[NEW YORK] JPMorgan Chase has told financial-technology companies that it will start charging fees amounting to hundreds of millions of dollars for access to their customers’ bank account information – a move that threatens to upend the industry’s business models.
The largest US bank has sent pricing sheets to data aggregators – which connect banks and fintechs – outlining the new charges, according to people familiar with the matter. The fees vary depending on how companies use the information, with higher levies tied to payments-focused companies, the people said, asking not to be identified discussing private information.
A representative for JPMorgan said the bank has invested significant resources in creating a valuable and secure system that protects consumer data.
“We’ve had productive conversations and are working with the entire ecosystem to ensure we’re all making the necessary investments in the infrastructure that keeps our customers safe,” the spokesperson said in a statement.
The fees – expected to take effect later this year depending on the fate of a Biden-era regulation – aren’t final and could be negotiated.
The charges would drastically reshape the business for fintech firms, which fundamentally rely on their access to customers’ bank accounts. Payment platforms like PayPal Holdings’ IVenmo, cryptocurrency wallets such as Coinbase Global and retail-trading brokerages like Robinhood Markets all use this data so customers can send, receive and trade money. Typically, the firms have been able to get it for free.
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Many fintechs access data using aggregators such as Plaid and MX, which provide the plumbing between fintechs and banks. The fees – which vary based on the use cases currently under discussion – could be passed from the aggregators to the fintechs and, ultimately, consumers.
The aggregator firms have been in talks with JPMorgan about the charges, and those are constructive and ongoing, another person familiar with the matter said. There have been some concerns about the number of times aggregators request customer data, the person said.
Shares of fintech firms and payments companies including Block and Affirm Holdings fell Friday on the news, with PayPal dropping as much as 6.5 per cent.
JPMorgan’s move comes as the fate of a controversial data-sharing rule hangs in the balance. The open-banking measure, finalised in October by the Consumer Financial Protection Bureau, enables consumers to demand, download and transfer their highly-coveted data. It also requires banks to share that data with another lender or financial services provider for free.
Proponents argue the rule enables customers to access a wider pool of financial services, fosters greater competition and boosts data security. But the banking industry, which immediately sued to block the measure, said the arrangements could stoke fraud and expose them to greater liability.
Under Donald Trump, a much-stripped back CFPB has asked a federal judge to vacate the open-banking rule, leaving its future in question. That judge has authorised the Financial Technology Association, a trade group with members affected by the fees, to defend the rule.
The issue has become contentious at times. PNC Financial Services Group sued Plaid in 2020 alleging it copied the look of PNC’s login screen, misleading the bank’s customers into providing Plaid with their login credentials. The firms resolved the legal battle with a customer-data sharing deal last year.
JPMorgan chief executive officer Jamie Dimon said in April that customers should know exactly what data is shared and how it is used. Third parties should pay for banking system access and be prevented from using the data beyond what was authorised, he said. His bank has no problem with data sharing, provided it’s properly done, he wrote in his annual letter to shareholders.
“Third parties want full access to banks’ customer data so they can exploit it for their own purposes and profits,” he said. “Banks provide fantastic services, and it’s time to defend ourselves – in the public realm or in court if need be.”
Steve Boms, executive director of the Financial Data and Technology Association of North America, said JPMorgan’s move exploits regulatory uncertainty “to levy an arbitrary and punitive tax on competitive offerings.” He called it a “blatant effort to curtail innovation and undermine a stronger American financial system.”
JPMorgan’s proposed fees in some cases would eclipse the revenue certain companies generate on a single transaction by as much as 1000 per cent, one of the people familiar said.
Lower-income customers may also be harmed by restricted access to payments and budgeting apps through fees, said David Silberman, a senior advisor to the Financial Health Network and a former top CFPB official.
“Consumers are getting a lot of value today by permissioning access to their financial data by trusted third parties,” Silberman said. BLOOMBERG
