Stripe objects to JPMorganChase’s data sharing fees. | PaymentsSource

JPMorganChase ‘s potential fees for data sharing are sparking controversy in the U.S. payment industry, with Stripe lodging objections to the Consumer Financial Protection Bureau.

Stripe, which sells payment technology to thousands of small businesses, told the CFPB that JPMorganChase’s plans to charge data companies for customer data would cause “startups and small businesses to face higher transaction costs to provide convenient payment experiences, and American households will lose access to convenient, cheap ways to make everyday payments.”

Stripe was commenting to the CFPB as the agency rewrites regulations for open banking, or rule 1033. The CFPB had finalized a rule implementing section 1033 of the Dodd-Frank Act during the Biden Administration, then signaled it would repeal those rules under President Trump. The CFPB then reversed course, saying it would rewrite 1033.

Fight over fees

The CFPB is considering whether banks can charge fees for data sharing, which supports open banking. Customers give permission to banks to share their bank account data with third parties, which then powers embedded finance and payments – or accessing financial services via nonfinancial apps. The older Biden-era open banking rule forbids charging fees for data sharing, leading Stripe to contend that JPMorganChase is using the current uncertainty to charge fees.

Read more about open banking. Open banking | American Banker

“If Chase is allowed to do an end-run around the process by charging fees during the interim, it will cause significant damage to the marketplace and consumers,” Stripe wrote in its comment letter, saying the bank is taking advantage of the current uncertainty in rulemaking. JPMorganChase did not return a request for comment. Stripe referred questions to its letter to the CFPB.

“Stripe believes that immediate action by the CFPB is essential to preserving our thriving marketplace and innovation in financial services. The largest banks should not be permitted to charge prohibitive fees for data access while the CFPB considers how to address it,” Stripe said in its letter.

JPMorganChase has said the fees will cover the cost of supporting technology that protects customer data. Banks also contend the 1033 rule requires data sharing with consumers and not third parties. These third parties include data aggregators such as Plaid, MX and Trustly, which gather data from banks and other providers and pass it to their clients, which include fintechs and sometimes banks.

Pressure for payments

After JPMorganChase floated the idea of charging data aggregators for their data, Visa reportedly paused its open banking business in the U.S. The card brand did not confirm that plan, which was reported by Bloomberg, though payment analysts said uncertainty over open banking fees, regulations and Visa’s greater strength in open banking in the European Union were the reasons for Visa’s retreat.

There has been an assumption in the payments industry that banks would support data sharing for free, Kieran Hines, principal banking analyst at Celent, told American Banker. “You hear different things around what banks think about this topic,” Hines said. “Some see it as an arm of the customer experience. If a customer wants to engage with a fintech app or something like that, it requires access to data. The bank can be a facilitator of that.”

JPMorganChase intends to charge data aggregators higher fees for payment use cases than for some other data uses, Christopher Miller, lead analyst of emerging payments for Javelin Strategy & Research, told American Banker.

“In other words, banks likely will fight to retain control of their customers’ payment activities, a key revenue source, while asserting lower levels of control through lower fees over simple information sharing,” Miller said, adding that it’s likely that aggregators will chart a path that accommodates the costs incurred by banks yet maintains the benefits that consumers receive from at least some level of aggregation elsewhere.

The previous version of the CFPB’s 1033 rule carved out exceptions for smaller institutions, similar to the exceptions to debit routing rules for banks with less than $10 billion of assets — which is often referred to as the Durbin Amendment to Dodd-Frank.

“That sort of exemption obviously could impact the types of opportunities that are uniquely fitted to smaller institutions via the partner banking route,” Miller said. “If banks are able to turn data possession into revenue, it’s another way in which money centers and regional banks would easily outpace community banks and smaller credit unions.”