JPMorgan's New Fees Threaten Fintech and Crypto Startups

JPMorgan Chase has announced a new fee structure that has sent shockwaves through the fintech and crypto industries. According to industry executives, this move could be devastating for early-stage startups, making it economically impossible for many consumers to use stablecoins and crypto. The fees are expected to be particularly onerous for many early-stage fintechs, with one estimating that the costs to access JPMorgan’s API would exceed the revenue the company made in its 10-year existence. This could potentially put many small companies out of business, as they would need to raise prices significantly to cover the new costs.

Crypto firms and fintechs typically use aggregators like Plaid or MX to access customer accounts at major financial institutions. Up to now, the banks have not charged the fintechs for this service, but JPMorgan’s new plan could change that. The fees would be charged every time a consumer moves money from JPMorgan Chase to a crypto account or a third-party service. This could make it impossible for small companies to serve Chase customers, according to one executive.

Alex Rampell, a general partner at venture firm Andreessen Horowitz, criticized JPMorgan’s plans, stating that it is not about creating a new revenue stream but about strangling the competition. He warned that if JPMorgan gets away with this, every bank will follow. Arjun Sethi, co-CEO of Kraken, one of the largest crypto exchanges, described JPMorgan’s move as a “calculated” effort to assert ownership over data generated by consumers and stored in infrastructure controlled by JPMorgan.

JPMorgan Chase, the nation’s largest bank by assets, has informed crypto and fintech firms that it would start charging fees for accessing its customers’ bank account information. The bank has not disclosed how much it plans to charge. In a statement, JPMorgan Chase said it has invested significant resources in creating a valuable and secure system that protects customer data and is working with the entire ecosystem to ensure necessary investments in infrastructure that keeps customers safe.

More mature fintechs like PayPal and Block, which owns Cash App, are expected to face little impact from the fees since they have already negotiated agreements with the largest banks, including JPMorgan. However, the size of the fees and their impact on the industry remain uncertain. Some analysts believe that the impact could be significant, depending on the fees imposed.

Jamie Dimon, JPMorgan Chase’s CEO, has long been critical of fintechs, warning of tough competition in the next decade. He has expressed concerns about the improper use of data by third-party aggregators and has advocated for banks to charge for accessing the banking system and payment rails. Dimon believes that customers should authorize any sharing of their data and that the data should not be remarketed or resold to third parties.

Skeptics view charging fees for data as a way for large banks to build a moat around their products and services, making it hard for consumers to access competing services. The fees could raise costs for consumers, limit their financial choices, and jeopardize innovation. Aggregators like Plaid, Yodlee, Finicity, and MX will initially feel the brunt of these changes, as consumers rely on them to share their data and connect their accounts with fintech apps.

JPMorgan has always reserved the right to charge for the data in its contracts with aggregators. The bank also wants to encourage more responsible data access practices. Other banks, such as PNC Financial Services, are considering similar moves. Bill Demchak, PNC’s chairman and CEO, applauded JPMorgan’s decision and stated that PNC is also thinking about charging fintechs for accessing its customer data.

The change in JPMorgan’s fees comes as the CFPB’s open banking rule remains unresolved. The rule, which was finalized by the Consumer Financial Protection Bureau, makes it easier for consumers to switch between financial service providers and requires banks to share data with other lenders or financial services providers for free. However, two bank lobby groups sued the CFPB, claiming the regulator overstepped its authority. The CFPB, now overseen by the Trump administration, filed a motion for summary judgment in May, asking a Kentucky district court to vacate the open banking rule.

Steve Boms, executive director of the Financial Data and Technology Association, criticized JPMorgan Chase for exploiting regulatory uncertainty to levy a “punitive tax on competitive offerings.” He described the move as a blatant effort to curtail innovation and undermine a stronger financial system. The impact of JPMorgan’s new fee structure on the fintech and crypto industries remains to be seen, but it is clear that the move has raised significant concerns among industry executives and analysts.