What Is Material Service Provider?

Material Service Provider — under APRA's prudential standard CPS 230, a third party an APRA-regulated entity relies on to deliver a critical operation, or that exposes it to material operational risk — increasingly including providers of AI and cloud services.

CPS 230 (operational risk management) requires Australian banks, insurers, and superannuation trustees to identify their material service providers, manage the risks those providers create, and keep registers and contingency arrangements. As AI models and platforms become critical inputs, the AI vendor is increasingly a material service provider — which is why APRA's April 2026 letter stressed mapping these dependencies, including the fourth parties behind them.

Source: APRA Prudential Standard CPS 230