Back when Google first launched its email service, “Gmail” was free for users, and the platform was monetized primarily through ads. However, as the platform grew in its success, so did the amount of data stored in its users’ inboxes. This came with added costs for Google, which, in turn, continued to offer a standard 15 GB of free storage while requiring a small fee for those in need of more. YouTube also made similar changes to its business model to pay for the necessary investments amid rising costs of doing business stemming from its growth.
Crucial in both anecdotes is that such decisions were made absent government intervention — the market found a way forward on its own. In the end, both platforms continued to offer free service while having the means to invest in greater innovation and security for their user base.
The lesson above should be applied to the ongoing debate over the potential reform of “Section 1033” of the Dodd‑Frank Act. Under 1033, banks are required to provide customer data — upon consumer request — to other banks or financial service providers, including fintech services such as Venmo, Robinhood, and Zelle. So you own and control your own data. That makes sense. But some fintechs have come to believe that this should mean they can make an infinite number of data retrieval requests for free, and during the Biden administration the CFPB agreed to and issued a proposed regulation to that effect, which has now been blocked in court and sent back to the agency for reconsideration.
The problem with this belief in infinite free access is the simple reality of how much these services have grown — as well as the rising costs of such data transfers for banks. In much the same way Gmail faced higher expenses as its user base grew, banks providing secured customer data via APIs have similarly incurred additional costs, which they are now shouldering entirely.
In more ways than one, this regulation is a solution in search of a problem. Recently, the fintech company Plaid, the largest aggregator of financial data, reached an agreement with JPMorgan Chase, the largest bank, to renew its data-access agreement that included a non-zero pricing structure which, reportedly, would not impact Plaid’s current customer agreements and pricing models.
This goes to show that the fintechs are not little guys who need government help, but big players in their own right who are more than capable of negotiating commercial terms with the banks.
The CFPB should allow this ecosystem to evolve naturally and sort out the costs and risks on its own. Doing so is the best way to ensure sustained growth and to protect consumers. There’s no such thing as a free lunch – even in technology.
