Open banking is safer than it looks, but the risk depends on who you give access to and what permissions you grant
Open banking lets you connect your bank account to third-party apps and services—think budgeting tools, payment apps, or loan marketplaces—without handing over your password. Instead of logging in directly, you authorize the app to pull specific data from your bank through a secure connection. The bank verifies the request, not the app. That architecture is genuinely more secure than the old way, where you'd type your login credentials into a third-party website and hope they didn't store them.
But "safer than the alternative" is not the same as "no risk." Open banking exposes you to new attack surfaces: apps that misuse the data you've given them, companies that get hacked and leak your financial information, or services that disappear and leave your authorization dangling. The safety question is really two questions: Is the connection itself secure? And is the company on the other end trustworthy?
Key Takeaways
- Open banking uses encrypted connections and bank-verified authorization, which is more secure than typing your password into a third-party website.
- Your bank does not share your password with the app; you authorize the app to pull only the data you choose, and you can revoke access anytime.
- The real risk is the app itself—whether the company is trustworthy, how they store your data, and what they do with it after you disconnect.
- Check the app's privacy policy, look for security certifications, and start with read-only access (viewing data) rather than write access (moving money).
- If an app gets hacked or misuses your data, your bank account is protected by federal law, but recovering your information and time takes effort.
How the connection actually works and why it's harder to intercept
When you authorize an app through open banking, you're not giving it your password. Instead, you're redirected to your bank's website or app, where you log in directly. Your bank then issues a token—a temporary credential that lets the app pull specific data without ever seeing your password. The token is encrypted, expires after a set time, and can be revoked instantly from your bank's settings.
This is different from the old "screen scraping" method, where apps would log into your account as you and grab whatever data they could see. That required your actual password, which the app had to store somewhere, and it left your account vulnerable if the app's servers were breached. Open banking tokens are single-use, limited-scope, and tied to your bank's security infrastructure instead of the app's.
The connection between the app and your bank is encrypted using the same technology that protects your email and online shopping. An attacker sitting on your Wi-Fi network cannot intercept the data flowing back and forth. That said, the app itself still has access to the data you've authorized it to see—your transaction history, account balance, or payment information—so the app's own security matters enormously.
What happens if the app company gets hacked
If the app you've connected to gets breached, the attacker can access whatever data the app has stored about you. If the app stores your full transaction history, they get that. If it stores your account number, they get that. They do not automatically get access to your bank account itself, because they don't have your password or the authorization token—those stay with your bank.
However, depending on what data the app collected and how the breach happened, an attacker might be able to use that information to impersonate you elsewhere. If the app stored your name, address, phone number, and account numbers, that's enough for identity theft or to answer security questions on other accounts. Your bank account is protected by federal fraud laws, but recovering from identity theft is time-consuming and stressful.
You can revoke the app's access immediately from your bank's settings—usually under "Connected Apps" or "Third-Party Access"—which cuts off its ability to pull new data. Revoking access does not delete the data the app already collected, so if you suspect a breach, contact the app company and your bank to report it and ask what data was exposed.
The difference between read-only and write access
Most open banking connections are read-only: the app can see your balance and transactions but cannot move money or change your account settings. That's the safer option. Some apps request write access, which means they can initiate payments, transfers, or other changes on your behalf. Payment apps and bill-pay services need write access to work. Budgeting apps and loan marketplaces should only need read-only.
Before you authorize an app, check what permissions it's asking for. If a budgeting app is asking for write access, that's a red flag—it doesn't need to move your money to show you your spending. If a payment app is asking for read-only, it won't be able to send money, so that's also wrong. Match the permission to the service's actual function.
Write access is riskier because a compromised app or a malicious employee could drain your account. But it's also more useful for services that actually need to move money on your behalf. The key is to use write access only with apps you trust, and to check your bank's transaction history regularly for unauthorized activity.
How to evaluate whether an app is trustworthy
Start with the company's privacy policy. Look for clear statements about what data they collect, how long they keep it, whether they sell it to third parties, and what happens to it if the company shuts down. If the policy is vague, evasive, or says they share your data with "partners" without explaining who those partners are, that's a warning sign. A trustworthy company will be specific and transparent.
Check whether the app has security certifications. Look for SOC 2 Type II certification, which means an independent auditor has verified the company's security controls. Some apps also display ISO 27001 certification, which covers information security management. These are not guarantees, but they show the company invested in security and submitted to outside review.
Read reviews on independent sites, not just the app store. Look for complaints about unauthorized charges, data breaches, or poor customer service when things go wrong. Check whether the company has a track record of responding to security issues quickly. If you find reports of a past breach, look at how the company handled it—did they notify users, offer credit monitoring, and fix the vulnerability?
Start small. Connect the app to your account with read-only access first, use it for a few weeks, and see how it behaves. Does it pull data only when you open it, or constantly in the background? Does it send you unexpected emails or notifications? Does it try to upsell you to premium features or partner services? A well-designed app should be quiet and focused on what you asked it to do.
What your bank is responsible for and what you are
Your bank is responsible for the security of the authorization process itself—making sure the token is encrypted, that it expires, and that only the app you approved can use it. Your bank is also responsible for monitoring your account for fraud and refunding unauthorized transactions under federal law. If someone uses your account number to make a fraudulent purchase, your bank has to cover it.
You are responsible for choosing which apps to connect and managing your authorizations. You should review your connected apps periodically—most banks let you see them in your account settings—and disconnect anything you no longer use. You should also monitor your account for suspicious activity and report it to your bank immediately. If you notice an app is behaving strangely or you suspect a breach, disconnect it and change your password.
The gray area is the app company itself. They're responsible for securing the data they collect and for following the privacy policy they published. But if they get hacked or misuse your data, your recourse is limited. You can report them to your state's attorney general or the Federal Trade Commission, but recovering money or restoring your credit takes time. That's why choosing trustworthy apps upfront matters so much.
Red flags that suggest an app might not be safe
Avoid apps that ask for your password instead of using open banking authorization. If an app says "Enter your bank login here," it's using the old screen-scraping method and storing your password somewhere. That's a major security risk and a sign the company either doesn't understand modern security or doesn't care about it.
Be wary of apps that request write access but don't explain why. A budgeting app that wants to move your money is suspicious. A payment app that wants to see your full transaction history going back years is collecting more data than it needs. An app that requires you to give it access to multiple accounts when you only want to use one is being greedy.
Watch for apps that have no privacy policy, a privacy policy that's been unchanged for years, or a policy that's written in vague corporate language instead of plain English. If you can't understand what they're doing with your data, assume the worst. Also be cautious of apps with very few reviews, very new reviews that all sound the same, or reviews that mention security problems or unauthorized charges.
What to do if you suspect an app has misused your data
First, disconnect the app immediately from your bank's settings. Then contact your bank and report the issue. Your bank can flag your account, monitor it for fraud, and help you understand what happened. If you see unauthorized transactions, report them within 60 days to get federal fraud protection.
Contact the app company directly and ask what data they collected, how long they kept it, and whether they've had a security breach. Document their response. If they don't respond or you suspect they've violated their privacy policy, file a complaint with the Federal Trade Commission at reportfraud.ftc.gov. You can also report them to your state's attorney general.
Check your credit report for signs of identity theft. You can get a free report from each of the three major credit bureaus at annualcreditreport.com. If you see accounts you didn't open or inquiries you didn't authorize, place a fraud alert on your credit file and consider a credit freeze. These steps are free and take a few minutes but can prevent serious damage.
Frequently Asked Questions
Can a hacker get into my bank account through an app I've connected?
Not directly. The app doesn't have your password or the authorization token your bank issued. But if the app gets hacked and the attacker steals your account number, name, and other personal details, they might be able to use that information to impersonate you or commit identity theft. Your bank account itself is protected by federal fraud laws, but your identity is at risk.
What's the difference between open banking and just giving an app my password?
Open banking keeps your password with your bank. The app gets a temporary, limited token instead. If the app is hacked, the attacker doesn't get your password and can't access your account after you disconnect the app. With password sharing, the app stores your actual login credentials, so a breach exposes your password and gives the attacker ongoing access until you change it.
Can I revoke an app's access anytime?
Yes. Go to your bank's settings, find the "Connected Apps" or "Third-Party Access" section, and disconnect the app. Access is revoked immediately. The app can no longer pull new data, but it still has whatever data it already collected, so if you suspect a breach, contact the app company and your bank.
Do I need to worry about apps that use open banking for budgeting or expense tracking?
Less than apps that move money, because they only need read-only access. But you should still check their privacy policy, see how long they keep your data, and whether they sell it to third parties. Start with read-only access and disconnect if the app behaves strangely or you stop using it.
What should I do if I see a transaction I didn't authorize?
Report it to your bank immediately, ideally within 24 hours. Federal law protects you from fraud, but you have to report it within 60 days to get full protection. Your bank will investigate and refund the transaction. Also disconnect any apps you suspect might be involved and file a complaint with the FTC.