Open Banking Explained
🔑 Your Bank Data, Shared on Your Terms
Open banking is a way for you to securely let other approved companies access your banking information, or make payments on your behalf, with your permission. Instead of a bank keeping all your data locked inside its own app, open banking lets you choose to share specific information with a budgeting app, a lender, or another service, through a secure connection. It is being rolled out in New Zealand to give people more control and choice over their own financial data.
The Two Main Things It Enables
- Sharing account information: letting a service see your transactions or balances, for example a budgeting app.
- Initiating payments: letting a service start a payment from your account with your approval, as an alternative to card payment.
🔗 How It Works Without Sharing Your Password
The crucial feature of open banking is that you never give the third party your banking password. Instead, the connection is made through a secure, official link between the third party and your bank, and you approve the access directly with your bank.
Why This Is Safer Than the Old Way
Before open banking, some apps asked for your actual banking username and password to log in on your behalf and copy your data, a practice called screen scraping. That meant handing your full credentials to a third party, which is risky and can breach your bank terms. Open banking replaces this with permission-based access where your password stays secret and you control the scope.
⚖ Benefits and Risks
The Benefits
| Benefit | What it means for you |
|---|---|
| Better tools | Budgeting and money apps can use real data to give useful insights |
| Easier switching and comparison | Services can assess your situation with your data, with consent |
| More payment choice | Pay directly from your account as an alternative to cards |
| More competition | New providers can offer services, which can lower costs |
The Risks to Manage
- Sharing with the wrong service: only connect to providers you trust and that are properly approved.
- Over-sharing: grant only the access a service genuinely needs, for the time it needs it.
- Forgotten connections: access you granted long ago may still be active if you do not review it.
- Scams imitating open banking: fraudsters may try to mimic the flow to steal credentials.
💡 Using Open Banking Wisely
Sensible Habits
- Check the provider is legitimate and approved before connecting.
- Read what you are consenting to: what data, what actions, and for how long.
- Approve through your own bank, never by typing your bank password into another app.
- Review your connections periodically and revoke any you no longer use.
- Stay alert to scams that imitate the open banking flow.
What It Is Not
Open banking is not the bank selling your data behind your back; it is permission-based sharing that you control. It is also not a reason to lower your guard: the same scam awareness applies, because criminals will try to imitate any new system. Used carefully, it can make managing money easier and give you more choice, while keeping your password private.
Pair this with our guide on bank account security to keep your accounts safe. Final word: open banking lets you securely share bank data or initiate payments with approved services, without giving away your password. It offers better tools, more choice, and more competition, as long as you connect only to trusted providers, share the minimum needed, and review your permissions. This is general information, not personalised financial advice.
🎯 Test Your Knowledge
Quiz on Open Banking (20 Questions)
Related guides
- Banking Hardship Support, a related guide in the same area.
- Helping Elderly Parents With Banking NZ, a related guide in the same area.
Related tools and guides
- Subscription cost calculator: the recurring payments an aggregator will surface.
- Switching banks: what open banking is meant to make easier.