Fraud Risks in Open API Implementation: A Comparative Study of India and International Financial Markets

Introduction. The adoption of the Open Application Programming Interface (Open API) model is transforming the financial sector by promoting transparency, interoperability, and innovation through the integration of third-party applications. While Open APIs promote digital financial inclusion and customer-centric service delivery, they also introduce significant vulnerabilities, most notably the risk of fraud. This paper examines fraud as a critical challenge in the implementation of Open APIs, drawing comparative insights from both Indian and international contexts. Materials and methods. The materials used included peer-reviewed journal publications related to information security, financial technology, and economics. Specialized literature on information security, risk management, and financial technology was also used. Results. India has emerged as a leader in digital finance through innovations such as the Unified Payments Interface (UPI) and India Stack. However, the widespread integration of third-party apps has led to an increase in fraud incidents, including phishing, credential misuse, and unauthorized access. Cases involving platforms such as Paytm and PhonePe highlight the need for stronger API governance and consumer awareness. In contrast, the European Union’s Revised Payment Services Directive (PSD2) mandates strong customer authentication and standardized APIs, establishing a regulatory framework for preventing fraud. However, breaches like the 2020 TrueLayer incident in the UK reveal that even advanced systems are vulnerable to threats arising from API vulnerabilities. This paper highlights the gaps in regulatory oversight, technological safeguards, and user education in both Indian and global ecosystems. It calls for the implementation of robust API security standards, real-time fraud detection systems, and coordinated regulatory frameworks to ensure adequate protection. Strengthening inter-agency collaboration and public-private partnerships is crucial for creating a secure, resilient, and trustworthy financial API environment.