JP Morgan’s API charges spark debate over banks’ data revenue

JP Morgan's decision to implement charges for fintechs accessing consumer bank account data has drawn commentary regarding its implications on both sides of the Atlantic.

Moshe Winegarten, Chief Revenue Officer at Ecommpay, stated that this type of move by a major US institution would not be possible in Europe due to the existing regulatory environment. Under the revised Payment Services Directive (PSD2) and open banking standards, banks across Europe are prevented from charging for essential API access that enables third parties to retrieve consumer data.

Winegarten explained, "Under PSD2 and open banking regulations in Europe, banks are prohibited from charging for mandatory API access. This has been both a blessing and a curse - while it democratised financial data access, it also meant banks couldn't monetise their infrastructure investments."

JP Morgan's action comes at a time when data access is increasingly critical to fintech development and market competition. The bank's decision to begin charging for this access has sparked discussion around the potential for similar approaches in other markets, and what it signals for future bank-fintech collaboration models.

Premium APIs potential

Winegarten suggested that while European rules prevent direct monetisation of regulated data access, there could be other opportunities for banks in Europe to create revenue from their digital infrastructure investments through the provision of premium services.

"However, JP Morgan's move highlights an interesting opportunity that European banks could explore: premium APIs. While basic regulatory-mandated data must remain free, banks could charge for enhanced datasets not covered by PSD2, or offer APIs that enable bank services to be embedded in third-party applications as a new sales channel."

The possibility for banks to diversify their offering through enhanced data sets and value-added API services is becoming more recognised, as the overall industry moves into an era of open financial data and embedded banking. Winegarten also cited regulatory nuances within the PSD2 framework that could offer further avenues for revenue generation.

He said, "There's also a fascinating regulatory nuance worth considering. PSD2 stipulates that banks cannot discriminate between open banking payments and traditional transactions. This means if a bank charges for standard online transfers, they could theoretically charge for Payment Initiation Services (PISP) transactions too. While this seems unlikely in the UK's free banking environment, it could be viable in European markets where transaction fees are common."

Strategic questions

The move by JP Morgan could prompt other US banks to reconsider their data access strategies. As fintech services and crypto firms rely heavily on aggregators to retrieve account information necessary for their offerings, new fees could alter the cost and competitive dynamics of the sector.

Winegarten observed, "The real strategic question is whether other major US banks will follow JP Morgan's lead. If they do, the impact on crypto firms and fintechs could be significant, as they typically rely on data aggregators to access customer accounts."

Lessons for Europe

With the US financial sector potentially shifting towards paid data access models, European banks could look to these developments for inspiration on monetising their own technological investments - albeit within the stricter confines of European regulation.

"For European banks watching this development, the lesson isn't about charging for basic compliance - that ship has sailed. Instead, it's about finding creative ways to monetise the digital infrastructure they've built while staying within regulatory boundaries. The future lies in premium services and embedded banking, not gatekeeping basic data access."

The dialogue around paid access to banking data and alternative monetisation channels is set to continue as both US and European financial markets evolve their competitive landscapes and regulatory approaches.