Why Third-Party Vulnerabilities Can Be Dangerous and Costly

Introduction

In today’s digital landscape, very few organizations build all their systems entirely in-house. To accelerate development, reduce costs, and deliver reliable services, companies rely heavily on third-party services such as email and SMS providers, cloud platforms, open-source libraries, and external APIs.

While these dependencies provide convenience, they also create serious risks. If a third-party service suffers from a vulnerability, the consequences are not limited to the provider itself—they can directly impact the organization that depends on it. One of the most critical consequences is the financial cost imposed on the primary organization.

What Are Third-Party Vulnerabilities?

A third-party vulnerability refers to any security weakness found in services or tools that an organization uses but does not directly control. Examples include:

Email and SMS delivery services
Payment gateways
Open-source libraries
External APIs
Cloud storage or computing services

Although these services operate outside the organization’s infrastructure, their security flaws can cause direct harm to the organization.

Real-World Example: A Vulnerability in an Email Delivery Service

In one bug bounty program, a website relied on a third-party email service to send password reset links and one-time passcodes (OTPs) for user logins.

During testing, I discovered a flaw: the service allowed an attacker to send an unlimited number of emails to any address.

With a simple script, an attacker could generate thousands—or even millions—of email requests.

Consequences

Direct Financial Loss

The email service charged the company per message sent. This meant the primary website had to cover the cost of all the attacker-generated emails. In effect, the attacker could create an enormous bill for the company with minimal effort.
Financial Denial of Service (DoS)

By exhausting the organization’s messaging budget, legitimate users could no longer receive critical emails such as OTPs or password reset links. This essentially blocked real users from accessing their accounts.
Reputational Damage

From the user’s perspective, the fault lies with the primary company, not the external vendor. Users may lose trust in the company, complain publicly, or stop using the service altogether.

The Bug Bounty Contradiction

Interestingly, the bug bounty program listed this issue as Out of Scope, since the vulnerability existed within a third-party provider and not the company’s own infrastructure.

However, in reality:

The company paid the cost of every fraudulent email.
End-users were directly affected.
Attackers could indirectly exploit the company by abusing a vendor’s flaw.

This contradiction highlights a gap in many bug bounty scopes: excluding third-party vulnerabilities can leave organizations blind to real risks that impact them directly.

Why Third-Party Vulnerabilities Matter

1. Direct Cost Transfer

Many third-party services operate on a pay-as-you-go model. Any abuse or exploitation results in costs that are immediately transferred to the primary organization.

2. Low-Complexity Financial Attacks

Unlike advanced intrusions that require technical skill, exploiting flaws in external services may only require basic scripting. Yet, the financial impact on the victim organization can be massive.

3. Operational Risk

When funds or service credits are drained, real users are left unable to access critical features like password recovery or login verification. This creates downtime without any direct compromise of the internal systems.

4. Damage to Trust and Brand

Users do not differentiate between a vulnerability in the vendor versus the primary company. They hold the organization accountable, leading to reputational harm, customer churn, and potential media backlash.

Recommended Actions for Organizations

To mitigate financial risks from third-party vulnerabilities, organizations should:

Evaluate cost models of third-party services and enforce spending limits or budget thresholds.
Include security obligations in vendor contracts, ensuring accountability for flaws that affect customers.
Continuously monitor service usage to detect abnormal spikes that may indicate abuse.
Acknowledge the impact of third-party flaws in bug bounty programs, even if they originate outside direct infrastructure.

Conclusion

This case demonstrates that third-party vulnerabilities are not just technical flaws—they can evolve into direct financial threats. Attackers don’t need to compromise a company’s servers; they can simply exploit weaknesses in external providers to drain resources, disrupt operations, and harm customer trust.