JPMorgan Chase wins battle with fintech over fees

JP Morgan Chase CNBC revealed that it has signed a deal to ensure it receives compensation from fintech companies responsible for nearly all data requests from third-party apps connected to customers’ bank accounts.

JPMorgan spokesman Drew Pusateli said the bank signed the latest deals with fintech intermediaries that account for more than 95% of the data captured in its systems, including Plaid, Yodly, Morningstar and Akoya.

“We have reached an agreement that will make the open banking ecosystem more secure and sustainable, allowing customers to continue to access their favorite financial products reliably and securely,” Pusateri said in a statement. “The free market worked.”

The milestone is the latest development in a long-running dispute between traditional banks and the fintech industry over access to customer accounts. For years, intermediaries like Plaid didn’t pay anything to eavesdrop on banking systems if customers wanted to use fintech apps such as: robin hood To withdraw funds or check your balance.

This dynamic seemed set to become law in late 2024, when the Biden administration-era Consumer Financial Protection Bureau finalized so-called “open banking rules” that would require banks to share customer data with other financial companies for free.

But banks filed lawsuits to stop the CFPB rule from taking hold, and appeared to have the upper hand in May when the Trump administration asked a federal court to invalidate the rule.

Shortly after, JPMorgan, the largest US bank in terms of assets, deposits and branches, reportedly told intermediaries that it would begin charging fees worth hundreds of millions of dollars for access to customer data.

In response, fintech, crypto and venture capital executives accused the bank of engaging in “anti-competitive and rent-seeking practices” that hurt consumers’ ability to innovate and take advantage of popular apps.

Weeks of negotiations between JPMorgan and the intermediary resulted in JPMorgan agreeing to lower prices than originally proposed, while the fintech intermediary won concessions on responding to data requests, according to people familiar with the negotiations.

One venture capital investor, who requested anonymity about the companies in which he invests, said fintech companies preferred the certainty of a fixed rate of data sharing, as it was unclear whether the CFPB would favor banks or fintechs as it currently revamps its open banking rules.

The bank and fintech company declined to disclose details about the agreement, including the amount the intermediary agreed to pay and how long the agreement was in force.

The deal signals a shift in the dynamics between banks, intermediaries and fintech apps that increasingly threaten incumbents. Industry observers say more banks are likely to start charging fintech companies for access to their systems.

“JPMorgan tends to be a trendsetter,” said Brian Shearer, director of competition and regulatory policy at Vanderbilt Policy Accelerator. “They’re sort of the leaders of the pack, so it’s reasonable to expect other big banks to follow suit.”

Shearer, who worked at the CFPB under former director Rohit Chopra, said he was concerned that the development would create barriers to entry for emerging startups and ultimately lead to higher costs for consumers.

Supporters of the 2024 CFPB Rule said it would give consumers control over their financial data and encourage competition and innovation. Banks, including JPMorgan, argued that they were being exposed to fraud and unfairly charged with higher costs of maintaining systems increasingly used by intermediaries and their customers.

When the Plaid-JPMorgan deal was announced in September, both companies issued dual press releases emphasizing the continuity they offer customers.

But industry groups, of which Plaid is a member, have harshly criticized the development, suggesting that although JPMorgan has won a decisive battle, skirmishes may continue to play out in court and in public.

In response to JPMorgan’s milestone, Penny Lee, CEO of the Financial Technology Association, told CNBC that “introducing exorbitant fees is anti-competitive, anti-innovation and contrary to the clear interpretation of the law.”

“These agreements are not working in a free market, but rather large banks are using their market position to exploit regulatory uncertainty,” Lee said. “We call on the Trump Administration to comply with the law by preserving the existing prohibition on data access fees.”