As the UK’s smart data ecosystem expands from open banking to open finance and broader cross-sector data sharing, managing risk in real time has become a critical priority. Invela’s new white paper explores how to strengthen defences against the rising risks tied to third-party providers.
In its new white paper, an open finance risk management network, Invela, warns that third-party risk management frameworks are failing to keep pace with rapid innovation, as the UK’s smart data ecosystem is evolving rapidly, moving from open banking toward open finance and cross-sector data sharing under the ambitions of the upcoming Data Use and Access Act.
The report outlines the growing vulnerabilities facing banks, building societies, and data aggregators as digital connections become more complex.
The paper identifies several key risks that continue to challenge financial institutions, including third-party impersonation, weak consent management, mobile app vulnerabilities, payment manipulation, and data breaches. These threats have been underscored by recent high-profile incidents, such as failures in fraud detection systems at major payment providers, highlighting the need for more coordinated, real-time oversight.
One example was the failure of PayPal’s fraud filters, which led to €10 billion in unchecked debits affecting European banks and demonstrated how quickly vulnerabilities can cascade through interconnected systems.
Industry data shows that liability for fraud and data breaches in open finance remains a major concern. Many financial institutions fear they bear responsibility for losses resulting from third-party failures, which can lead to both financial and reputational harm. The issue is compounded by fragmented regulatory oversight, as most frameworks remain sector-specific and do not yet address risks that span multiple industries.
In response, Invela has proposed a new Open Finance Risk Management framework designed to provide greater visibility and accountability across data-sharing networks. The framework consists of three components: vetting and validating third-party providers and aggregators, including those outside regulated environments; real-time monitoring across thousands of data points, alerting institutions when activity exceeds set risk thresholds; and an insurance-backed mechanism providing compensation for verified losses linked to third-party risks.
Jim Wadsworth, Chief Revenue Officer at Invela, noted that as innovation continues to reshape financial data ecosystems, addressing emerging vulnerabilities will be key to maintaining trust and resilience.
The report calls for industry collaboration and cross-sector risk management standards to strengthen the UK’s smart data infrastructure as it evolves toward open finance and broader data sharing.
