In a deal that could have far-reaching ramifications for the U.S. financial service industry, Plaid will pay JPMorgan Chase (JPMC) fees to access consumers’ banking data.
Plaid’s aggregation platform connects banks and their customers with third-party services, ranging from peer-to-peer payments and credit score monitoring to crypto trading.
Until now, fintech companies have had unfettered access to banks’ customer data. That will change for Plaid under its updated agreement with JPMC, which establishes a pricing structure for data access and sets clear guidelines for how both parties will protect consumer information.
A Foregone Conclusion
This shift in the financial services paradigm seemed almost inevitable after JPMorgan Chase recently highlighted the increasing number of API requests it receives from fintechs.
JP Morgan Chase reported receiving 1.89 billion requests in a single month, most of them from aggregators. Only a small fraction of these requests were initiated by customers; the rest came from fintechs pulling data for various purposes, including improving their products and marketing.
In addition to the strain on banks’ systems caused by the flood of API calls, JPMorgan Chase has also raised concerns about how some fintechs exploit consumer data. The company noted that opening access to fintechs not only creates potential privacy issues but also exposes banks to increased fraud risks.
The Insights into Why
There has been substantial resistance to both JPMC’s stance on fintechs and its decision to charge fees. The current system—which represents a shift toward the open banking model—has been built on free access to information. Charging fintechs fees could severely hinder many smaller companies’ ability to innovate and compete, potentially leading to greater centralization in the financial services industry.
In an email to PaymentsJournal, Plaid offered insights into why it agreed to pay fees to JPMC. One of the main reasons was continuity—the deal will cement the firm’s long-standing relationship with JPMC and ensure that all of Plaid’s services remain available to the bank’s customers.
While Plaid didn’t provide specifics regarding pricing, it confirmed that there will be no changes to current contracts or pricing as a result of this agreement, and customers won’t face additional fees at this time.
Finally, Plaid emphasized that it still believes consumers deserve the right to freely access and share their own information with whomever they choose. It noted that it will continue advocating for a regulatory framework to be created under Section 1033, even though that rule faces significant challenges.
