Open banking lets you share your bank data with other companies on purpose
Open banking is a system that lets you give permission for apps, fintechs, and other services to see your bank account information or move money on your behalf — without giving them your password. Instead of logging into your bank's website every time you want to use a third-party service, you authorize that service once, and your bank sends the data directly to it.
The key difference from the old way: you're not handing over your login credentials. Your bank stays in control of what information leaves and when. You can revoke access at any time, just like you'd unfriend someone on social media.
Open banking is built on technical standards and legal rules. In the United States, the framework is still developing, but the principle is already in use by payment apps, budgeting tools, loan platforms, and investment services. Your bank doesn't have to participate — some do, some don't — but the ones that do have to follow security and privacy rules.
Key Takeaways
- Open banking lets you authorize third-party apps to access your bank data or move money without sharing your password.
- You control what information is shared, with which service, and for how long — and you can revoke access whenever you want.
- Not all banks support open banking yet, and the ones that do may support different services or have different rules about what data they'll share.
- Open banking is different from linking your account the old way (giving an app your username and password), which is less secure and gives the app more power than you intend.
- Your bank and the third-party service both have legal obligations to protect your data and handle your money correctly.
How open banking actually works when you use it
When you want to use a service that supports open banking — say, a budgeting app or a loan marketplace — you'll see an option to connect your bank account. Instead of typing your username and password into that app, you'll be redirected to your bank's website or app. You log in there (to your actual bank), and your bank shows you what the app is asking for: "This app wants to see your transaction history and account balance. Do you agree?"
You say yes or no. If yes, your bank creates a secure connection and sends only the data you approved. The third-party app never sees your password. If you later change your mind, you go into your bank's settings and revoke that app's access — it stops working immediately.
Some services use open banking to read your data (like a budgeting app reading your transactions to categorize spending). Others use it to move money (like a bill-pay service that needs to pull funds from your account). The permission you give is specific to what the service needs to do.
Why banks and regulators are pushing open banking
Open banking exists because regulators and consumer advocates realized that the old method — giving apps your actual bank password — was a security and privacy disaster. If you gave an app your login, it could see everything in your account, change your settings, and you had no easy way to limit what it could do.
Open banking also creates competition. When you can easily connect your account to multiple budgeting apps, loan services, or investment platforms, those services have to compete on features and price instead of relying on the friction of switching. Your bank can't lock you in as easily.
In Europe, open banking is mandated by law (PSD2 regulation). In the United States, there is no single federal mandate yet, but the Consumer Financial Protection Bureau has signaled support, and major banks are building the infrastructure. Some states have also passed their own rules.
What data can be shared and what stays private
The data available through open banking typically includes your account balance, transaction history, and account type. Some services can also access information about linked accounts or standing orders you've set up.
What is not shared: your password, your security questions, your Social Security number, or any data you didn't authorize. Your bank doesn't share information about other customers, and third-party apps can't see data from accounts at other banks unless you authorize them separately.
The scope of what's shared depends on what the service needs and what your bank allows. A budgeting app might only need read-only access to your transactions. A bill-pay service needs permission to initiate transfers. You see the request before you approve it.
The difference between open banking and account linking the old way
Many apps still ask you to log in with your bank username and password. This is not open banking. When you do this, the app has your actual credentials and can do anything you can do — change your password, set up new accounts, move large sums of money. You have no way to limit its access, and if the app gets hacked, your bank account is directly exposed.
Open banking is the safer alternative. The app never gets your password. It gets only what you authorized, and only for as long as you want. If the app is compromised, the attacker can't use stolen credentials to access your bank account because no credentials were shared.
Some banks and apps still use the old password-sharing method because they haven't built open banking infrastructure yet. If you have a choice, open banking is the better option.
Which banks and services support open banking right now
Support varies widely. Large national banks like Chase, Bank of America, and Wells Fargo have begun rolling out open banking connections, but not all of them support all services yet. Regional banks and credit unions are slower to adopt, though some have partnered with third-party platforms that handle the technical work.
On the service side, popular budgeting apps like Mint and YNAB, loan marketplaces, and some investment platforms support open banking connections. But not every app you use will have this option. You may still need to use password login for some services, at least for now.
The easiest way to learn about your bank supports open banking is to try connecting an app you already use. If your bank offers it, you'll be redirected to your bank's login page instead of being asked for credentials inside the app. If your bank doesn't support it yet, you'll be offered the old password-login method instead.
Security and fraud protection under open banking
Open banking is designed to be more secure than password sharing, but security depends on how well both your bank and the third-party service implement it. Your bank is responsible for authenticating you (making sure you're really you) and for encrypting the data in transit. The third-party service is responsible for storing your data securely and not sharing it with anyone else.
If something goes wrong — if a third-party app misuses your data or a fraudster gains access to your account through an open banking connection — your bank's fraud protection rules still apply. You have the right to dispute unauthorized transactions, and your bank is required to investigate. The timeline and your liability depend on how quickly you report the problem, just as with any other account access.
You can revoke access to any third-party service at any time through your bank's settings. Once you do, that service can no longer see your data or move your money, even if you had authorized it before.
Frequently Asked Questions
Can a third-party app see my password if I use open banking?
No. With open banking, you log into your bank directly, and your bank sends only the data you approved to the app. The app never sees your password, security questions, or any credentials. Your bank stays in control of the connection.
What happens if I revoke access to an app?
Once you revoke access through your bank's settings, the app can no longer see your account data or move money on your behalf. It stops working immediately. You can re-authorize it later if you change your mind, but you'll have to go through the approval process again.
Is open banking safe if my bank gets hacked?
Open banking doesn't eliminate the risk of a bank breach, but it limits the damage. If your bank is hacked, attackers won't find your passwords stored in third-party apps because you never shared them. Your bank's fraud protection still applies to any unauthorized transactions, and you can dispute them.
Do all banks support open banking?
No. Support varies by bank and by region. Large national banks are more likely to support it than smaller regional banks or credit unions. The easiest way to find out is to try connecting an app you use — if your bank supports open banking, you'll be redirected to your bank's login page.
Can I use open banking to connect accounts at different banks?
You can authorize open banking connections to multiple banks, but each connection is separate. If you want a budgeting app to see accounts at two different banks, you'll need to authorize it at each bank independently.