Systematic Framework for Managing Third-Party Software Vendor Relationships in Banking Sector

Posted: Feb 14, 2021

• Scarlett Hernandez
• Scarlett Thomas
• Scarlett Young

Abstract

The banking sector's digital transformation has accelerated the adoption of third-party software solutions, creating complex interdependencies that traditional vendor management frameworks struggle to manage effectively. Financial institutions increasingly rely on external vendors for critical functions including core banking systems, payment processing, cybersecurity, and customer relationship management. This dependency introduces multifaceted risks encompassing data security, regulatory compliance, operational resilience, and strategic alignment. Current vendor management practices predominantly rely on periodic audits, contractual agreements, and compliance checklists, which fail to provide real-time visibility into vendor performance and risk exposure. The limitations of existing approaches became particularly evident during recent cybersecurity incidents where third-party vulnerabilities led to significant financial losses and reputational damage across multiple banking institutions. This research addresses the critical gap in third-party risk management by developing a comprehensive framework that leverages emerging technologies to create a proactive, adaptive, and transparent vendor management ecosystem. The framework integrates blockchain technology for immutable record-keeping,