20-07-2025
JP Morgan Chase Have A Point, But The Whole Economy Needs Data To Flow
INDIA - 2025/07/14: In this photo illustration, a JPMorgan logo is seen displayed on a smartphone ... More with a JPMorgan Chase Co logo in the background. (Photo Illustration by Avishek Das/SOPA Images/LightRocket via Getty Images)
The not entirely unexpected news that JP Morgan Chase intends to start charging for customers' data that is obtained by third parties through APIs, data that is provided free through 'open banking' in other parts of the world, is causing significant comment across the fintech sector.
Data Needs A Business Model
The planned charges would affect how fintech platforms access information through intermediaries, particularly data aggregators like Plaid and MX. who provide the infrastructure layer that sits between banks and third parties. As Jason Mikula pointed out, if these aggregators are forced to begin paying banks on a per data access basis, those costs will inevitably be passed along to aggregators' fintech customers, and, presumably, those fintechs' end users. This may make some of the services unviable, which will in turn reshape the market in a couple of ways:
For the economy as a whole to benefit we therefore need to find a compromise that would allow the banks to earn a reasonable return on the data but also benefit the wider economy. In other jurisdictions, that compromise takes the essential form of 'basic and 'premium' services., which seems a reasonable way of working, so my high-level view is that there should be a standard model put in place to encourage the use of bank data for the greater good while providing balanced rewards. Using the language of cards, this means resolving interchange and liability. In other words, who gets paid what when things work properly and who compensates whom when things go wrong.
It seems to me that it should hardly beyond the bounds of human ingenuity to find appropriate solutions. For example, the regulators might decide that the banks will earn zero interchange on basic facts about the account holder but they can earn whatever interchange they set for other premium services that they want to provide (an example might be giving a 'safe to spend' limit for the purposes of regulated gambling). In return for fees, the banks will also have to accept liability.
I would need to defer to someone like Tom Brown, but I would've thought it might be possible to construct a solution that is based on transactional but not contingent liabilities. In other words if I give you a loan because I think you have an account with a certain amount of money in it and it later turns out that it wasn't you then the bank should be liable to the value of the loan but not beyond it.
Identity is the new... well, you know.
Open Banking, Open Data
There is, however, another aspect beyond such "interchange fees' where I do actually feel the banks have a reasonable complaint and that is symmetry. The banks argue with complete justification that open banking does not create a level playing field for competition if they are required by law to provide basic customer data for nothing whereas third parties are not. They would argue that if they have to provide customer data to a social media company, for example, then the social media company should provide social graph data to the bank.
(This is an argument that's been raging for years in Europe and the example of the Consumer Data Right in Australia shows one way forward here.)
Taking all of this together, I think the principle of banks being allowed to charge something for customer data is sound provided it is within a framework set by the regulators to maximise the net welfare and not to maximise the profits of commercial banks. The fact is that allowing customer data to flow, under an equitable arrangement, is good not only for banks and fintechs but for society as a whole.
Open Data And Open Minds
This is not only about open banking data. There is another, bigger picture here. In a paper on "The Data Economy: Market Size and Global Trade" for the Economic Statistics Centre of Excellence (part of the UK's National Institute of Economic and Social Research), Diane Coyle and Wendy Li wrote about the "data gap" between global Big Tech and potential competitors, disruptors and innovators. They argue (convincingly) that this data gap is a a barrier to entry that affects not only businesses but also aggregate innovation, investment and trade. Similarly, the European Council on Foreign Relations (ECFR, a prominent think tank) published a call for action on "Defending Europe's Economic Sovereignty" in which it called for the EU (and the UK) not to put up barriers at all but to agree data free-flow with the US.
Coule and Li conclude that an open data-sharing ecosystem will increase productivity and therefore economic wellbeing. From my inexpert perspective, I could not agree more, so if I were the CEO of a US bank, I might therefore be tempted to play a longer game. I would go to the industry and say something like the...
I know this sounds radical, but I hope that US regulators will, in time, choose this path, a path that grows the pie while ensuring that everyone, including banks, gets a fair slice.
