JPMorgan Tells Fintechs They Have To Pay Up For Customer Data (bloomberglaw.com) 42
An anonymous reader quotes a report from Bloomberg: 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 to create a 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 open-banking measure, finalized in October, enables consumers to demand, download and transfer their highly-coveted data to another lender or financial services provider for free.]
The charges would drastically reshape the business for fintech firms, which fundamentally rely on their access to customers' bank accounts. Payment platforms like PayPal's Venmo, cryptocurrency wallets such as Coinbase and retail-trading brokerages like Robinhood all use this data so customers can send, receive and trade money. Typically, the firms have been able to get it for free. Many fintechs access data using aggregators such as Plaid and MX, which provide the plumbing between fintechs and banks. The new fees -- which vary from firm to firm -- could be passed from the aggregators to the fintechs and, ultimately, consumers. The aggregator firms have been in discussions with JPMorgan about the charges, and those talks are constructive and ongoing, another person familiar with the matter said.
A representative for JPMorgan said the bank has invested significant resources to create a 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 open-banking measure, finalized in October, enables consumers to demand, download and transfer their highly-coveted data to another lender or financial services provider for free.]
The charges would drastically reshape the business for fintech firms, which fundamentally rely on their access to customers' bank accounts. Payment platforms like PayPal's Venmo, cryptocurrency wallets such as Coinbase and retail-trading brokerages like Robinhood all use this data so customers can send, receive and trade money. Typically, the firms have been able to get it for free. Many fintechs access data using aggregators such as Plaid and MX, which provide the plumbing between fintechs and banks. The new fees -- which vary from firm to firm -- could be passed from the aggregators to the fintechs and, ultimately, consumers. The aggregator firms have been in discussions with JPMorgan about the charges, and those talks are constructive and ongoing, another person familiar with the matter said.
I'd do that too (Score:2)
Re: I'd do that too (Score:2)
JPMorgan has been giving third-parties access to JPMorgan bank account info for free at great expense to JPMorgan, why shouldn't they charge third-parties a fee for the info?
JPMorgan was shouldering the cost, asking the users to pay for this info just makes sense.
It's hard to feel bad for these competing payment platforms & others whose business models and pricing sheets were based on JPMorgan giving them free access to JPMorgan customer data.
Re: I'd do that too (Score:2)
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JP Morgan is milking its real customers - depositors and borrowers - for these costs. So it is almost like they're getting twice the price.
Sharing/selling/etc. should be opt-in (Score:2)
Somewhere, we'll need a law which prohibits this sharing of data, aggregation, etc. without an individual's written consent and if such data is shared, the individual whose data is used should receive a payment from the aggregator every year, even if it is rounded up to $0.01.
The bank selling the data for profit should only be able to make 3% off of what the third-party pays to all the individuals.
Re: (Score:2)
Amen, but there will never be enough pressure to push this through. And it will be a mess to enforce, and there will be deafening noise how it is "killing innovation". Well, some kinds of it for sure ;)
Easy rereading (Score:2)
Put the quotes from leaders and news articles through the language translator:
- "killing innovation" -> "reducing jobs", "reducing government tax revenue", "reducing political campaign contributions"
- "not living up to potential" -> "not enough future tax payers", "not earning enough to pay for government programs giving handouts to other people"
and more....
Case in point, look at the NATO countries complaining about spending more on defense. It's not about spending on defense, it is about politician
Private equity approach (Score:2)
Private equity like steps:
1. Identify some small part of a business process, government process, ...
2. Extract out that small part
3. Get investors or others to fund a business from that part
4. Extract fees from it
5. Raise costs for everyone else slowly over time and cause inflation
6. Call it something else to claim a positive social benefit and get appeal for it from the general population
For example, shopping center owners in the suburbs putting paid parking meters nearest to the entrance doors even though
Pass on the fees. (Score:2)
The companies in question should just pass on the fees to their users. Want to use your Chase account with a third-party payment provider? That's a $15 service fee. When Chase starts bleeding customers, they'll rethink their strategy.
Re: Pass on the fees. (Score:3)
The problem is all banks will start charging fees
Heavens to mergatroids! Banks charging customers fees ? Say it isn't so! /sarcasm
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At the end, the only thing left will be for them to charge us money to keep our money, which will FINALLY give people pause.
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At the end, the only thing left will be for them to charge us money to keep our money, which will FINALLY give people pause.
We're already there. Fail to maintain a minimum balance? Fee. It's expensive to be broke.
Re: Pass on the fees. (Score:2)
Yes, bank services should be free, and everyone that works in a bank should be a volunteer!
Re: (Score:2)
That's called a negative interest rate and it has already been used in various places.
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The problem is all banks will start charging fees
Maybe. Or maybe some banks won't because that way they get more depositors. The market will sort it out.
My bank charges fees for many things, but most fees are waived if I maintain a high enough average balance.
Other fees are waived if I have my paycheck direct-deposited and have my mortgage payment auto-deducted.
So only poor people end up paying the fees, which is yet another reason not to be poor.
Re: Pass on the fees. (Score:2)
No, if you want to tie your PayPal account to your bank account, there's a fee from PayPal, not the bank. PayPal needs to recoup the fee they pay the bank.
Previously, the bank itself covered the cost of providing the info, not the subset of customers that use the info.
Raw materials/ (Score:1)
If your business model is contingent on free resources from others, then wouldn't that mean the business plan wasn't viable to start with?
Re: Raw materials/ (Score:2)
Oh no! You can't disrupt the disrupters, that's not fair!
Re: thank god (Score:2)
Which? Banks? Alternate payment platforms? And what would we have in their place? Little pieces of paper with pictures of dead presidents and founders? A barter-based economy?
Re: (Score:2)
And what would we have in their place?
The credit cards that banks (like JPMorgan) offer their customers. "Alternative payment platforms" can coexist within the same clearing and settlement system as physical cards. And with the same data requirements. Transactions only need a yes/no verification for the amount entered at the point of sale. They don't need my banking and financial history.
Insane (Score:3)
It is insane to me that banks ever allowed access to the data for free in the first place.
Re:Insane (Score:5, Insightful)
Who in their right mind provides your login details of ANY financial institution? I don't share passwords/logins with anyone for even something like /. But my bank. Ef no.
Re: (Score:3)
That is crazy. I can't believe nothing really horrendous has come of this practice (that I know of).
I hear about people losing access to their coinbase accounts, or getting them drained all the time, but actual banks - I never hear of that happening.
Re: Insane (Score:2)
Everyone who uses "fintech?"
Afaik, you fintech provider definitively requires your account and login information for your bank accounts in order to conduct any business on your behalf. I.e. that is the way it works
Should you trust any old fintech offering convenience with that ?
Doubtful, I agree. You would have to assume that all companies have superb data security, which clearly is not the case if you follow the hacking ne
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I don't know which is worse (Score:2)
that a bank put up their customers' data for sale for a price, or that other companies thought they should get that data for free.
Whaat?! (Score:3)
Re: Whaat?! (Score:2)
Re: (Score:2)
Don't do this. Or pay us (Score:2)
In "personal data", there's "personal".
How can you, rotten bankers, sell our data ?
From now on, if you want to sell them, you'll negotiate with us a per buyer contract, and I'll write my price on this contract (if I accept to sell). Be prepared, it will be at least a 6 figures amount.
Re: Interesting (Score:2)
I get the impression they "create" liquidity by... injecting their own crypto holdings into other cryptos by transacting algorithmically, simulating organic trading activity
Is that the jist of it?