There is no such thing as a proverbial jack-of-all-trades in open banking. Companies therefore work with third-party providers, technology partners, and external service providers to implement digital financial services quickly and efficiently.
However, this collaboration entails risks – for example, in terms of regulation, security, or the stability of connected systems. Third-party risk management (TPRM) helps to identify these risks early on, evaluate them, and manage them in a controlled manner.
Third-party risk management – a definition
Third-party risk management in the open banking environment describes the structured process for identifying, assessing, monitoring, and controlling risks arising from collaboration with third-party providers such as TPPs, API partners, or technical service providers. The focus is particularly on regulatory requirements (e.g., PSD2/PSR), information security, data protection, API availability, and the operational and financial stability of connected parties. Effective TPRM enables financial institutions and open banking platforms to transparently manage third-party providers throughout their entire lifecycle, ensure regulatory compliance, and build trustworthy, scalable ecosystems.
Why third-party risk management is important
Third-party risk management plays a central role in open banking, as modern financial services are increasingly based on collaboration with external partners. Third-party providers enable innovation, scalability, and faster time to market, but at the same time they increase the attack surface and risk exposure of companies. Regulatory requirements, security standards, and data protection regulations still apply even when critical processes are outsourced. Companies therefore remain responsible for compliance and the protection of customer data. Without structured third-party risk management, it is difficult to manage risks transparently and controllably across complex partner networks. TPRM creates the necessary foundation for trust, stability, and sustainable growth in the open banking ecosystem.
What counts as a “third party” in open banking?
In the context of open banking, the term “third party” encompasses a variety of external players involved in the provision of digital financial services. These include, in particular, third-party providers (TPPs) such as payment initiation service providers (PISPs) or account information service providers (AISPs). API partners, technology providers, cloud and infrastructure service providers, and specialized compliance or identity solutions are also considered third parties. The decisive factor here is not so much the type of company as access to systems, data, or critical processes. Even indirect service providers can pose relevant risks if they are part of the value chain. A clear definition and delimitation of third parties is therefore the basis for effective third-party risk management.
Typical risks associated with third-party providers
Working with third-party providers in the open banking environment involves various types of risk. The main risks include regulatory and compliance risks, such as non-compliance with requirements such as PSD2 or PSR. In addition, there are IT and cybersecurity risks, particularly when accessing APIs and processing sensitive financial data. Data protection risks arise when personal data is not adequately protected or is passed on in an uncontrolled manner. Operational risks can also occur, for example due to external system failures or inadequate service quality. Financial and strategic risks also play a role, for example when third-party providers are economically unstable or lead to excessive dependencies.
The TPRM lifecycle
Third-party risk management is not a one-time process, but accompanies the entire duration of a business relationship. It begins with the identification of potential third-party providers and a structured risk analysis as part of due diligence. On this basis, third parties are evaluated, classified, and appropriate control and security measures are defined. During the ongoing collaboration, continuous monitoring is necessary to identify changes in the risk profile at an early stage. This includes regular reviews, monitoring of performance indicators, and verification of regulatory and technical requirements. The lifecycle ends with controlled offboarding, which ensures that access is terminated and data is handled properly.
Conclusion: TPRM as a success factor in open banking
Third-party risk management is a key success factor for secure and scalable open banking ecosystems. It combines innovation with regulatory control and enables responsible collaboration with third-party providers. Transparent processes and continuous monitoring allow risks to be identified early on and managed in a targeted manner. At the same time, effective TPRM strengthens the trust of customers, partners, and regulatory authorities and supports the sustainable growth of digital financial services.
