Penetration Testing for Financial Services: Meeting Compliance and Security Benchmarks

The financial sector has always been a prime target for attackers, but the scale and sophistication of threats have grown exponentially. In just the first half of 2025, over 742 million attacks were recorded across more than 600 global banking and financial services (BFS) sites, averaging 1.2 million attacks per site, a 51% increase compared to the same period in 2024. Even more concerning is that 77% of these attacks focused on exploiting vulnerabilities, while API-targeted attacks surged by 60%, driven by the sector’s growing reliance on APIs for payments, onboarding, and loan processing.

With such staggering numbers, it is clear that financial services remain one of the most attractive targets for cybercriminals. This makes penetration testing critical for identifying weaknesses before attackers do, safeguarding sensitive customer data, and maintaining compliance in an increasingly hostile threat landscape.

Why Financial Institutions Need Penetration Testing

The financial sector faces unique security challenges that make penetration testing a necessity rather than an option:

1. High-Stakes Data and Trust at Risk

Financial institutions handle some of the most sensitive and valuable data, customer identities, account details, credit information, and billions of transactions processed daily. Unlike other industries, the stakes are exceptionally high because even a single breach can trigger cascading consequences: regulatory fines, fraud losses, legal exposure, and long-term damage to customer trust.

2. The Cost of a Breach

According to IBM’s Cost of a Data Breach 2024 Report, the average breach in the financial sector now costs USD 6.08 million, one of the highest across all industries. Beyond direct costs, breaches erode the very foundation of digital banking “trust” which takes years to rebuild once compromised.

3. Expanding Attack Surface

Every layer of the financial ecosystem presents an opportunity for attackers. Online banking apps, APIs powering open banking, mobile wallets, payment gateways, and even internal banking systems are all attractive targets. Penetration testing becomes essential because it simulates realistic attack scenarios against these systems, uncovering vulnerabilities before adversaries exploit them.

4. Compliance and Regulatory Pressure

Compliance is another major driver. Compliance standards like PCI DSS 11.3, and RBI (Clause 24) guidelines mandate pen testing to validate the security of financial systems. Failure to comply not only risks penalties but also exposes institutions to systemic risks in increasingly digital financial markets.

5. From Reactive to Proactive Resilience

By identifying weaknesses such as broken access controls, insecure APIs, misconfigured cloud services, and gaps in fraud detection, penetration testing empowers institutions to strengthen their defenses and validate their response capabilities. More importantly, it shifts the approach from reactive firefighting to proactive resilience, ensuring financial services can withstand threats without disrupting operations or eroding customer confidence.

Key Components of Penetration Testing in Financial Service

A robust penetration testing program for financial institutions goes far beyond surface-level vulnerability scans. Here are the key components of effective penetration testing for financial services.

1. Testing Banking Applications, Customer Portals, and Core Systems

Banking applications, whether customer-facing portals or internal systems like loan origination, treasury platforms, or employee dashboards, are prime targets due to the sensitive data and privileged access they manage. Both external attackers and malicious insiders can exploit vulnerabilities to steal data, manipulate transactions, or disrupt services.

Key risks to assess include:

• Authentication and Session Security:Identifying weak login flows, session hijacking risks, or bypass mechanisms.
• Business Logic Exploits:Detecting vulnerabilities in transaction workflows, fund transfers, or approval chains that could be manipulated.
• Privilege Escalation:Ensuring customers or lower-level employees cannot gain administrative or staff-level access.
• Segregation of Duties:Verifying that high-value operations, such as fund approvals, are restricted through proper role separation.
• Data Protection:Testing data handling processes to prevent leakage or unauthorized access to financial records.

Indusface certified experts conduct in-depth manual penetration testing of both customer-facing and internal banking applications, supported by continuous DAST scanning that includes authenticated testing. This ensures that critical systems, from transaction portals to core banking platforms, remain resilient against fraud, privilege abuse, and insider or external exploitation.

2. Testing Payment Gateways and Transaction Workflows

Payment gateways are the backbone of digital transactions. Even minor vulnerability can result in fraudulent payments, double spending, or transaction manipulation. Effective penetration testing focuses not only on traditional injection vulnerabilities but also on the security of business logic and financial workflows.

This includes:

• Transaction Integrity: Ensuring payments cannot be intercepted, replayed, or altered.
• Encryption Validation: Testing if sensitive payment data is properly secured in transit and at rest.
• Fraud Simulation: Assessing whether fraud detection mechanisms can identify and block malicious activity.

3. Testing Financial APIs and Integrations

APIs are now the connective tissue of modern finance, powering mobile apps, third-party integrations, and open banking ecosystems. However, poorly secured APIs remain one of the most exploited attack surfaces.

Penetration testing of financial APIs must include:

• OWASP API Top 10 Coverage: Detecting vulnerabilities like broken object-level authorization, mass assignment, and data exposure.
• Shadow API Discovery: Identifying undocumented endpoints (Shadow APIs) that often bypass security controls.
• Authentication and Authorization Testing: Ensuring only verified and authorized entities can access transaction data or initiate payments.

Indusface’s API penetration testing leverages the Infinite API Scanner, which combines unlimited, plugin-based scans with expert manual review to uncover both technical vulnerabilities and financial

4. Testing Cloud and SaaS-Based Financial Platforms

As financial institutions migrate to cloud platforms and SaaS-based solutions, ensuring their resilience is essential. Misconfigurations or weak access policies in cloud environments can expose vast amounts of financial data.

Testing must address:

• Configuration Reviews: Identifying insecure cloud setups, weak IAM (Identity and Access Management) roles, or excessive permissions.
• Data Segregation in SaaS: Ensuring that multi-tenant systems do not leak one client’s financial data to another.
• Vendor-Provided Evidence: Verifying that third-party SaaS providers conduct regular, independent penetration testing.

5. Testing Incident Response and Resilience

Penetration testing is not just about finding vulnerabilities; it validates whether defenses work when under attack. For financial institutions, resilience is tested by simulating real-world attack scenarios and monitoring how SOC teamsand incident response playbooks perform.

This includes:

• Detection Validation: Confirming that monitoring tools and SIEMs generate accurate alerts.
• Response Drills: Assessing if SOC teams respond quickly and effectively to simulated intrusions.
• Operational Continuity: Ensuring that critical banking operations remain functional during simulated disrup

6. Compliance and Remediation

Regulators often mandate not just penetration testing but also timely remediation of identified vulnerabilities. Meeting compliance means you must discover, document, fix, and verify the remediation. Here are some relevant compliance mandates:

PCI DSS – Requirement 11 (Testing / Monitoring) & 11.4.4 – PCI DSS requires using a methodology for penetration testing (Req. 11.3) and to remediate “exploitable vulnerabilities” and “security weaknesses” (Req. 11.4.4) in PCI DSS v4.0. Also, patches for Critical/High risk vulnerabilities must be installed within one month per Req. 6.3.3.

Indusface Penetration Testing ensures comprehensive compliance by delivering detailed reports that highlight vulnerabilities, prioritize risks, and provide actionable remediation guidance.
By onboarding applications to AppTrana WAAP, you can virtually patch critical, high, and medium-level vulnerabilities through SwyftComply, helping you generate clean vulnerability reports and maintain continuous compliance.

The Path to Continuous Financial Resilience

For financial institutions, compliance frameworks like RBI, PCI DSS, and ISO 27001 set the minimum bar, but real security requires continuous comprehensive penetration testing. By validating banking applications, APIs, and core systems, penetration testing not only meets compliance but strengthens resilience against evolving threats.

Get started with Indusface’s PTaaS approach for web apps and APIs, combining expert-led testing, AI-driven scanning, and SwyftComply for instant protection, to safeguard compliance, operations, and customer trust.

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