Open Banking and Payments Competition

Summary

Much of the operation of the financial industry is legible to people outside of it. Your credit card works basically like you understand it to (excepting the occasional mythmaking about second order consequences). Debates about what terms banks are allowed to offer on credit cards are fairly straightforward and can be easily followed by non-specialists.But some issues are under the hood, and a societal debate about them doesn’t exactly wear its consequences on its sleeves. Consider the controversy over Section 1033 of the Dodd-Frank Act (and even that framing is an effective medication for insomnia).In July, JPMorgan Chase announced its intention to charge fintechs for access to so-called Open Banking data. This comes amidst a consortium of banks trying to sue this hithertofore obscure regulation out of existence.Almost all discussions of it center on “data”, but it’s actually a fight about payments, and whether banks have a right to monopolize and charge for all economic activity their users engage in, irrespective of whether the bank operates the payment method.Cards on the table: I previously worked at, and am an advisor to, Stripe, a financial infrastructure company which facilitates customers’ use of both bank-sponsored (cards, etc) and competing (account-to-account, stablecoins, etc) payment methods. Stripe does not necessarily endorse what I say in my personal spaces. (I’m also a user and tiny shareholder of Chase. One presumes they also don’t endorse what I say in my personal spaces.)The genesis of Section 1033The Dodd-Frank Act was passed in the wake of the 2008 financial crisis. It included a combination of needed reforms and, effectively, partial negotiated settlements for the way in which banks had reaped enormous profits originating mortgages of less-than-stellar quality then left taxpayers holding the bag once those mortgages could not be repaid.We’ve previously discussed one of the knuckle raps: banks had their debit card interchange capped, with an e...