|
Fair Play
While the Consumer Financial Protection Bureau’s open banking rule continues to work its way through the courts, JPMorgan Chase & Co. has decided to charge fintechs to access customer data. The fees, which could be negotiated, would vary based on how the data is used, according to Bloomberg, with payment providers paying higher fees.
In many ways, the CFPB’s rule — tied to Section 1033 of the Dodd-Frank Act — was seen as a net good for consumers and reflected a different financial landscape compared to 15 years ago. In the final rule, the CFPB estimated that “at least 100 million consumers had authorized a third party to access their account data.” Americans now use an array of financial products and services that connect to one another. Payments platform Venmo, for instance, pays the intermediary Plaid to connect to banks via application programming interfaces (APIs) to verify account information and ensure there are enough funds for a transaction.
But so far, some of that connection has been on the banking industry’s dime. “We’ve invested significant resources creating a valuable and secure system that protects customer data,” a Chase spokesperson told Bank Director. The CFPB’s final rule prohibited depository institutions over $850 million in assets from charging third parties and data aggregators like Plaid — a bitter pill to swallow when some of those third parties are also competitors.
Chase CEO and Chairman Jamie Dimon shared his concerns about this friction in the bank’s shareholder letter earlier this year. “Third parties want full access to banks’ customer data so they can exploit it for their own purposes and profits,” he wrote. It's understandable that Chase would want reimbursement for some of its infrastructure investment, and it’s likely other banks would follow. PNC Financial Services Group CEO and Chairman William Demchak told analysts on Wednesday, "We're in discussions on it. I applaud what JP did.
Banks may want to seek balance in those arrangements to ensure they’re not anti-competitive. Andrew Grant, a partner at the law firm Runway Group who primarily represents fintechs, says one consequence could be the return of screen scraping, a less secure method of accessing customer data that 1033 didn’t ban outright; the CFPB expected the practice to fall out of favor due to the preference for APIs. If banks charge high fees that are then passed along by data aggregators, cash-strapped fintech startups could use screen scraping as a cheaper alternative.
“That, to me, is a real future risk of charging for access in a non-competitive way,” says Grant.
• Emily McCormick, vice president of editorial & research for Bank Director
| 
