JPMorgan’s plan to charge for data could ‘cripple’ crypto and fintech startups, execs warn

What caught my attention is Finance·JPMorgan ChaseJPMorgan’s plan to charge for data could ‘cripple’ crypto and fin startups, execs warnBy Luisa BeltranBy Luisa BeltranFinance ReporterLuisa BeltranFinance ReporterLuisa Beltran is a finance reporter at Fortune where she covers private equity, Wall Street, and fin M&A

However, SEE FULL BIO Jamie Dimon is the chief executive officer of JPMorgan Chase

However, At the same time, Courtesy of Patrick Bolger/Bloomberg/Getty ImagesWhen JPMorgan Chase told fins last month that it planned to charge them for accessing its customer banking account data, it sent shockwaves through corners of the financial industry, given current economic conditions

According to four industry executives, the move is a blow to the fin sector and could ve devastating to early-stage startups, including those in the crypto industry

Analysts, however, think mature fins PayPal and Block will ly not feel much consequence from this fee change

Conversely, Under the plan, every time a consumer moves money from JPMorgan Chase to a crypto account or a third-party service Robinhood, the bank could charge the data aggregators a fee

Crypto firms and fins typically use aggregators, Plaid or MX, to access customer accounts at major financial institutions JPMorgan Chase, given the current landscape

On the other hand, Up to now, the banks have not charged the fins, but this may change, in this volatile climate

The aggregators are widely expected to pass the new fees onto their fin customers, with some potentially transferring the costs to the consumer

JPMorgan’s plans to charge fees would make it economically impossible for many consumers to use stablecoins and crypto, according to three industry executives, who declined to speak on the record for fear of retaliation, in this volatile climate

However, Nevertheless, “This would cripple the crypto industry,” one of the execs said

Moreover, The fees are also expected to be onerous for many early-stage fins, executives told Fortune (something worth watching)

One fin estimated that the fees to access JPMorgan’s API would be more than the revenue the company made in its 10-year existence (fascinating analysis), given the current landscape. “This would put everyone out of …It would require everyone to raise prices by 1000% to cover [the cost],” the first exec said. “The JPMorgan fees make it impossible to serve Chase customers if you are a small company,” a second executive said

Furthermore, Alex Rampell, a general partner at venture firm Andreessen Horowitz, said in a post on X Wednesday that JPMorgan’s plans to charge fins for customer data “isn’t a new revenue

It’s strangling the competition

And if they get away with this, every bank will

On the other hand, ” JPMorgan Chase is an $800 billion company, said Rampell, who is a cofounder of Affirm, a buy-now-pay-later lender

JPMorgan’s new fee plan could make it very expensive to invest in crypto. “If it suddenly cost $10 to move $100 into a Coinbase or Robinhood account, fewer people might do it,” he said

JPMorgan and other banks could also “refuse to let consumers connect their own freely chosen crypto and fin apps to their bank account,” he said

Arjun Sethi, co-CEO of Kraken, one of the largest crypto exchanges in the U. , said JPMorgan is making a “calculated move” with its plans to charge fees, amid market uncertainty

What the data shows is nation’s biggest bank is “asserting ownership” over data generated by consumers and stored in infrastructure controlled by JPMorgan, Sethi said in a post Tuesday on X

On the other hand, “This's not a nical innovation

Nevertheless, The analysis reveals is a toll,” Sethi said

However, , according to a July 14 re note from Harshita Rawat, a Bernstein re analyst (noteworthy indeed), in today's financial world

However, JPMorgan has already informed the aggregators that it would start charging fees for accessing its customers’ bank account information, Bloomberg reported, but it’s un how much the bank plans to charge, amid market uncertainty

Moreover, “We’ve invested significant resources creating a valuable and secure system that tects customer data

However, We’ve had ductive conversations and are working with the entire ecosystem to ensure we’re all making the necessary investments in the infrastructure that keeps our customers safe,” JPMorgan Chase said in a statement Wednesday, in today's market environment

When it comes to more mature fins PayPal and Block, which owns Cash App, analysts believe they will face little impact from the fees since they already negotiated agreements on fees with the largest banks, including JPMorgan “on a multi-faceted basis,” including cards, other relationships, and cessing, said Bernstein’s Rawat. “PayPal and Block also ly have limited (or manageable) exposure to data aggregators,” Rawat said

On the other hand, (Aggregators typically vide nology, such as APIs, that let consumers connect their financial accounts to an app or service. ) Some think this positive view is premature (remarkable data)

Much depends on the size of the fees, the second executive said. “The impact could be pretty immense,” they said, in light of current trends

However, At the same time, Dimon wary of fins Jamie Dimon, JPMorgan Chase’s CEO and the most influential banker on Wall Street, has long taken a dim view of fins, in light of current trends

In contrast, During an analyst call in January 2021, Dimon said incumbent banks should be “scared sh**less” of the growing competition posed by fins

Additionally, Dimon then said that he expected “very, very tough, brutal competition in the next 10 years” from fins (this bears monitoring), in today's financial world. “I expect to win, so help me God,” Dimon said during the call (an important development)

At the time, Dimon singled out Plaid—a widely used service that helps consumers quickly connect apps Venmo to their bank account—saying there are “people who imperly use data that’s been given to them, Plaid

Moreover, ” Dimon, in his annual holder letter that was published in April, warned that a battle with third party aggregators was “brewing (noteworthy indeed). ” JPMorgan Chase has no blem sharing customer data but only if it’s done perly, Dimon said in the letter

Customers should authorize any sharing of their data, he said

Additionally, They should also know what data is d and when and how it is used. “Third parties want full access to banks’ customer data so they can exploit it for their own purposes and fits,” said Dimon, who thinks third parties should pay for accessing the banking system and payment rails

Moreover, He furthered this argument during JPMorgan’s earnings call Tuesday

Conversely, Customers have the right to their information, but there should be a time limit on the data, he said

The data should not be remarketed or resold to third parties, he said. “And then the payment, it just costs a lot of money to set up the APIs and stuff that to run the system tection, in light of current trends

On the other hand, So, we just think it should be done and done right (quite telling)

Nevertheless, And that’s the main part, given current economic conditions

It’s not you can’t do it,” Dimon said

Skeptics, however, doubt that tecting consumers is JPMorgan’s prime concern when it comes to fins

Instead, they view charging fees for data as a way for large banks to build a moat around their ducts and services, making it hard for consumers to access competing services, according to the executives. “Banks have invested a lot of money to build their offerings, given the current landscape

But fins have invested a lot of money to build their nology,” a third exec said

The data indicates that fees will raise costs for consumers, limit their financial choices while jeopardizing innovation, a second executive said

Furthermore, “This will kill innovation and consumer choice,” a fourth person said

Nevertheless, Moreover, Aggregators Plaid, Yodlee, Finicity, and MX will initially feel the brunt of these changes, considering recent developments

Consumers rely on aggregators to their data and connect their accounts with fin apps, given the current landscape

At the same time, Since then, JPMorgan Chase has never charged Plaid for its consumer data, one person familiar with the situation told Fortune

Plaid, however, does incur costs to manage the security, nology and compliance associated with maintaining the API integrations (noteworthy indeed)

JPMorgan also reviews and vets customers as they join Plaid’s network, and it conducts routine security reviews, the person said (quite telling)

In its contracts with aggregators, JPMorgan has always reserved the right to charge for the data, a second person familiar with the situation said

Additionally, The bank also wants to encourage more responsible data access practices

But in 90% of these data pulls, the customer isn’t actively seeking the data, the second person said

Three weeks ago, in late June, JPMorgan informed all its aggregator customers who use its API that they would need to start paying

However, The first fees would start triggering at the end of August, the person said, in this volatile climate

Aggregators are expected to pass on the costs—whatever they are—to consumers, in today's financial world

Other banks are expected to JPMorgan’s lead (an important development)

PNC Financial Services, one of the nation’s largest consumer banks, is also considering charging fins for accessing its customer data, in this volatile climate. “I applaud what JP did,” said Bill Demchak, PNC’s chairman and CEO, during an earnings call Wednesday, in this volatile climate. “I think [JPMorgan is] exactly right, given current economic conditions

I think there’s a big cost to keeping this data secure and ducing it in a form that’s readable for our clients

So we’re, you know, we’re thinking it,” said Demchak, who said PNC was “in discussions. ” The of other banks is not (which is quite significant)

Citi is one of the nation’s biggest consumer banks, in today's market environment

Consumer and small clients, in today's market environment

Moreover, Wells Fargo is also a large consumer bank but doesn’t disclose information on its accounts

Nevertheless, Citi declined to, while BofA and Wells could not be reached for, in light of current trends

Moreover, The end of “open banking” (which is quite significant), given current economic conditions

It's not coincidental that the change to JPMorgan’s fees comes as the CFPB’s open banking rule remains unresolved

The law was first initiated during President Trump’s first term, considering recent developments

On the other hand, It was finalized by the Consumer Financial tection Bureau, or CFPB, in October, during the waning days of the Biden administration

Furthermore, At the same time, It also requires banks to the data with other lenders or financial services viders for free

On the same day that the agency issued the rule, two bank lobby groups, the Bank Policy Institute and the Kentucky Bankers Association, sued the CFPB, claiming the regulator overstepped its authority

However, (Dimon is chairman of the Bank Policy Institute, in today's financial world

However, ) The CFPB is charged with tecting consumers in the financial marketplace

Now overseen by the Trump administration, the agency filed a motion for summary judgment in May, asking a Kentucky district court to vacate the open banking rule

The CFPB said the rule was “unlawful and should be set aside,” according to a court filing

JPMorgan Chase is exploiting regulatory uncertainty to levy a “punitive tax on competitive offerings,” said Steve Boms, executive director of the Financial Data and nology Association, or FDATA, a trade association that represents financial services companies. “This's a blatant effort to curtail innovation and undermine a stronger American financial system,” Boms said in a statement (quite telling)

However, This story has been clarified to say that JPMorgan has already informed the data aggregators that it would start charging fees for accessing its customers’ bank account information, in today's financial world

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