Who Owns the Data? Who Wins Stablecoins?
Happy Wednesday, Fintech Listeners!
This week in parenting war stories: my younger son decided to cut his own hair. I’m not sure what possessed him to do it, but let’s just say that the results of his efforts with the kid art scissors were a bit … uneven. Luckily, his mom was able to even things out in the morning and it turns out that he likes the feeling of being a freshly-shorn sheep.
Kids: It’s always something.
Anyway, it’s been a very busy few weeks on the podcast front and I am excited to share what I’ve been up to with you!
— Alex
3 BIG IDEAS FROM THE PODCAST
This week’s episode is a fresh Fintech Recap, which means Jason Mikula’s back in the co-host seat. Together, we dig into JPMorgan Chase’s open banking gambit and the passage of the GENIUS Act.
Tune in for the full conversation here
And read below for my three big ideas...
#1: How Risky Is Pay By Bank? (And how should those risks be addressed?)Copy anchor linkCopied
By now, you likely know that JPMorgan Chase is planning to charge data aggregators for access to open banking data. There are a lot of different motivations behind this move (as I outlined on Twitter), but one of the key ones is mitigating the risks of pay by bank.
As multiple journalists (including myself) have reported, JPMC’s proposed pricing for open banking data access is significantly higher (roughly 10x) for payments use cases than for non-payments use cases.
Why is that?
Well, according to JPMC, the rate of fraud and customer complaints for ACH payments initiated through data aggregators is far higher than for ACH payments made directly through the bank:
Transactions involving money sent over electronic ACH transactions were 69% more likely to result in fraud claims if they involved data middlemen.
Interestingly, JPMC says that this elevated risk isn’t restricted to specific types of transactions, such as transfers to sports betting apps, which is a common use case for pay by bank and is obviously higher risk. The bank claims that even mainstream ACH transactions, such as utility bill payments, present a higher risk when enabled through open banking.
How true is this claim?
It’s hard to say without seeing the bank’s data, but the more relevant question (which Mikula and I get into in the podcast) is this: Is pricing the right way to solve this problem?
I would argue that it’s not. The Chopra-era CFPB made a mistake in not directly addressing liability in its final open banking rule. If it had done so, it could have created an incentive for the responsible party (bank, aggregator, or fintech company) to address the underlying problems that are causing the elevated fraud risks in the first place.
Of course, that only would have ended up mattering if the CFPB’s rule didn’t get challenged in court by the banks, which probably wasn’t happening in any alternate universe.
🎬 DIRECTOR'S COMMENTARY
If you have some spare time and brain cells, you could choose to read the letter written to President Trump by the Financial Technology Association, American Fintech Council, Blockchain Association, Chamber of Progress, Crypto Council for Innovation, The Digital Chamber, Financial Data and Technology Association, National Association of Convenience Stores, National Restaurant Association, and National Retail Federation. And then you could read the response from the Bank Policy Institute, the American Bankers Association, America’s Credit Unions, Consumer Bankers Association, and the Independent Community Bankers of America.
You could do this, but I would strongly advise against it.
They are embarrassingly sycophantic.
#2: Revenge of Screen Scraping?Copy anchor linkCopied
JPMC is currently negotiating with each of the aggregators over its proposed pricing and it’s entirely possible that the parties end up settling on a number that they can all live with.
But what if that doesn’t happen? What happens if we get to October and suddenly Chase customers start getting messages informing them that they can no longer use the fintech apps they want to use because their bank is now charging money to let the customer connect their accounts?
(Editor’s Note — If this were to happen, I’m guessing that fintech companies and data aggregators would choose to frame the situation in a very unflattering light for JPMC.)
Would open banking simply stop working in the U.S.?
No.
First, even if JPMC and some other big banks implemented unworkably high pricing for open banking, there would be plenty of other banks, credit unions, and fintech companies who wouldn’t. Coverage would get noticeably worse, but it wouldn’t go to zero. Not even close.
And second, I’m guessing that fintech companies would work on filling those coverage gaps with screen scraping.
It wouldn’t be exactly like it was a decade ago, with centralized data aggregators hitting the banks’ websites with hand-built scrapers. The banks are prepared for that.
No. The 2025 version of screen scraping would be much, much worse.
It would be highly decentralized. Every fintech startup with access to LLMs would simply vibe code their own janky screen scraper. Instead of a few obvious IP addresses to block, it would be death by a thousand cuts, with banks losing visibility into who’s accessing what, whether users have given permission, or how that permission is being managed.
And when something breaks? When fraud occurs? Customers wouldn’t call the fintech company. They would call their bank.
This is why JPMC’s strategy feels so shortsighted to me. Customers will share their data. Startup founders will find ways to make it happen. Trying to reset the clock to a pre-data-sharing era simply isn’t feasible.
If enough customers get hurt, if enough stories hit the press, it won’t matter that the banks were legally in the right. Elizabeth Warren won’t care.
Once again, the CFPB’s open banking rule is far from perfect. But it gives banks leverage, visibility, and a degree of control.
It’s distinctly possible that whatever comes next won’t.
🚨 BREAKING NEWS 🚨
As I was finishing up this newsletter, news broke that the CFPB has asked the United States District Court, Eastern District of Kentucky (which is where the Bank Policy Institute filed its lawsuit against the CFPB over the open banking rule) to stay proceedings so that it can “initiate a new rulemaking to reconsider the Rule with a view to substantially revising it and providing a robust justification” and “comprehensively reexamine this matter alongside stakeholders and the broader public to come up with a well-reasoned approach to these complex issues that aligns with the policy preferences of new leadership and addresses the defects in the initial Rule.”
OK, well. Damn.
I need more time to digest this, but here are some initial, off-the-cuff reactions:
- This request is, according to the CFPB, in response to “recent events in the marketplace”. That is clearly code for JPMC’s pricing gambit. Evan Weinberger at Bloomberg had already reported that the bank’s move had caught at least some folks at the bureau off guard, which is actually pretty funny to me. It’s like the CFPB and JPMC have been engaged in this weird game of one-upmanship with each other, where each organization has been trying to outdo the other, while fintech companies and data aggregators watch, bewildered, from the sidelines. I guess JPMC’s latest move finally went too far for the bureau.
- I’m also hearing that complaints from the fintech community might have found a sympathetic ear at the White House. Perhaps Tyler Winklevoss got through?
- Does this motion indicate that the CFPB has officially reversed its position that the Biden-era rule should be vacated by the court? Unclear, but that’s my best guess.
- The CFPB says that it will engage in an “accelerated rulemaking process” and that it will issue an advance notice of proposed rulemaking (an ANPR is basically a document that solicits public input on an upcoming rule) within three weeks. Given the massive reduction in staffing and funding at the CFPB, this seems … ambitious.
- If the bureau does indeed work on a new rule, I would predict that cost recovery, liability, and secondary data use will be the three primary battlefields that banks, aggregators, and fintech companies will fight on.
#3: Stablecoins Are Now Legal (Let the Fun Begin!)Copy anchor linkCopied
The GENIUS Act is now the law of the land as a framework for U.S. stablecoin regulation that creates a dual state/federal path to compliance, defines permissible reserve assets (e.g., short-term Treasuries, bank deposits, etc.), and gives current issuers three years to get in line.
As Jason reported on, Circle and Ripple are applying for national trust bank charters to comply with the GENIUS Act while unlocking some extra goodies (Fed Master Accounts, anyone?). And in hindsight, Circle’s long-game “be the regulated one” strategy now looks ... well, genius.
But the ripple effects (pun intended, I’m on a roll, you can’t stop me!) go way beyond compliance.
Winners:
- Circle, for embracing regulation early and pushing more institutional adoption of stablecoins.
- Consumers living in countries with unreliable monetary systems, who now have easier access to U.S. dollars.
Losers:
- Tether (at least temporarily), which must either sit out the U.S. market or take a very different approach to compliance.
- Community banks, which get a lot of the downsides of stablecoins with few of the upsides.
- Regulators, who have zero headcount to write the rules that will implement the GENIUS Act (to say nothing of supervision and enforcement).
And then there’s the geopolitical tension.
Stablecoins will be a useful tool for U.S. policymakers seeking to extend the dollar's dominance, but they're detrimental for foreign governments that lose monetary control. We haven’t seen the backlash yet, and we don’t know what form it’ll take … but it’s coming.
Meanwhile, big banks aren’t sitting still. JPMorgan Chase and Citi are laying the groundwork for stablecoins and/or tokenized deposits (same rails, but FDIC-insured and interest-bearing) and I expect we will see many more incumbents follow them.
WHAT I'M LISTENING TO
So many podcasts to plug this week! Grab your headphones!!
#1: Model Citizens Ep 1: Into the CFPB Void (Fintech Takes) 🎧 Copy anchor linkCopied
My new podcast series with FairPlay! In this series, Kareem Saleh (Founder and CEO of FairPlay) and I are exploring all the various ways that AI, lending, and compliance are colliding.
In Episode 1 we talk to a couple of former CFPB employees about what’s happening at the bureau and what it will mean for the broader consumer protection landscape.
#2: Model Citizens Ep 2: Credit Risk Analytics in the Age of AI (Fintech Takes) 🎧Copy anchor linkCopied
In Episode 2 Kareem and I speak with Kevin Moss (long-time credit risk executive and friend of Fintech Takes) and Andrada Pacheco (Chief Data Scientist at VantageScore) about how the use of AI in credit risk analysis is (rapidly) evolving.
Enough said.
#2: Stablecoins, Tokenized Deposits and the Race to Win the Future of Money (Banking With Interest) 🎧Copy anchor linkCopied
I was delighted to be invited back to Banking With Interest with Rob Blackwell to discuss stablecoins, tokenized deposits, and open banking.
#2: From Bozeman to Fintech (Paradigm Shock) 🎧Copy anchor linkCopied
I was also honored to be a guest on Paradigm Shock, a podcast hosted by Anjon Roy. We spent most of the time discussing my professional journey, content creation as a career, and the power of the internet as a tool for entrepreneurship.
We also, of course, talk a bit about Chase and open banking.
WHERE I'LL BE
September. My god in heaven. Tell my family I love them.
(If you’ll be at any of these shows, hit me up!)
✈️ Symposium on Agentic AI & Consumer Payments | 9/8 - 9/9 | Washington D.C.Copy anchor linkCopied
Put on by my friends at the Consumer Bankers Association. I look forward to learning more about a topic that fascinates me.
✈️ FinovateFall | 9/8 - 9/10 | New YorkCopy anchor linkCopied
I’ll be giving a 7-minute presentation on a trend in financial services that banks and fintech companies should be thinking about. I’ve done this specific session before, and it’s more difficult than it sounds. Looking forward to the challenge!
✈️ Cash Flow Underwriting Summit | 9/10 | New YorkCopy anchor linkCopied
I’ll be doing A LOT at this event, which is fortunate as I am OBSESSED with cash flow underwriting, as you have probably noticed!
✈️ Money Experience Summit | 9/15 - 9/17 | Salt LakeCopy anchor linkCopied
One of my favorites. I never miss it. My panel this year should be a lot of fun!
✈️ Salt Flats Summit | 9/17 - 9/18 | Salt LakeCopy anchor linkCopied
Truly one of the most unique events I’ve ever attended. Looking forward to year 2!
✈️ AI-Native Banking & Fintech Conference | 9/30 | Salt LakeCopy anchor linkCopied
Year 2 for this one as well. The first one was a lot of fun (plus, I’m digging all these conferences in my backyard … Silicon Slopes for the win!)
Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
