Open-source core banking software refers to software whose source code is publicly available for inspection, modification, and distribution. In core banking software development, open-source components are widely used across infrastructure layers, programming frameworks, database systems, cryptographic libraries, and API tooling. The question of whether open-source technology is safe and secure in this context is not a binary one. Security depends not on whether the components are open-source or proprietary, but on how they are selected, implemented, monitored, and maintained within the institution’s overall ICT security framework.
As illustrated in a typical open-source security management process within a core banking environment, the development team maintains an inventory of all open-source components used across the system, monitors vulnerability disclosure databases such as the National Vulnerability Database (NVD) for newly identified issues affecting those components, and applies patches and updates within a defined remediation timeframe based on the severity of the vulnerability.
This process, often referred to as software composition analysis (SCA), is a standard element of secure software development practice and a requirement under the ICT risk management framework that DORA imposes on financial institutions and their technology providers.
Key Takeaways: #
- Open-source technology can be safe and secure in core banking software development when implemented with appropriate security controls, ongoing patch management, and a disciplined software supply chain governance process;
- The primary security advantages of open-source components are community-driven code review, transparent vulnerability disclosure, and rapid patching cycles, which in many cases produce faster remediation of identified vulnerabilities than proprietary software development cycles;
- For payment institutions and e-money institutions, the use of open-source components in core banking software must be managed within the ICT risk management framework required by DORA, including component inventory, vulnerability monitoring, and documented processes for applying security updates.
Why Open-Source Technology Can Be Secure in Core Banking Contexts #
Community-driven security and code transparency: One of the structural advantages of open-source software is that its source code is publicly available for inspection by any developer or security researcher. This transparency enables a large and diverse community of security professionals to identify vulnerabilities, propose fixes, and review code changes on an ongoing basis. In practice, widely adopted open-source projects often benefit from more intensive security scrutiny than proprietary software, where code review is limited to the vendor’s internal team. The collaborative model means that vulnerabilities are frequently identified and disclosed through coordinated processes, with patches made available to all users simultaneously.
Rapid patching and vulnerability remediation: Open-source communities have established processes for responding to identified security vulnerabilities, including coordinated disclosure, patch development, and release. For widely used projects, the time between vulnerability identification and patch availability is often shorter than the equivalent cycle for proprietary software vendors, which must manage internal development, testing, and release processes before a fix reaches customers. For core banking software, the ability to apply security patches promptly is a critical operational requirement, particularly under DORA, which requires financial institutions to manage ICT vulnerabilities systematically and within defined timeframes.
Customisation and security control implementation: Open-source technology allows development teams to inspect and modify the underlying code to meet specific security requirements, implement additional security controls, and remove functionality that is not required and that may represent an unnecessary attack surface. This level of control is not available with proprietary software, where the institution is dependent on the vendor to implement security changes on its behalf. For payment institutions and e-money institutions with specific security architecture requirements, the ability to customise open-source components to meet those requirements is a practical advantage.
Vendor independence and supply chain control: Using open-source components reduces dependency on individual software vendors for security updates and patches. Where a proprietary vendor discontinues support for a product, becomes insolvent, or delays a critical security update, the institution has limited recourse. With open-source components, the institution can apply patches independently, fork the codebase if necessary, or engage third-party support providers, maintaining continuity of security coverage regardless of any single vendor’s commercial decisions.
Compliance with security standards: Many widely adopted open-source projects are actively maintained to comply with recognised security standards and undergo formal security assessments. Open-source cryptographic libraries, for example, are frequently subjected to independent security audits, the results of which are publicly available.
For financial institutions required to comply with PCI DSS, GDPR, and the ICT security requirements of DORA, the availability of audit reports and security assessment results for open-source components supports the institution’s own compliance documentation and third-party risk assessment processes.
Key Risks and How to Manage Them #
Open-source technology introduces specific risks that must be actively managed within the institution’s ICT risk framework.
Unmanaged component inventory: The most common open-source security failure in software development is the use of components that are not tracked, monitored, or updated systematically. Financial institutions using open-source components in core banking software must maintain a complete software bill of materials (SBOM) covering all open-source dependencies, including transitive dependencies, and must monitor each component for newly disclosed vulnerabilities on an ongoing basis.
Abandoned or unmaintained projects: Not all open-source projects benefit from active community maintenance. Components that are no longer actively maintained will not receive security patches for newly discovered vulnerabilities. Development teams must assess the maintenance status and community activity of any open-source component before incorporating it into core banking software, and must have a documented process for replacing components that become unmaintained.
Licence compliance: Open-source software is distributed under a variety of licence types, some of which impose conditions on how the software may be used, modified, or distributed. Financial institutions using open-source components in commercial core banking software must ensure that their use of those components complies with the applicable licence terms, and must maintain records of the licences governing each component in their software inventory.
Secure coding and integration practices: The security of open-source components in a core banking environment also depends on how those components are integrated and configured. Insecure default configurations, failure to implement available security features, and poor integration practices can introduce vulnerabilities regardless of the underlying security quality of the open-source component itself. Development teams must follow secure coding standards and conduct regular code reviews and penetration testing across the full application, not only at the component level.
DORA Implications for Open-Source Use in Core Banking Software #
Under DORA, financial institutions are required to implement a comprehensive ICT risk management framework that covers the identification, protection, detection, response, and recovery functions across all ICT systems. The use of open-source components in core banking software falls within the scope of this framework. Institutions must be able to demonstrate that they maintain an inventory of software components, monitor for vulnerabilities, and apply patches within defined timeframes. Where open-source components are used in systems that support critical or important functions, the institution must assess the associated risks as part of its ICT risk management process and document its mitigation measures accordingly.
FAQ:
What is a software bill of materials (SBOM), and why is it relevant to open-source security?
- A software bill of materials (SBOM) is a structured inventory of all software components used within an application, including open-source libraries and their transitive dependencies, along with version information and licence details. For core banking software, an SBOM is the foundational document that enables the development and security teams to monitor all components for newly disclosed vulnerabilities and to assess the impact of a specific vulnerability on the system quickly and accurately. Under DORA’s ICT risk management requirements, the ability to identify and respond to ICT vulnerabilities is a mandatory obligation, and maintaining an accurate SBOM is a practical prerequisite for meeting that obligation in a system that uses open-source components.
How should open-source components in core banking software be assessed as part of DORA ICT third-party risk management?
- DORA’s ICT third-party risk management requirements apply primarily to ICT service providers that deliver services to financial institutions under a contractual arrangement. Open-source components that are incorporated into the institution’s own software are generally not third-party ICT service providers in the DORA sense, as there is no contractual service relationship. However, the institution’s ICT risk management framework must still address the risks associated with open-source component use, including vulnerability management, licence compliance, and component maintenance status.
- Where the institution engages a third-party provider to supply or support software that incorporates open-source components, the contractual provisions required by DORA, including audit rights, incident notification, and exit arrangements, should address how the provider manages open-source security within the delivered software.
