Why the JPM-Intuit partnership is a big step for data sharing
In his annual letter to shareholders last year, Dimon described his vision for a future where customers would be able to share their data with third parties in a more secured and managed fashion. The partnership the company announced on Wednesday with Intuit to share data over application programming interfaces makes good on that promise, essentially.
“This is the beginning of a long journey,” said Zach Perret, CEO of the financial technology infrastructure provider Plaid. “We see this as Chase saying that this should be an open and inclusive financial ecosystem, and consumers should be able to give access to their data to others and gain value from the broader system.”
Perret said his firm has had conversations with JPMorgan, but was not involved in the deal with Intuit. Still, such moves by banks raise the profile for firms such as Plaid or MX — a financial data analytics company that partners with banks and fintechs — that are pushing for the industry to connect via APIs.
“I think this is a good step in a series of them to building a strong more inclusive financial ecosystem,” Perret said. “We are excited to see the trend continue.”
In a press release, Dimon said the “most important part of this is giving control to the customer.”
So, what’s in it for JPMorgan? In some ways, the move speaks to a larger conversation happening within fintech circles about the value proposition to customers and the move away from products. Those types say the future of banking is in the data.
“This helps free up this financial data so that people can enrich their lives and could lead to a stronger connection to Chase,” said Ryan Caldwell, the chief executive of MX. “They are playing the long game here and taking care of their customers.”
JPMorgan said it would like to partner with other providers of financial management tools, too.
“It is undeniable that our customers love to use these apps. Traffic is going up and up each year,” said Trish Wexler, a spokeswoman for JPMorgan. “If you think about how we’ve described the bank’s relationship to fintech, we’ve taken a ‘build, buy or partner’ model and this is a perfect example of partnering.”
In some regards, the move is a safe one for JPMorgan. At 34 years old, Intuit is not exactly a fintech startup.
But, as a well-entrenched company, Intuit has a lot of customers that are likely also JPMorgan Chase customers. Mint has 6 million active users — defined as those who’ve logged in once in the last year. QuickBooks Online has 1.6 million users — or 5 million if desktop users are included in the count. TurboTax has 34 million.
“They have more joint customers with Intuit than they likely would with a startup,” said Kristin Moyer, a research analyst at Gartner. “They are dealing with the big ones first and will take it from there.”
Given that there are thousands of different parties, Moyer said, the industry in the U.S. will eventually need to adopt standards that allow smaller providers to connect to banks.
“Using an open standard approach reduces the development and support burden associated with proprietary API approaches,” Moyer said. “Many data formats and flows will remain bank-specific/non-standard, but API standards offer a framework for providing common infrastructure capabilities quickly and less expensively.”
There is also the issue of bandwidth on JPMorgan’s servers. The company famously throttled account access to Intuit for several days in October 2015 because of a large volume of requests.
In general, APIs should reduce some of the strain.
“The API identifies what it needs to pull from Chase and does just that; it is a much more efficient system of bringing in the data,” said Stephen Sharpe, an Intuit spokesman. “It is accurate and secure, and given the pace at which data is being produced, it make sense to do this.”
Wexler said the reduced load on the servers is one of the partnership's major benefits.
Screen scraping carried out in massive batches “can and has crashed our website before,” she said. “Creating a secured pipe that is push rather than pull is something that is going to benefit us.”
Moyer said there are still some risks involved in adopting this way of exchanging information.
“They are moving to a new form of sharing data and there are great benefits to it, but there are always new risks, too,” Moyer said. “You’re handling security in different ways. You need different types of talent to support and build them.”
In their announcement, the companies said the agreement aligns closely with the Center for Financial Services Innovation’s “Consumer Data Sharing Principles.”
One of the principles is reliability. Financial data should be timely, consistent, accurate and complete, according to the principles.
The "complete" part of that list is one of the things companies worry about when weighing APIs against screen scraping. APIs might be more secure, but they can also be more restrictive. A third party that may have previously been able to see everything, could be limited to account balances and transactions, not interest paid on loans and annual percentage rates. It’s debatable if some third parties need all of that information, but the key is putting that decision in the hands of the consumer rather than allowing banks to limit data access in the name of security.
MX’s Caldwell said his team was encouraged by the bank's citation of the CFSI principles.
“It is the thing that struck me as the most important,” Caldwell said. “When we talk about reliability, it means having it all available in a quick manner.”
Wexler and Sharpe said customers of JPMorgan and Intuit will see the same information as before.