Rethinking penetration tests in modern finance

Penetration testing has long been a staple of security assurance in the world of finance and fintech. Traditionally viewed as an ethical hacking exercise to identify vulnerabilities, it’s a critical component for meeting regulatory requirements. However, for today’s financial institutions, merely ticking the “pen test” box on a compliance checklist is a strategy fraught with risk. The evolving threat landscape, coupled with the increasing complexity of financial technologies, demands a more strategic, insightful, and continuous approach to penetration testing.

Financial services are prime targets for sophisticated cyber adversaries, driven by the potential for significant financial gain and disruption. As institutions embrace open banking APIs, cloud platforms, mobile-first solutions, and AI-driven analytics, their attack surface expands, introducing new and often unforeseen vulnerabilities. A compliance-first mindset towards penetration testing can create a false sense of security, potentially overlooking critical weaknesses that a more tailored and intelligent approach would uncover. This article explores how financial organizations can elevate their penetration testing from a reactive necessity to a proactive strategic advantage.

Why standard pen testing often falls short

The unique pressures and characteristics of the financial sector mean that a generic, off-the-shelf penetration test may not provide the depth of assurance needed:

• Rapid Innovation Cycles: FinTech’s, in particular, operate with agile development and rapid deployment. Annual or infrequent penetration tests struggle to keep pace with these changes, leaving new features or APIs untested for extended periods.
• Complex Regulatory Demands: Financial institutions navigate a labyrinth of regulations (e.g., PCI DSS, DORA, GDPR, NYDFS Cybersecurity Regulation). While pen tests are mandated, a purely compliance-focused test might only verify baseline controls, not the resilience against advanced, targeted attacks.
• Sophisticated Adversaries: Attackers targeting financial services are often well-resourced and employ advanced persistent threat (APT) tactics. Standardized tests may not accurately simulate the ingenuity and determination of these threat actors.
• Interconnected Ecosystems: Open banking and third-party integrations create a complex web of interconnected systems. A strategic pen test must consider these dependencies and potential cascading risks, which a narrowly scoped test might miss.

Hallmarks of a strategic penetration test for financial institutions

Moving beyond a checkbox mentality requires embedding penetration testing within a broader risk management framework. Key characteristics of a strategic approach include:

1. Clear Objectives Aligned with Business & Security Risks:

Instead of a generic “find vulnerabilities” mandate, objectives should be specific and tied to the institution’s unique risk profile. This could involve:

• • Simulating an attack on a new digital banking platform before launch.
  • Testing the security of Open Banking APIs and their integration points.
  • Assessing the resilience of cloud infrastructure against common misconfigurations and financial sector-specific threats.
  • Evaluating the effectiveness of fraud detection mechanisms within payment applications.

2. Realistic Threat Emulation (Adversary Simulation):

Strategic tests go beyond automated scanning to mimic the tactics, techniques, and procedures (TTPs) of adversaries known to target the financial sector. This might involve scenario-based testing, where testers attempt to achieve specific goals, such as accessing sensitive customer data or executing fraudulent transactions.

3. Comprehensive and Contextual Scope:

The scope should encompass all critical assets and potential attack vectors, including:

• • Web and mobile applications (especially banking apps and payment gateways).
  • Internal and external network infrastructure.
  • Cloud environments (IaaS, PaaS, SaaS) and their configurations.
  • APIs (internal, external, third-party).
  • Wireless networks.
  • Where appropriate and agreed, social engineering and physical security assessments.

4. Skilled Testers with Financial Sector Expertise:

The quality of a penetration test heavily depends on the skill and experience of the testing team. For financial services, it’s crucial to engage testers who understand:

• • Financial application logic and common vulnerabilities (e.g., in payment processing, loan origination systems).
  • Regulatory compliance requirements relevant to the sector.
  • The TTPs of threat actors targeting financial institutions.

5. Actionable, Prioritized Reporting & Remediation Support:

A strategic pen test delivers more than just a list of CVEs. The report should provide:

• • Clear, concise summaries for executive management.
  • Detailed technical findings for security and development teams.
  • Risk-based prioritization of vulnerabilities.
  • Actionable recommendations for remediation, including addressing root causes.
  • Strategic insights into security posture weaknesses and areas for improvement.

Integrating pen testing into the financial secure development lifecycle (DevSecOps)

For fintech companies and financial institutions adopting agile methodologies, penetration testing shouldn’t be an afterthought. Integrating security testing, including elements of penetration testing, into the development lifecycle (DevSecOps) is crucial. This involves:

• Automated Security Testing Tools: Incorporating SAST (Static Application Security Testing) and DAST (Dynamic Application Security Testing) tools early in development.
• API Security Testing: Regularly testing APIs as they are developed and updated.
• Threat Modeling: Proactively identifying potential threats and vulnerabilities during the design phase.
• More Frequent, Focused Pen Tests: Conducting smaller, targeted penetration tests on new features or significant changes, rather than relying solely on large annual tests.

Choosing the right penetration testing partner

Selecting a competent penetration testing provider is paramount. Financial institutions should look for:

• Industry-Recognized Certifications: Such as CREST, OSCP, OSCE, GPEN, GWAPT.
• Proven Experience in the Financial Sector: Request case studies (anonymized if necessary) and references from other financial clients.
• Deep Understanding of Financial Regulations: Ensure the partner understands PCI DSS, GLBA, DORA, etc., and how they relate to testing methodologies.
• Transparent Methodology: The provider should clearly articulate their testing approach, tools, and rules of engagement.
• Commitment to Ethical Practices and Data Handling: Especially given the sensitive nature of financial data.

Evolving penetration testing for enhanced financial resilience

The discipline of penetration testing is continuously evolving. Financial institutions should anticipate and explore:

• AI and Automation: Leveraging AI to enhance vulnerability discovery and automate certain aspects of testing, allowing human testers to focus on more complex scenarios.
• Continuous Automated Red Teaming (CART): Platforms that provide ongoing, automated simulation of adversary tactics to continuously assess defenses.
• Expanded Scope Red Teaming: Comprehensive red team operations that test not only technical controls but also people and processes, including incident response capabilities.
• Focus on Business Email Compromise (BEC) and Social Engineering Resilience: Given that these are prevalent threats to financial institutions.

From compliance burden to strategic enabler

For financial institutions and fintechs operating in today’s dynamic and perilous environment, penetration testing must transcend its role as a mere compliance checkbox. By adopting a strategic, intelligence-led, and continuous approach, organizations can transform penetration testing into a powerful tool that not only identifies critical vulnerabilities but also provides invaluable insights into their true security posture. This proactive stance is not just about preventing breaches; it’s about building resilience, protecting customer trust, and safeguarding the integrity of the financial ecosystem. It’s time for financial leaders to re-evaluate their testing strategies and ensure they are truly prepared for the sophisticated threats of tomorrow.