JP Morgan Charges Customers for Data Access

Forbes

5 days ago

The JP Morgan building in London's Canary Wharf financial district. An American investment bank and ... More financial services company.
Two weeks ago news broke that JP Morgan Chase planned to begin charging third-parties fees to access customer data and Fintech Internet blew up. Immediate reactions ranged from 'Open Banking is Dead' to those championing the move as an inevitable one by banks who have invested millions in building the infrastructure needed to support open banking. Regardless of which end of the spectrum you sit on, the reality is this is not the first time JP Morgan has made bold moves. History shows us that those decisions have not always worked out as planned, but often are necessary to drive the market forward.Experimenting at Scale
If you are a financial services nerd like me, chances are in October of 2015 you may have been at Money2020 in Las Vegas. In which case, you will most certainly remember the big splash JP Morgan made with the announcement of Chase Pay (they had cookies!) and Chase's plans to offer a bank digital wallet that would allow it to link Chase customers with Chase merchants. At the time the move was counter to the early industry momentum around other solutions such as Apple Pay and Google Pay and many saw it as a sign of a future where every bank had their own wallet.
The thing is, that didn't work out. After several years of failed effort to push the Chase Pay wallet with customers, JP Morgan shut down the project and moved on. Undoubtedly, the bank learned a lot from the effort, and leveraged the technology and the business model with future merchant projects. However, just because the largest bank in the US announces, or even launches, something does not mean the rest of the industry will follow or that it is ultimately the model that will win. When you are as large as JP Morgan you get to 'test' ideas and see how the industry reacts.The Role of Akoya
What was also surprising to some about the recent JP Morgan data announcement is that many thought the ability to control access to customer banks data was exactly why JP Morgan joined its peers in founding Akoya, 5 years ago. When I interviewed Akoya's then CEO, Stuart Rubinstein, in 2021 he stated Akoya was, 'meant to help banks, to help aggregators, and help fintechs to connect, and solve the many-­to-­many problem of negotiating individual bilateral agreements and individual connections, so that we can get everybody on a safe, secure, transparent way of sharing data through APIs'.
If that is the future JP Morgan signed up for then they may have gotten tired of waiting for Akoya to make it a reality. Akoya is clearly still working toward their mission; however, it remains to be seen if they will serve a greater role in creating the monetization framework that banks need to follow JP Morgan's lead, or if they are purely solving the technical connection layer.Don't Believe Everything You Read
After working in the banking and payments world for the last 20 years, I've seen a lot of headlines along the way that were a bit…thin. A large tech player launches a new 'game changing' product that will completely rewrite the rules of money movement, or a bank announces a 'revolutionary' new credit product that customers have been craving for years. Rarely does the ultimate product live up to the initial headlines, and sometimes it never makes it to market at all. That is the first thing to keep in mind with the JP Morgan announcement.
The media is here to tell a story and many times large organizations use the media to do just that. Often that story is to test an idea with the market or regulators, sometimes it is to get ahead of the impending reaction from customers or partners. Regardless of the exact reason, it's always important to realize that articles with quotes are not 'leaks' and are planted announcements. The question you need to ask is why is JP Morgan signaling this to the market?Value Attribution
My theory would be that this announcement was released to allow JP Morgan to draw a line in the sand and say that the burden of cost for serving up customer data needs to shift to where the value is created or monetized. A notion I find hard to argue with. Yodlee, Plaid, MX, and others have built entire businesses on top of leveraging the data the banks provide. Even the large core providers charge banks to access their own data via APIs. The prices being quoted, the timing of implementation, or even the parties that it would apply to are likely all speculation because the reality is those details will be very nuanced, if they even go to market in that shape. Floating a pricing model allows JP Morgan to have leverage with partners and place value on their efforts to make customer data available in a secure way.
There is also no doubt that the timing of this announcement is directly aligned with the political climate and the current questions around Rule 1033 and the CFPB as a whole. If there ever was a time for a bank to suggest they are going to directly or indirectly add cost to the end consumer, it's now. The thing is, political leaders come and go, and the regulatory environment often changes with them. It could be that JP Morgan feels it is important to try and set a precedent while the environment is more bank friendly so that there is a position to negotiate back from should the environment change. The line has been drawn.Looking Forward
A bank the size of JP Morgan is understandably going to make headlines with nearly every move it makes. My eye will be on what other banks do now that JP Morgan has broken the seal on participating directly in the monetization of customer data. My theory is that JP Morgan, and others like it, will continue to offer data directly to consumers through its own channels and key partners. Meanwhile, it will look to participate in the economics of any other 3rd party monetizing its customer data through fees. Several large banks will likely follow suit, while smaller banks may need to leverage Akoya or their core provider to aggregate access. For the aggregators, it may be time to firm up those corporate partnerships.