FinTech companies account for the majority of API calls, according to JPMorgan Chase.
JPMorgan Chase, one of the world's largest banks, has announced plans to implement new fees for fintech companies and crypto platforms that use its API to access customer banking data. The move, which could take effect as early as October, is aimed at offsetting the substantial infrastructure and operational costs associated with handling large volumes of data requests.
The bank's decision comes amidst a changing open banking landscape, following the Consumer Financial Protection Bureau's (CFPB) support for ending the Biden-era open banking rule in May. According to JPMorgan CEO Jamie Dimon, third parties want full access to banks' customer data to "exploit it for their own purposes and profits."
The new fees are expected to have significant financial implications for fintechs. JPMorgan estimates fees for large data aggregators like Plaid could reach $300 million annually, potentially passed down to fintech platforms and consumers. This could drastically increase costs, threatening smaller and early-stage fintech firms and crypto startups by making it financially unsustainable to offer services reliant on JPMorgan's APIs.
JPMorgan executives argue that the API requests, frequently made multiple times per day per customer by aggregators, are "massively taxing" their systems. They also cite higher fraud risks linked to aggregator transactions—69% more than traditional banking channels—as an additional concern.
However, Plaid, a fintech company that uses data from JPMorgan Chase, claims that all API calls begin with customers giving permission when they sign up for accounts. The company also disputes the higher rates of fraud, stating that claims of higher rates are "misleading." Plaid wants the data sharing ecosystem to benefit consumers, FinTechs, and financial institutions alike.
Critics view JPMorgan's move as anti-competitive behavior designed to create a market moat rather than a necessary cost recovery. Industry leaders argue that these fees could chill fintech funding and innovation, disproportionately impacting smaller players while larger, mature fintech companies might absorb the costs more easily.
In a memo to shareholders, Dimon wrote that JPMorgan Chase has no problem with data sharing, but only if it is authorized by the customer, the customer knows exactly what data is shared and when and how it is used, and third parties pay for accessing the banking system and payment rails.
The exact nature and amount of the new fees have not been specified in the report. JPMorgan Chase is currently negotiating the fees with FinTech companies. The volume of data access is increasing alongside consumer demand for smarter, faster, and more tailored financial tools, according to Plaid.
As the fintech industry continues to evolve, the impact of these new fees remains to be seen. Some executives warn this could effectively "cripple" parts of the crypto industry and significantly hinder fintech innovation. The new fees, if implemented, could raise significant concerns about the potential negative impact on fintech innovation and competition.
- JPMorgan Chase, in light of the Consumer Financial Protection Bureau's (CFPB) stance and a shifting open banking landscape, plans to impose fees on fintech companies and cryptocurrency platforms using its API, aiming to recuperate costs from managing large data volumes.
- In response to JPMorgan's decision, Plaid, a fintech company, claims that all API calls are made with customer consent and disputes higher fraud rates associated with the data requests, advocating for a data-sharing ecosystem that benefits consumers, fintechs, and financial institutions.
- Critics perceive JPMorgan's move as potential anti-competitive behavior, claiming it could stifle fintech funding, impact smaller players disproportionately, and hinder the crypto industry and overall fintech innovation.
- Despite the uncertainty surrounding the specifics of the new fees, JPMorgan is currently negotiating the terms with fintech companies, as increased consumer demand for intelligent, efficient, and personalized financial tools continues to drive the growth of the fintech industry.
