Should You Demand Fintechs Pay for Your Data Like Chase?
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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Executive Summary
- JPMorgan Chase, the nation’s largest bank and a major factor in payments, has issued pricing sheets to data aggregators who serve fintechs. Chase wants to be paid — a lot — for data its APIs currently provide for free.
- Chase wants to recoup its investment and ongoing costs for providing this data. It says it is happy to provide data to third parties at customers’ request, subject to controls.
- Fintech organizations brand the megabank’s move as an anti-competition, anti-innovation ploy.
- Some are worried that this combination of events could chill fintech funding.
Has JPMorgan Chase unleashed an existential storm in the fintech industry? One that could stifle innovation and choke off many fintechs from the very data that allows them to function?
Or is Chase solely a company that has invested a great deal in another industry’s critical infrastructure that now wants to recoup something for what it’s been putting in?
And how far is the bank prepared to push its demands? And how far could the ripple effects go?
This debate has peaked since the Bloomberg Law website broke the news on July 11 that JPMorgan Chase has told data aggregators, the middlemen between banking institutions and many fintechs, that it wanted to begin charging them fees for providing access to banking consumer customers’ account data —information that is critical to many fintech apps.
The data aggregators have all received pricing sheets from Chase detailing what the megabank proposes to charge them to continue to receive data delivered through the bank’s API (applied programming interface). Major aggregators include Akoya, Envestnet|Yodlee, MX Technologies, Mastercard Finicity, and Plaid. (Note that Akoya is jointly owned by multiple organizations, including The Clearing House and a group of its bank members — including Chase.)
The Core of the Debate: Chase Wants to be Paid
“Aggregators currently get data access from JPMC for free, and in turn charge a fee for that data to downstream fintechs,” says a Chase spokesman. “We’ve made significant investments to create a safe and secure infrastructure to do this.”
An industry insider confirms that that’s been the typical arrangement thus far between the bank and aggregators, which began connecting in recent years as “screen scraping” and other insecure methods of grabbing account data became less acceptable.
Chase provided the data at no charge, and the aggregators charged the fintechs for the service. The insider points out that from the aggregators’ perspective Chase was accommodating the desires of their customers who wanted a convenient way to connect their banking and fintech relationships. Aggregators, the insider explained, invest a good deal themselves in the systems that connect the two worlds, including necessary security systems.
Chase declined to provide an example or redacted replica of a pricing sheet, and the insider noted that legal agreements with the banks they work with don’t allow them to publicly comment on pricing or other details. According to multiple sources, the pricing is in the millions of dollars.
Chase’s move has been made possible thanks to the fact that 1033 open banking regulations, issued in final form last year by the Biden-era Consumer Financial Protection Bureau, remain in legal limbo.
The regulation barred banks and other data providers from charging for access to the consumer data — a stipulation that Chase and other banking interests had opposed during drafting. However, in a convoluted case, banking industry representatives sued as soon as the final rule was published. Then the Trump CFPB effectively changed sides and asked the federal court handling the case to vacate the rule. Subsequently, a fintech group, the Financial Technology Association, obtained the court’s permission to participate in the case as an “intervener defender” — taking the CFPB’s original side of the matter. Dive Deeper: What Banks Must Do While 1033 Open Banking Rules Hang in Legal Limbo
With the regulation not yet in place, Chase is free to propose charges.
The move should not come as a complete surprise. In a late 2023 comment letter on the then-pending notice of proposed rulemaking on the 1033 rules, Chase objected to the prohibition of fees.
“We support over one billion third-party API calls each month,” the bank wrote. “And every month, thousands of JPMC customers engage with the Security Center dashboard on our consumer portal to easily view, modify, or remove a permissioned third party’s access.” In the letter Chase resisted the idea of assessing data-access fees directly on customers.
In the letter Chase complained that the CFPB considered only the incremental cost of providing access and not the overall costs.
“A data provider cannot be expected to build and maintain services to enable third-party access to customer data without accounting for the foundational investments upon which those services rely or the cumulative impact on the overall economics of providing banking services,” the bank wrote.
“If data aggregators are permitted to charge fees to authorized third parties, there is no reason data providers should not likewise be permitted to charge reasonable fees,” Chase said in the letter.
In his widely followed annual report letter and his remarks during the Chase second quarter earnings briefing, Jamie Dimon, chairman and CEO, addressed the question of data access. Most recently, he said, “Forget pricing for a second. We are in favor of the customer. We think the customer has the right, if they want, to share their information.” But he added that time limits and other controls should apply, such as prohibition of remarketing of data to other parties. And he insists that third parties should be liable for any risks they create when accessing or using bank customer data.
Regarding “the payment … It costs a lot of money to set up the APIs and stuff like that to run the system protection,” said Dimon.
Read more: Open Banking Isn’t Dead. The Battle Over Regulation 1033 Now Pits Banks vs. Fintechs
Fintech Trade Groups Attack the Move as Anti-Innovation and Anti-Competitive
Some in the business with access to pricing documents say the proposed charges are so high that they could put some fintechs out of business very quickly if assessed.
Commentator Alex Johnson, in his Fintech Takes blog on Substack, observes: “You could argue that the all-in costs (which include the infrastructure as well as compliance and customer support) for payments use cases are higher (this may be true), but it’s hard to take JPMC’s word on that given its obvious incentive to set prohibitively high fees for use cases that threaten its core business.”
The fintech business’ reaction to the Chase move has been vehement. Clearly there are concerns about the ability of some fintechs to be viable should the high prices Chase is said to have proposed to aggregators are passed along to fintechs.
“Consumers have a right to their own financial data, full stop,” the American Fintech Council said in a statement. “Any effort to restrict or monetize access to consumer-permissioned financial information is a direct threat to responsible innovation, healthy competition, and the progress we’ve made toward a more inclusive financial system.”
In an interview Phil Goldfeder, AFC CEO, doesn’t see any middle ground, where Chase (and potentially other banks, if they follow the move) might drop prices to lower levels while fintechs pay something toward the charge to aggregators.
“Whether it’s a half cent or a penny or a nickel, ultimately consumers shouldn’t have to bear the burden for the biggest banks in the country’s lack of innovation,” says Goldfeder. He accuses Chase of trying to charge consumers in order to take advantage of what fintech innovators have built. Goldfeder feels that fintechs stepped into a void left by banks’ failure to innovate and serve many consumers. He believes the move undermines the purpose of open banking by erecting barriers for fintechs.
Goldfeder argues that consumers must now lean on providers like Chase to emphasize that their account data belongs to them.
At the FTA, the group that is intervener defender, spokesperson Miranda Margowsky has harsh words for Chase.
“JPMorgan Chase is taking advantage of this moment of regulatory uncertainty to impose a tax on fintechs in an effort to squash competition and rebuild some of the moat around their services, to make it harder for their customers to access the fintech services of their choice,” says FTA’s Margowsky.
She adds that her group was opposed to the move of “the nation’s biggest banks to claw back control and deny consumers their right to access the world of fintech apps and services.”
Margowsky also says FTA believes both fintechs and banks have invested a great deal in building connectivity for the benefit of their mutual customers.
“So, I would say this is not really about security or recouping costs,” says Margowsky. “This is clearly anti-competitive.”
Jason Henrichs, CEO at Alloy Labs Alliance, thinks reasonable fees for providing data are warranted, but he believes that the high charges he’s heard about could sink some types of fintech services because of the frequency with which they must check banking data. One such fintech category is earned wage access plans. Another is cashflow underwriting lending. Both require extensive monitoring.
Henrichs thinks a cost or cost-plus model could work, covering at least a given number of API calls. He says these are not as expensive as they once were.
For Chase’s part, a spokesman says, “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.”
Read more: Reality Check: Can AI and Open Banking Really Drive Engagement and Growth?
Did Chase Make a Good Chess Move?
Ron Shevlin, managing director and chief research officer at Cornerstone Advisors, notes that this is the first move by Chase, and only an announcement thus far.
“This is a brilliant political and competitive move,” says Shevlin. “Basically, it’s pretty warranted. Chase spends a lot of money on infrastructure, security, data privacy and data protection. Why should anybody get free access to that?”
Shevlin suggests that fintechs have some chutzpah in expecting banks to shoulder the costs of providing data to the fintechs.
That expectation, he says, is akin to going to a restaurant where you like the chicken parmesan, but not the side dishes. So you order the chicken, but ask the waiter to go to the bistro down the block to pick up a serving of the spaghetti that you prefer.
“You would never think to do that,” says Shevlin, so why think it would work in financial services?
As for the argument that the data belongs to the customer, Shevlin draws the line between ownership and free service.
“Yes, it is your data,” he says. “So, if you want to open a fintech account, feel free to open one with Dave or Square Cash App and plug in your data manually every month. Go ahead. Nobody’s stopping you. But to assume that someone else is going to underwrite the cost of that is nonsense.”
Read more: Banking Apps Are Trapped in Digital Mediocrity, and It Shows
Will Chase’s Move have Ripple Effects on Fintech Funding — and Community Banks?
Henrichs says he’s disagreed many times with the way CFPB conducted its duties, but gutting the bureau, as the Trump administration has, has meant that “there’s no sheriff in town anymore.”
“Is Chase going to be able to push out whatever price it wants to, and have it stand until things work their way through the courts?” asks Henrichs. “In that case, you’ve devastated the landscape.”
He’s also concerned that fintech venture capitalists might now get cold feet. “They may say, ‘I don’t understand what your economics are going to be, or even if you have a viable business, so I’m not so sure I want to invest’.”
Henrichs is also concerned about community financial institutions. Many depend on fintech partners to be able to innovate and to match services major banks can provide on their own. Endanger the fintechs and it affects the partner banks.
Finding Middle Ground or Reverting to the Past
The consensus is that Chase’s salvo is a first move, a lever for negotiated pricing, though being the nation’s largest bank and a major payments company on its own does give Chase a formidable fulcrum for that lever.
One concept being discussed is data access resembling the way that the nation’s credit bureaus work. Lenders pour their data into the credit bureau databases, but they also obtain something out of the process — the ability to lend with a sense of how prospective borrowers will pay.
Shevlin thinks giving banks, especially smaller institutions, something back in exchange for raw data could be a decent trade. Sharing insights provides value added for the data providers. It could be a way for aggregators, for instance, to offset actual fees.
The specter hanging over this debate is that if some middle way can’t be found, it will drive a return to screen scraping and other such practices. No one wants that.
