JPMorgan to Charge Plaid for Customer Data as Companies Reach Agreement to Propel Open Banking

Banking giant JPMorgan Chase and Plaid, a fintech that lets users share their bank data with third-party apps, have struck a deal in which Plaid will pay the bank for access to its customer information.

The agreement provides a model for how credit card issuers and data aggregators can work together to advance open banking innovations while maintaining data security.

“Today’s announcement will ensure that our customers can continue to quickly, safely, and securely access their financial data for years to come and stay connected to the products they rely on every day,” said Melissa Feldsher, Head of Consumer Payments at JPMorgan Chase, in a press release.

JPMorgan Chase’s move to form a new plan with Plaid may have ripple effects on other major players in the credit card space. The bank boasts one of the largest credit-card loan portfolios among bank holding companies in the U.S., and other issuers are likely to take cues from its data-sharing strategies.

The agreement between JPMorgan Chase and Plaid may motivate other fintechs to seek similar deals with banks.

It’s unclear how other fintechs will respond to the agreement. For example, Stripe, one of the biggest fintech startups in the world, recently submitted comments to the Consumer Financial Protection Bureau (CFPB) on open banking.

In comments to the CFPB, Stripe urged the agency to prevent banks from imposing excessive fees for access to customer banking data, according to a PYMNTS report.

The JPMorgan Chase–Plaid partnership could prompt Stripe to rethink its strategy. The fintech now faces a choice: wait for the CFPB to intervene or begin forging its own agreements with banks to access customer data.

Now that JPMorgan Chase and Plaid have laid the groundwork for megabanks and fintechs in the open banking era, other financial players may soon follow with their own data-sharing agreements.

JPMorgan Chase’s new alliance with Plaid may have caught other financial services stakeholders off guard. Earlier this year, CEO Jamie Dimon told shareholders that the bank has no objection to data sharing — as long as it’s done responsibly.

“Third parties want full access to banks’ customer data so they can exploit it for their own purposes and profits,” Dimon said in a letter, adding that third parties should face fees when they access the banking system.

Companies like Stripe would likely prefer to tap into customer banking information for free, but credit card issuers have a responsibility to their customers to protect their financial data. 

Protecting customer data and managing third-party access requires banks to invest heavily in security systems. In June alone, JPMorgan Chase received 1.89 billion requests for data from intermediaries, according to an internal memo reported by CNBC.

“Aggregators are accessing customer data multiple times daily, even when the customer is not actively using the app,” an employee for the bank wrote in the memo. “These access requests are massively taxing our systems.”

A JPMorgan Chase spokesperson recently told American Banker that the company has spent considerable resources creating a secure system that guards customer data. Now the company can use the fees it collects from third parties to make sure customer information stays secure when data aggregators access it. 

Jim McCarthy, a founding member of the CFPB, said in the American Banker report that banks have good reason to charge for access to their data. He explained that providing secure access to information carries real costs.

The agreement between JPMorgan Chase and Plaid may help ensure that banks don’t have to shoulder those costs alone. After all, open banking may open the door to rapid innovation in the financial sector, but banks, fintechs, and consumers aren’t likely to appreciate those innovations if they come at the expense of data security.