tl;dr
JPMorgan Chase is concerned about fintech aggregators, like Plaid, overwhelming its systems with excessive data requests, many of which are not customer-initiated. In June, only 13% of 1.89 billion data requests were transaction-related and customer-initiated; the rest supported product improvement ...
JPMorgan Chase has raised concerns about fintech middlemen overwhelming its systems with excessive data requests. According to an internal memo, aggregators are accessing customer data multiple times daily, often without the customer's active use of the corresponding app. In June alone, out of 1.89 billion data requests, only 13% were customer-initiated for transactions. The rest served purposes from product improvement to data harvesting for sale. This surge is straining JPMorgan’s infrastructure and prompting the bank to consider new fees for these data accesses, potentially starting in October.
The fintech middlemen, including major players like Plaid, have historically connected traditional banks with modern financial apps, enabling services such as fee-free checking and trading accounts. These API connections were free until recently, supported by the Biden-era Consumer Financial Protection Bureau’s (CFPB) “open banking” rule. However, following the CFPB’s legal challenge to this rule and JPMorgan CEO Jamie Dimon’s call to confront such regulations, the landscape is shifting dramatically.
The volume of API calls to JPMorgan has more than doubled over two years, with fraud risks notably higher in transactions facilitated by data middlemen. JPMorgan reported $50 million in fraud claims linked to aggregator-initiated ACH transactions, expecting this to triple within five years. The bank's data highlights that a majority of these API calls stem from one leading aggregator, revealed to be Plaid, where only a small fraction (6%) are directly customer-initiated.
Plaid defends its practices, noting that all data access begins with customer consent and that periodic API calls without the user’s real-time presence are standard for delivering critical alerts. The company also disputes JPMorgan’s fraud claims as misleading and emphasizes the growing consumer demand for innovative, personalized financial tools. Still, JPMorgan’s proposed fee structure could cost Plaid up to $300 million annually, with other smaller aggregators also facing significant charges.
As the "open banking" rule faces potential legal overturn, the discussions between JPMorgan and fintech middlemen revolve around how to adjust data access practices within an evolving payment ecosystem. Both sides recognize a need to optimize the volume of API calls. The ongoing negotiations aim to establish a sustainable model balancing technological innovation, data security, and infrastructure costs.