The largest U.S. bank, JPMorganChase, has been in conversations with data aggregators — companies like Plaid that draw customer data from banks and feed it to their fintech clients — to charge them for this data. The bank said the new fees are intended to offset the costs of maintaining a secure system for protecting customer data; it did not say how much it will charge.
"We've invested significant resources creating a valuable and secure system that protects customer data," said JPMorgan spokeswoman Emma Eatman. "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 conversations between JPMorgan and the data aggregators have been constructive, according to a person familiar with those discussions.
"There is an understanding and agreement that there is value that [the bank has] created through significant investments in building up infrastructure for data sharing," this person said. "The aggregators have been leveraging that, and they built businesses off of that. The bank should be getting compensated for the value of the significant investment it made."
For data aggregators, "the cost of goods sold has been zero. They charge their customers, the fintechs, and they have not had to pay in any way to actually get any of that data," the person familiar with the conversations said.
The move, which was first reported in
The Financial Data and Technology Association, a group that represents data aggregators including Plaid, Intuit and Trustly, objected on several grounds.
"JPMorganChase is exploiting regulatory uncertainty to levy an arbitrary and punitive tax on competitive offerings," FDATA said in a statement shared with American Banker. "This is a blatant effort to curtail innovation and undermine a stronger American financial system."
It is assumed that data aggregators will pass bank fees on to fintechs. PayPal's stock price dropped 2.8% after the news came out, a hit that
"This is huge," Todd H. Baker, senior fellow at the Richman Center for Business, Law and Public Policy at Columbia Business and Law Schools, wrote in a LinkedIn post. "By some accounts, 25% of U.S. individuals are customers of JPMorganChase. Many U.S. fintechs require that data for their apps to work. If they have to pay for it, watch out."
JPMorgan's plan to charge fees to aggregators comes after a decade of rancor between banks, fintechs and data aggregators over the sharing of consumers' bank account data.
Banks historically have seen their customer databases as information they need to protect and use to provide their customers with products and services. Fintechs see their own products and services as more innovative and popular than banks' offerings; many of them depend on bank account data to function properly.
Data aggregators like Plaid originally established themselves as middlemen by getting consumers to provide them with their bank account login data, accessing banks' online banking sites with the consumers' credentials and siphoning out that data, then passing it on to fintech clients, without telling the banks what was going on.
To banks, these high-volume, automated hits on their core systems looked like denial of service attacks or malware and sometimes overloaded their servers. At times, fintechs have accused banks of blocking their screen scraping efforts entirely, for competitive reasons. Over the years, data aggregators established relationships with banks whereby they pulled customer data out of the banks through application programming interfaces; JPMorgan was one of the first banks to come to such agreements.
The Dodd-Frank Act of 2011 required the Consumer Financial Protection Bureau to establish rules around the sharing of consumer bank account data. Last year, the CFPB finalized its Personal Financial Data Rights Rule. The rule
Though the rule was originally supposed to take effect in January, the CFPB's new leadership under the Trump administration has moved to vacate it, creating a regulatory vacuum.
Data aggregators say they will pass JPMorgan's fees on to their fintech clients, who will pass them on to consumers. The fees will also limit consumers' financial choices and jeopardize innovation across the financial technology ecosystem, according to the data aggregators. In addition, they fear that JPMorgan's move will set a precedent for other banks to follow.
The person familiar with the bank's conversations with aggregators pointed out that the bank is not directly charging the underlying fintechs or their consumers.
"I don't know if they're going to pass along the cost or not," this person said. "The bank's goal is certainly not to destroy the ecosystem," but simply to be compensated for a product it is providing. This source also noted that data aggregators commonly pull customer data, such as payments information, that the underlying fintech does not need for its app.
Baker pointed out that the question of whether banks should be able to charge for providing their customer data is ultimately about how the economic value of consumer financial data is allocated between various parts of the banking and fintech ecosystem and consumers.
"From the banks' standpoint, everyone is making money from their customers' transaction data except the banks," he told American Banker. "It costs banks money to collect, organize and protect consumer data. Of course, they earn revenues associated with the products that use that data, but it's reasonable for them to assert a priori that they should be entitled to some compensation for the economic value they have created by collecting and storing the data and securely making it available to others. It is also reasonable for them to seek to limit access and control security to protect their customers' data from disclosure or misuse, especially as they have learned that customers will blame them when something goes wrong and that recourse against any misusing fintech is limited by the financial condition of the fintech and the lack of a contractual arrangement in many cases."
Another way of looking at this is that the economic value belongs entirely to the consumer and that the consumer should decide how that economic value should be allocated, he said.
"This view holds that data reflecting a consumer's financial transactions held by a bank belong 'as a matter of right' to the consumer who therefore has to be able to access that data and use it, or provide it to others, for their own benefit," Baker said. "That view was generally supported by Section 1033 of Dodd-Frank. Beyond, that, everything about the issue is up for grabs. Section 1033 did not contemplate the large ecosystem of fintechs that started scraping data from banks, nor did it contemplate the rise of data intermediaries like Plaid, so the statute isn't helpful when considering how broadly it should apply to these new business cases."
One challenge to this concept that consumers should dictate what happens to their data is that consumers know little about any of this. And every party to these disputes — the banks, the aggregators and the fintechs — is driven by self-interest.
"Now that the CFPB rule is likely dead, the ultimate question remains — can banks charge fees for access?" Baker said. "JP Morgan is taking the view that they can and it will. Other banks may follow in due course. Yes, there will be lawsuits, but I do not see the Roberts-era courts taking an expansive view of Section 1033's statutory language, which would be required to stop the banks. In the current political environment it also seems highly unlikely that Congress will intervene on the issue."
