Open banking is reshaping how money moves between people and businesses. It allows customers to connect their bank accounts directly to known apps and services for easier payments, accounting, and financial management. The global open banking market was worth about $31.6 billion in 2024 and is forecast to continue growing. It’s fast and efficient. But is it safe?

The good news is that open banking was built for security. It runs on connections secured by encryption, with Strong Customer Authentication (SCA) and strict regulations. Users stay in control at every step: they decide what to share and for how long, and can revoke access instantly.

Safety in open banking depends on trust as well as technology. Below, we’ll explain what open banking is, how its protections work, and how to stay secure while using it.

What’s in this article?

• What is open banking?
  
• Is open banking safe?
  
• What are the risks of open banking?
  
• How is open banking designed to be safe?
  
• Who regulates open banking and enforces safety standards?
  
• Is open banking safe in the UK?
  
• How can you stay safe when you use open banking?
  
• How Stripe Payments can help
  

What is open banking?

Open banking is a framework that lets banks safely share the customer’s financial data with other authorized businesses (e.g., budgeting apps, accounting tools, payments platforms), with the customer’s permission. Instead of making every bank guard its data in isolation, open banking uses standardized application programming interfaces (APIs), which act as digital doorways that enable trusted third parties to access specific bits of information or initiate payments on a user’s behalf.

When someone connects an app to their bank through open banking, they authenticate directly with their bank rather than hand over a password or login credentials. They’re then issued a secure, time-limited token that allows only the approved access.

Is open banking safe?

When it’s designed and used the way regulators intended, open banking is safe. It’s built on the same security standards that banks use to protect their own systems, and every connection, piece of shared data, and payment is based on permission and encrypted.

When a customer uses an open banking app or payments service, they don’t share their bank password with a third party. Instead, they’re redirected to their bank’s own interface to log in and confirm exactly what’s being shared or authorized.

That architecture makes open banking safer than older data-sharing methods such as “screen scraping,” which required handing over login credentials to third parties. With open banking, credentials never leave the bank and access can be revoked anytime.

Even though open banking is largely safe, it’s not perfect. Open banking still depends on strong regulation, secure tech, and user awareness.

What are the risks of open banking?

Open banking expands the digital “surface area” that has to stay secure, which creates more risks.

Potential risks of open banking include the following:

• More connections mean more exposure: Each new link between a bank and a third-party provider is another point that needs protection. If one provider’s systems are weak or poorly maintained, that becomes a potential entry point for fraudulent actors.

• Third-party responsibility isn’t always clear: In many jurisdictions, every provider that touches financial data must be licensed and regulated. But if there’s a data breach or an unauthorized transaction, it can take time to determine who’s accountable.

• Fraud targets the human layer: Even if the tech is secure, many criminals use social manipulation to gain access to a person’s money. Scammers use phishing or fake apps to convince users to approve payments or share sensitive information.

• Technical errors can create friction: APIs can sometimes fail or misfire. The issues are often minor, but they can temporarily disrupt access or reveal limited data if they’re not quickly fixed.

Open banking isn’t risk-free, but no part of modern finance is. The main difference here is that the risks are visible, regulated, and actively managed.

How is open banking designed to be safe?

Every layer of open banking, from technology to regulations, exists to make sharing data and payments transparent and controlled. Open banking is built with the same rigor as the banking infrastructure itself.

These measures protect the safety of open banking:

• Bank-grade encryption: All open banking connections use end-to-end encrypted APIs that meet financial security standards. Data can’t be intercepted or modified in transit.

• SCA: Every open banking transaction requires multifactor authentication—typically something the customer knows (e.g., a password) and something they have (e.g., their phone or fingerprint). This way, only the account holder can approve access or payments.

• Granular permissions and limited access: Users approve exactly what data a service can access (e.g., just recent transactions instead of the full account history) and for how long. That consent usually expires automatically after a set period unless it’s renewed.

• Revocable access at any time: Customers can disconnect an app instantly through their banks or the app itself. Once access is revoked, the provider loses all ability to view data or initiate payments.

• Tightly regulated providers: Accessing financial data usually comes with regulatory requirements and supervision to protect customers and businesses. These providers are subject to regular audits, strict data protection rules, and liability requirements.

• Incorporated consumer protection: If an unauthorized payment occurs through an open banking channel, customers are typically refunded—just as they would be after a bank or card fraud case.

Who regulates open banking and enforces safety standards?

Countries that have adopted open banking generally set clear rules regarding who can participate, how data is shared, and what happens if those rules are violated.

In the UK

The Financial Conduct Authority (FCA) oversees all open banking providers. Only companies authorized by the FCA can access bank data or initiate payments, and they must appear in the official Open Banking Directory. The framework itself is maintained by Open Banking Limited, which sets the technical and security standards banks must follow.

Across the EU

Open banking is governed by the revised Payment Services Directive (PSD2), which is enforced by each country’s financial regulator. The European Banking Authority develops the underlying technical standards, while national regulators ensure banks and third parties comply.

Elsewhere in the world

Countries such as Australia, Brazil, and the United States have established or are finalizing similar directives. The rule is generally the same everywhere open banking exists: only licensed, supervised institutions are allowed to handle financial data.

Is open banking safe in the UK?

The UK is widely seen as the global benchmark for open banking safety. Since its launch in 2018, the Open Banking Standard has matured into a tightly regulated network used by millions of customers and businesses.

Every transaction runs through secure APIs and SCA. Users authenticate directly with their banks, never through a third-party app, so passwords stay protected.

Open banking transactions in the UK have a substantially lower fraud rate by volume than other payment types, according to Open Banking Limited’s 2024 report. When fraud does occur, banks are generally required to reimburse customers unless negligence is proven.

Major retailers, fintechs, and even government agencies, including His Majesty’s Revenue and Customs (HMRC), use open banking for payments.

How can you stay safe when you use open banking?

Customers can protect themselves while they use open banking through awareness and smart digital habits.

These are the top tips for keeping your accounts protected:

• Use only regulated providers: Before you connect your bank account to any app, check that it’s authorized by your country’s financial regulator. If you can’t find it on the regulator’s approved list, don’t connect your account.

• Never share your banking credentials: Real open banking services will never ask for your password, personal identification number (PIN), or one-time codes. You should log in only through your bank’s own website or app. If an app or email asks for details directly, consider it a scam.

• Read the permissions you’re granting: You should review exactly what an app will see or do before you approve access. Reputable providers will explain clearly why they need that access and for how long.

• Check your accounts regularly: Watch for transactions or data access you don’t recognize, and revoke permissions for any apps you no longer use. You can usually do this right inside your banking app.

• Protect your devices: Keep your phone and computer up-to-date, use strong passcodes, and activate biometrics where possible.

How Stripe Payments can help

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Learn more about how Stripe Payments can power your online and in-person payments, or get started today.