JPMorgan says fintech middlemen like Plaid are 'massively taxing' its systems with unnecessary pings

What's remarkable is In this articleJPM your favorite stocksCREATE FREE ACCOUNTJamie Dimon, chief executive officer of JPMorgan Chase & Co

Furthermore, , at the Institute of International Finance (IIF) during the annual meetings of the IMF and World Bank in Washington, DC, US, on Thursday, Oct

Additionally, Kent Nishimura | Bloomberg | Getty ImagesJPMorgan Chase said fin middlemen — the companies that have helped a new generation of financial apps connect with traditional checking accounts — are flooding the bank's systems with unnecessary data requests. "Aggregators are accessing customer data multiple times daily, even when the customer is not actively using the app," a JPMorgan systems employee wrote last week in an internal memo to retail payments head Melissa Feldsher. "These access requests are massively taxing our systems. 89 billion data requests from middlemen hitting JPMorgan's systems in June, only 13% were initiated by a customer for transactions, according to the memo, which was seen by CNBC (fascinating analysis)

At the same time, The majority of data pulls, known as API calls, were for purposes ranging from helping fin companies imve their ducts or prevent fraud to other efforts including harvesting data for sale, said a person with knowledge of the memo who declined to be identified amid talks between JPMorgan and the fins

JPMorgan, the biggest U (an important development)

Moreover, Bank by assets, is preparing to charge the middlemen new fees for access to systems that it says are increasingly costly to maintain, amid market uncertainty

Additionally, Negotiations between JPMorgan and the fin middlemen are, but the new fees could start as soon as October, said people with knowledge of the matter

The bank's move could lead to upheaval in the fin ecosystem, which flourished as aggregators including Plaid and MX connected traditional banks with newer arrivals (remarkable data)

Moreover, The API access had been free for years, allowing middlemen to fit from selling connectivity to fins that in turn offered accounts with no-fee checking or trading services

The situation changed in May after the Consumer Financial tection Bureau filed a motion in support of a banking industry lawsuit seeking to end the so-called "open banking" rule, in today's market environment

That rule, finalized by the Biden-era CFPB in the waning months of that administration, mandated that banks had to vide data to authorized parties for free (quite telling)

A week after the rule's passage, JPMorgan CEO Jamie Dimon called on bankers to "fight back" against what he said were unfair regulations

Furthermore, Furthermore, Surging volumesNews this month that JPMorgan was planning to charge for customer data, first reported by Bloomberg, led to accusations from venture capital investors and fin and crypto executives that JPMorgan was engaging in "anti-competitive, rent-seeking behavior" by putting up paywalls to customer data

But JPMorgan says it bears the rising costs from maintaining the infrastructure needed for the surge in volumes, as well as elevated fraud claims linked to payments made in the fin ecosystem

Furthermore, The total volume of API calls received by JPMorgan has more than doubled in the past two years, according to the memo (which is quite significant)

In contrast, Transactions involving money sent over electronic ACH transactions were 69% more ly to result in fraud claims if they involved data middlemen, according to the memo

However, JPMorgan saw $50 million in fraud claims from ACH transactions initiated through aggregators, a figure the bank expects to triple within 5 years, the memo said

Though the firms aren't named, CNBC has learned that the largest player represented in the data is Plaid

Plaid co-founders William Hockey and Zach PerretSource: PlaidGranting accessPlaid said in a statement to CNBC that this figure "misrepresents how data access works" because all activity begins when customers grant permission to fin companies when they for accounts

Of course, many customers don't closely read the lengthy "Terms and Conditions" pages that contain data-sharing disclosures before opening new accounts

However, "Calling a bank's API when a user is not present once they have authorized a connection is a standard industry practice supported by all major banks in order for consumers to get critical alerts for overdraft fees or suspicious activity," Plaid told CNBC

Plaid also said that JPMorgan's claims of higher fraud among aggregators were "misleading," though it didn't elaborate. "It's not surprising that the volume of data access is increasing alongside demand from consumers for financial tools that are smarter, faster, and more tailored to their needs," Plaid said. "To be, we believe it is essential that the data sharing ecosystem works for everyone, including consumers, fin developers, and financial institutions – many of whom leverage open banking in their own ducts," the company said

The posed fee schedules circulated by JPMorgan could result in Plaid paying $300 million in new annual fees, according to a Forbes report

Nevertheless, Moreover, Bid-ask spreadIf the Biden-era "open banking" rule is struck down by the courts, the main question is not whether the middlemen will have to pay for data but how much they will have to pay

Additionally, The back-and-forth between JPMorgan and the middlemen is a private cess, spilling into public view, to arrive at a new reality that is acceptable to all, in this volatile climate

Moreover, JPMorgan has had ductive conversations with several data aggregators who acknowledge that they can change the way they pull data if it is no longer free, according to a person with knowledge of the negotiations. "I think both sides fully acknowledge there are things they could do to right-size call volume," this person said.