JPMorgan May Charge Fintechs for Customer Data. Analysts Aren’t Worried.

If JPMorgan Chase were to charge data aggregators for access to customer banking information, costs could rise for PayPal and other fintechs. (Photograph David Paul Morris/Bloomberg)

JPMorgan Chase plans to charge financial technology companies for access to customer data, according to a report. In a world where data is as valuable as gold, this seems like big news.

However, analysts believe the change would have a negligible impact on names such as PayPal and Block, despite triggering a steep selloff on Friday.

Those declines stemmed from a Bloomberg report that said JPMorgan was considering an initiative to charge data aggregators for access to consumer information held at the bank. JPMorgan has sent pricing sheets to aggregators outlining the changes, the news service reported, citing people familiar with the matter.

In a note Monday, Evercore ISI said its industry and aggregator contacts “are still working out the details” with the bank.

“We’ve had productive conversations and are working with the entire ecosystem to ensure we’re all making the necessary investments in the infrastructure that keeps our customers safe,” JPMorgan said in a statement to Barron’s.

JPMorgan has “invested significant resources creating a valuable and secure system that protects customer data,” the bank added.

Fintechs rely on free access to customers’ financial data to process transactions. The concern is that charging aggregators, which link banks and fintechs, for access to customer banking information, could lead to higher costs for fintechs and their customers.

Plaid, a leading aggregator in the U.S., lists companies including Chime Financial and PayPal -owned Venmo as customers on its website.

Shares of PayPal Holdings, Block , and Chime were rising Monday after falling 5.7%, 5.3%, and 2.2%, respectively, on Friday. Meanwhile, Affirm Holdings deepened its losses. Affirm closed down 5.6% on Friday and fell 0.7% on Monday.

Evercore analysts led by Adam Frisch urged investors to “take a deep breath and relax.” For starters, Frisch said, it is unlikely the proposed change will survive an “inevitable legal challenge” under Section 1033 of the Dodd-Frank Act, which permits consumers to access and share their financial data.

While the Consumer Financial Protection Bureau under President Donald Trump has taken aim at this rule, and will likely amend or reissue it, Evercore isn’t concerned.

Even if banks were to start charging for data, “it is far from the end of the world for fintechs in general,” the Evercore team said. The firm expects a negligible impact on the sector, even for companies that rely on aggregators for consumer data used to generate customers’ profiles, risk-related decisions, and payment flows.

“Our initial position is that the headlines are far worse than the stock reactions—so we are buyers on the weakness associated with this news,” the firm wrote.

BTIG analyst Andrew Harte said that the negative response to Friday’s news “makes sense” for stocks the firm covers, as PayPal’s Venmo and Block’s Cash App benefit from access to customer bank accounts.

However, Harte believes it is too early for investors to panic. He expects fintechs and lawmakers alike to push back on the decision, arguing that it stifles competition while increasing costs to consumers and restricting access to alternative payment options. “As such, we expect any implementation of fees to be prolonged,” Harte wrote.

Seaport Research Partners analyst Jeff Cantwell said the Friday report left more questions than answers. “Our initial reaction is it seems like this could potentially be a greater issue for aggregators (i.e. Plaid) than it would for many of the Fintechs we cover, at least directly,” he wrote.

A bank charging for data could affect fintechs’ expenses to some degree, “though it’s very early to be making that call given all the unknowns,” Cantwell added. He said he believes there may be room for negotiations between fintechs and JPMorgan.

Banks need to tread carefully, the analyst wrote. “It’s easy to imagine a scenario in the future where a [global systematically important bank] overcharges fintechs for access to data, crowding them out of the market and reducing competition,” Cantwell wrote.

Charging fintechs for data could also backfire on banks themselves, “spurring deposit flight, potentially, as consumers gain greater awareness into how their data is being bundled and sold externally,” Cantwell wrote. “Bottom line, we’ll await more clarity.”

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com