Are Direct Connect Bank Feeds Worth It?

Connecting your banks to your financial management software through Direct Connect bank feeds may seem convenient and secure at first glance, but the reality can often be disappointing. Security concerns, privacy concerns, and unpredictable outages routinely plague this technology, to the point that it may be time to return to a more manual approach.

What is Direct Connect?

Direct Connect, also known as “automated bank feeds” or just “bank feeds,” is a feature offered by many financial management programs that allows them to automatically import data from customers’ bank accounts.

Some popular users of the Direct Connect protocol are Mint (a budgeting and finance tracking web application), Quicken (a desktop application with similar features), QuickBooks (like Quicken but for small businesses), Personal Capital (financial management software focused on investments) and YNAB (“You need a budget”—also for individual finance tracking). These applications and many others use Direct Connect as the default way to get data from your banks. They often import account balances as well as transaction information on a regular basis.

Why Not Use Direct Connect?

Here, we’ll look at three main drawbacks to Direct Connect that we believe are seldom pointed out to customers.

Security Concerns

Using automated bank feeds involves sharing your bank login credentials with your third-party accounting software. The accounting software can then access your account(s) at will. That essentially means that if it ever gets compromised, your bank account(s) will be compromised as well. Ideally, the accounting software would have “read-only” access to your bank details, but often it requires full account access—theoretically, it could move money and make transactions in your account.

On top of that, the protocol that banks use to connect to accounting software is less secure than what they use for their customers. The accounting software often isn’t required to do multi-factor authentication, even when the bank does use that standard for ordinary customer login. You can read more about these issues in Your Bank’s Digital Side Door.

Privacy Concerns

It goes without saying that once you connect your banks to your accounting software, that software can view everything that happens in your bank account. That’s sure to include some information that you’d rather not share, such as personally identifiable information. When your accounting software has access to this, it increases the risk of that information getting leaked or stolen someday.

Service Failures

Perhaps the most relevant downside of automated bank feeds is the occasional unexpected failures to import the data from your bank. On any given day, you could log in to your financial software and find that it hasn’t pulled in the latest data, and you’re unable to trigger a fresh import.

Because automated bank feeds happen “behind the scenes” between two institutions, there’s very little you can do as a user to “fix” a broken or blocked connection. That’s why you can find many support posts all over the Internet of users asking what to do to fix their connections.

This situation can be especially frustrating. You often won’t know why the outage occurred, nor when it will be fixed. You’ll have to wait for a support rep at the bank, or the accounting software, or both, to resolve the issue.

What are the Advantages of Direct Connect?
While the drawbacks of Direct Connect are kind of hidden, the advantages are more obvious: your data is imported without any work needed on your end, and it’s very accurate.

It should be noted, however, that the alternative to Direct Connect is not entering every transaction by hand. That would indeed be labor-intensive and prone to mistakes. Rather, most banks offer file-based import which is a process where you download a document from your bank, upload it to your accounting software, and then the software interprets the information in that document. It benefits from the accuracy of automation, and it doesn’t give your accounting software login access to your bank. It also doesn’t take long at all, especially if you only need to refresh your data monthly (which is often recommended).

Conclusion

It might be time to ditch Direct Connect bank feeds. They may appear to be a convenient and secure way to bring your financial data into your accounting software, but there are significant drawbacks to this technology that you should consider before you use it. Security concerns, privacy concerns, and service outages are a few of the issues that could come up. On top of all this, some financial institutions actually charge additional fees for the privilege of using Direct Connect!

These drawbacks may make it worth considering a more manual approach to managing your finances, such as file-based import.

File-based import is available in Big E-Z accounting software. After you set up and label the data columns the first time, you can import subsequent documents with ease.

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