection between identified risks, selected controls, and the organisation's overall information security objectives.

ISO 27001 Certification Audit for PSD3 and Open Banking Environments

Stage 1 and Stage 2 Audit Focus Areas

During an ISO 27001 certification audit, auditors evaluate whether the ISMS meets the applicable requirements of the standard within the defined scope.

Stage 1 generally focuses on areas such as the organisation's ISMS scope, documented information, organisational context, risk management approach, and readiness for the next stage.

Stage 2 involves a more detailed evaluation of the ISMS and its operation within the defined scope. For an organisation operating open banking APIs, this can include examining how information security risks are assessed and how relevant controls operate in practice.

The audit focus depends on the organisation's defined scope, risk profile, systems, processes, and applicable ISO 27001 requirements.

Evidence Auditors Review for API Security Controls

Evidence can demonstrate how security controls operate within the organisation.

For API environments, relevant evidence may include access control records, authentication configurations, security policies, risk assessments, vulnerability management records, security testing results, monitoring information, incident records, supplier evaluations, business continuity tests, and control-related records.

The specific evidence reviewed depends on the ISMS scope and the controls selected by the organisation.

Surveillance Audits and Ongoing Compliance

ISO 27001 certification is not a one-time security exercise. Certified organisations are subject to ongoing certification activities, including surveillance audits during the certification cycle.

For open banking environments, continued attention is important because API architectures, third-party connections, technologies, vulnerabilities, and regulatory expectations can change.

Changes to critical systems or API connections should therefore be considered within the organisation's information security risk management and ISMS processes.

Common Challenges in Securing PSD3 and Open Banking API Interconnections

One of the biggest challenges is the number of interconnected systems involved in modern payment services. An API may connect internal applications with several external providers, making it difficult to maintain consistent security controls across the entire ecosystem.

Another challenge is controlling access without disrupting legitimate services. Excessive permissions increase security risk, while overly restrictive controls can interfere with business operations.

Organisations may also face challenges in monitoring API traffic at scale. Large volumes of legitimate transactions can make unusual activity difficult to identify without appropriate monitoring and analysis.

Third-party dependencies create another layer of risk. An organisation may maintain strong internal security controls while still depending on external providers whose security practices affect the overall environment.

Finally, regulatory requirements and technical architectures continue to evolve. Organisations need processes that allow security controls and risk assessments to remain aligned with changes in their services and applicable regulatory obligations.

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Benefits of Aligning ISO 27001 Controls with PSD3 Security Requirements

Aligning ISO 27001 controls with PSD3-related security requirements can create a more structured approach to managing information security risks across payment and open banking environments.

A well-defined ISMS can provide greater visibility into information security risks, clarify responsibilities, establish consistent control processes, and create evidence of how security risks are managed.

It can also strengthen the security of API connections by bringing technical controls into a broader management framework covering people, processes, technology, suppliers, incidents, and business continuity.

For organisations operating across Europe, this alignment can also provide a clearer basis for demonstrating that information security risks associated with payment services have been identified and addressed through a structured risk management process.

ISO 27001 certification does not itself establish PSD3 compliance. However, when the ISMS scope and control environment are appropriately designed around the organisation's payment services and information security risks, ISO 27001 can provide a strong foundation for managing the security aspects of an open banking environment.

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