Financial Management Apps and Data Security: What You Need to Know

Financial Management Apps and Data Security: What You Need to Know

For people trying to save money and stick to a budget, mobile money management apps seem like the perfect solution. Some financial institutions have their own built-in budgeting and expense tracking apps. There are also numerous third-party apps available for download in your mobile phone’s app store. Although millions of people find these apps helpful for saving more money, there are some things to watch out for.

Top budgeting apps ask for access to your online banking login credentials. This access is necessary to view transactions and account activity and serves as a way to aggregate financial data in one handy app. However, if your bank offers mobile and/or online banking, it will often advise you to never share your username and password.

This leaves many account holders confused when it comes to third-party budgeting apps. The question many accountholders ask is, how safe is it to connect money management apps to a personal bank account?

What Happens When You Enter Your Banking Information?

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Despite being instructed to be vigilant with account login credentials, many people love the ease and convenience of mobile money management apps. When you log in to a budgeting app, you are prompted to enter your online banking credentials.

These credentials are then sent to a third-party company which encrypts the data. The major third-party aggregator is called Plaid. It is generally trusted by most major financial institutions that are compatible with the platform.

After you connect your online banking to a budgeting app, your information remains encrypted. Budgeting apps are only able to read account data such as the transaction amount, whether the transaction is a debit or credit, and the merchant’s name.

Don’t Ignore Terms and Conditions

One of the easiest ways to protect yourself and your account information is to make sure you read and agree to the fine print included with both your online banking disclosures as well as those of mobile budgeting apps. Don’t be afraid to research budgeting apps before you download them.

Many app developers make claims about the security of their apps, but it is important for the consumer to investigate these claims. Find out what type of encryption the money management app utilizes, if any, and see how it compares to the security of your financial institution’s online and mobile banking platforms.

Unfortunately, some of the most popular budgeting apps do not employ high-level data security protocols similar to major financial institutions. Consumers should also be aware of how much protection is offered by financial management apps in the event that their data is mishandled. In most cases, third-party money management apps cannot safeguard your money and will not replace funds if they are ever compromised.

Also, be sure to read the bank’s policy when it comes to allowing third-party access to your financial accounts. Some banks explicitly prohibit account holders from giving access to third-party apps. This will be evident when you try to sign up with a financial management app. If your bank has denied participation, it will not be among the list of compatible financial institutions.

Other banks discourage giving access to these apps, but do not ban it outright. Be sure you understand your bank’s position on third-party access before trying to use a new budgeting app. Remember, some banks refuse to cover any unauthorized transactions if it is determined that you willingly gave third-party access to your banking information.

Safety First

Using a budgeting app is a great way to keep a handle on your finances around the clock. However, there are a few things you can do to protect your personal and financial information. The following are some steps you can take to safeguard your information:

Be Password Savvy. Each money management app has its own separate username and password. Always be sure to create strong passwords that are different from your online banking login information.

Lock Your Mobile Device. In the event your smartphone or other mobile device is lost or stolen, having password protection enabled will keep strangers from accessing sensitive data. Avoid easy-to-guess passwords and use a combination of letters and numbers whenever possible.

Avoid Auto-Login. Most modern devices have password saving features which make it easy to access accounts without physically entering your password. Avoid enabling auto-login, especially in apps with access to sensitive information.

Don’t Use Public Wi-Fi. When accessing financial accounts and budgeting apps, avoid logging in on unsecure networks that are commonly available in places like restaurants, coffee shops, and airports.

Be Informed

Budgeting apps can be an effective tool to help you develop good money management habits and help you reach your financial goals. Ultimately, however, these apps work best when consumers are well-informed.

Research the companies behind any apps you are considering and be sure you always choose those with a good track record. Thoroughly reading any associated terms and conditions will give you peace of mind that those behind the financial management app take your data privacy seriously.