JPMorganChase reaches deal to charge Plaid for customer data

• Key Insight: JPMorgan's fee deal with Plaid signals a new data-monetization model.  
  
• What's at Stake: Banks' pricing could reshape fintech access, competition, and consumer data flows.  
  
• Forward Look: A pending CFPB 1033 rewrite could formalize pricing and data-access responsibilities.

Source: Bullets generated by AI with editorial review
JPMorganChase and Plaid have signed an agreement through which the bank will charge the data aggregator for access to its customer data, and both companies will make technology investments to improve data access.

"We've invested significant resources creating a secure and valuable system that protects customer data, and are engaged with the entire ecosystem to ensure we're all making the necessary investments in the infrastructure that keeps our customers safe," a JPMorgan spokesman told American Banker.

Neither company would say how much the $4.6 trillion-asset bank is charging Plaid. People familiar with the matter said the fees are fractions of a cent per data pull. CNBC reported that in the month of June, the bank received 1.89 billion data requests from middlemen, and that these high volumes of requests were "massively taxing" its systems. 

Plaid will not pass the new fees on to its 7,000 fintech and bank clients, a Plaid spokeswoman told American Banker.

"This establishes continuity," the Plaid spokeswoman said of the new contract with JPMorgan. "Our customers and the millions of JPMC customers who rely on them can continue accessing their fintech services as usual. This is our primary responsibility." 

The announcement comes amid a debate over whether banks should be allowed to charge fees for giving data aggregators their customer data. The final data-sharing rule that the Consumer Financial Protection Bureau published in October — known as the 1033 rule, in reference to a section of the Dodd-Frank Act — would have prevented banks from charging for this data. Under the Trump administration, the rule has been vacated and is being rewritten. 

JPMorgan first floated the idea of charging data aggregators for bank customer data in July. 

"We've invested significant resources creating a valuable and secure system that protects customer data," a JPMorgan spokeswoman said at the time. The megabank argued that it gets nothing in return, while data aggregators charge their clients for access to the bank's data. Industry groups representing data aggregators accused JPMorgan of "exploiting regulatory uncertainty to levy an arbitrary and punitive tax on competitive offerings."

Penny Lee, president and CEO of the Financial Technology Association, which represents data aggregators like Plaid and MX as well as large fintechs, said the announcement Tuesday "demonstrates the urgent need for action to protect the right of consumers to securely permission and share their financial data without costly fees."

"We continue to urge the CFPB to craft a 1033 rule that protects consumer data access and ensures a competitive, innovative and accessible financial system," she added.

Phil Goldfeder, CEO of the American Fintech Council, said that by attaching fees to consumer-permissioned data, "the deal sets a dangerous precedent that threatens to shrink competition, limit consumer choice, and slow the pace of responsible innovation."

But CFPB Founding Member Jim McCarthy said banks have a valid reason to charge for data. "Secure access is not free to provide, and the work banks do to make information reliable has real costs," McCarthy, who is now chairman of McCarthyHatch, told American Banker. "I support pricing the work, not the bytes. If an intermediary relies on bank validation, a reasonable, published, nondiscriminatory fee for that work makes sense. Consumer directed access to basic covered data should stay simple and free."

Some observers expressed discomfort with the two largest companies in the U.S. financial-data-sharing ecosystem setting rules of the road in the absence of government policy.

"The Plaid-JPMorgan agreement underscores the need for a new CFPB rule to clarify the responsibilities of all parties involved in open banking transactions," Martin Kleinbard, who was a senior fellow at the CFPB in the two years ending in January, told American Banker. "One-off pricing negotiations like this one reflect idiosyncratic market power dynamics rather than universal principles of compensation for services rendered.''

Ideally, the new 1033 rule will let whichever party is adding value to the underlying data be properly compensated based on the value added, with fair and transparent pricing, said Kleinbard, who is now the founder of fintech advisory firm Granular Fintech.

"The CFPB doesn't need to create that pricing menu itself, but it does need to clarify the framework that will allow industry-consensus-driven standard-setting bodies to fill in the details," he said.

JPMorgan was one of the first banks to sign a data-sharing agreement with Plaid, the largest U.S. data aggregator, in 2018. At the time, such deals were an answer to the then-common practice of screen scraping, which posed security risks.

Data aggregators would ask consumers for their online or mobile banking user name and password, log in as the consumer, and copy information from their bank account to send to fintech clients. This activity led to a bevy of complaints from banks and class-action lawsuits from consumers.

As a result of the 2018 agreement, JPMorgan created application programming interfaces through which it shared customer data directly with Plaid.

Today, 80% of Plaid's industry-wide data aggregation is on or migrating to APIs, the Plaid spokeswoman said. "We only screen scrape if a bank has not set up an API," she said.