Credit Card Caps, Couch Cushion Crypto Yields, and the Apple Card Reset: Politics Meets Banking Reality

Hey everybody. Welcome back to another episode of the What’s Going On in Banking podcast. I’m Ron Shevlin, chief research officer at Cornerstone Advisors, and here, as always, with my co-host Stacey Bryant.

Stacey, what’s going on these days?

How are you doing, Ron? I’m fantastic.

You know I always have to represent the Northeast, especially New York City, through and through.

It was great seeing you a little over a week ago at Cornerstone’s all-staff meeting. We reflected on what made us successful in 2025 and talked about the initiatives for this year.

But my favorite part, and don’t tell the rest of Cornerstone leadership, was Fat Ox.

For people who don’t know, Cornerstone is headquartered in Scottsdale, Arizona. Ron curated a dinner for a group of us at Fat Ox, a modern Italian restaurant in Scottsdale.

Sam Kilmer was there from our fintech team, Tristan Green from fintech advisory, Mary Wisniewski, Kevin Esche, you, me, and a few others.

What I loved was that you asked everybody what they wanted from the appetizers and entrees, then proceeded not to order exactly what anybody said.

But I see the method to your madness. You looked for the common denominator, and you had been there before.

Listen, I run a democratic dictatorship. I’m always happy to hear everybody’s input, but ultimately I make the decision.

I have three daughters. I’m used to this.

Well, you were lucky because it worked.

Almost two weeks later, I’m still thinking about the Wagyu short rib, the gnocchi, and the veal meatballs.

You hit it out of the park, so I’ll trust you again.

That dinner was technically extended research for the fintech advisory group, and you and Mary were critical participants, so it all worked out.

Before we get into the banking news, I want to mention one other thing from that trip.

Saturday the 10th was my birthday, and I was sitting on the plane texting with Sam Kilmer when he sent me the news that Bob Weir from the Grateful Dead had passed away.

It was especially strange because a couple of our colleagues had been wearing Grateful Dead gear at the company event the night before, and we had been talking about the band.

I’ve been a Deadhead for a long time, so that one hit me.

Anyway, most people listening probably didn’t come here for Grateful Dead commentary. Let’s get into what’s happening in banking.

A couple of weeks ago, the president proposed capping credit-card interest rates at 10%.

The negative economic consequences are not particularly hard to imagine.

Issuers would likely tighten underwriting, reduce credit limits, and potentially close or restrict marginal accounts.

That would shut some consumers out of traditional credit and push them toward alternatives such as payday loans and buy now, pay later products.

My larger take is that this did not strike me as a fully developed policy proposal. It looked much more like political positioning.

From a political standpoint, it was actually a clever move.

The proposal sounds more like something traditionally associated with Democrats than Republicans, which puts Democrats in an awkward position.

If they support it and the policy creates significant negative consequences, they share responsibility for the outcome. If they oppose it, they appear to be opposing a policy framed as helping consumers.

It also gives the president something domestically popular to point to at a time when parts of his base may be unhappy about other issues.

So politically, it makes sense.

As a consumer-credit policy, I think the consequences could be much worse than the headline suggests.

And operationally, there are enormous unanswered questions.

Would the cap apply only to new accounts? Would existing balances be repriced? What happens to rewards and fees? How would lenders compensate for the lost risk-based pricing?

I have a hard time believing it gets implemented exactly as described.

When I first saw the headline, I was confused too.

My immediate reaction was, “Wait, does this mean every credit-card rate becomes 10%?”

Then I started digging into it.

And you’re right, it is almost impossible to discuss this without touching politics because policy and banking are intertwined.

A one-year 10% cap sounds great on television. It sounds like middle-class relief.

But for consumers already living on credit cards or missing payments, it may simply rearrange where they borrow.

I think about what I call the triple D: declined, deferred, and defaulted.

If someone no longer qualifies for mainstream credit, they may be pushed toward title loans, payday lenders, or other expensive alternatives.

Then there’s buy now, pay later.

In December, right after the Turkey Five, the major shopping period from Thanksgiving through Cyber Monday, I listened to our colleague Tony DeSanctis on a panel discussing BNPL trends.

One thing that stood out was how younger consumers were using BNPL to plan large or seasonal purchases around their paychecks.

Unlike an open-ended revolving credit-card balance that can carry interest for years, many BNPL arrangements have defined installments and a clear repayment schedule.

CFPB research has also shown that BNPL use is common among consumers with relatively high credit-card utilization, which suggests it can provide additional liquidity when card capacity is tight.

So as banks plan for 2026, I think they need to be asking what payment options belong in their product suite.

I saw Affirm and Klarna offered constantly during holiday shopping, even on relatively small purchases.

If policy changes make traditional credit cards less available to some consumers, BNPL becomes even more relevant.

Great points.

And it isn’t only BNPL. If this cap somehow goes through, it could also push consumers toward payday loans, which is not a good outcome.

I have long viewed buy now, pay later as a kind of entry-level credit card.

Instead of giving a consumer a broad revolving credit line, you are effectively giving them credit for a particular purchase.

They repay it. Then they may qualify for another purchase. Over time, that creates a track record of repayment behavior.

That is why I think midsize banks and credit unions should look at BNPL as a way to attract younger consumers before those consumers build long-term relationships with Klarna, Affirm, or the largest banks.

That strategy stands on its own, regardless of what happens with the proposed interest-rate cap.

Ready for the next topic?

Let’s do it.

There is another regulatory and political fight underway over whether crypto providers should be able to offer yield.

Banks are lobbying heavily against it.

I’m probably not going to make a lot of friends with this view, but I think banks may be overestimating the threat.

There are already plenty of financial products that offer consumers higher yields than traditional bank deposits.

Go to Bankrate and look at the institutions offering the highest savings rates. Many are providers most consumers have never heard of, and they do not dominate the deposit market.

Over the last decade, which institutions have consistently gathered enormous deposits? Chase, Bank of America, Wells Fargo, and other large banks.

What have many of them paid on deposits for much of that period? Almost nothing.

The idea that offering yield on crypto will automatically cause consumers to abandon banks is too simplistic.

We have documented meaningful deposit displacement. In research we published last year, we estimated that roughly $3 trillion had moved from traditional bank deposits into fintechs, investment providers, and other non-bank destinations over time.

That matters.

But it is still only one part of the total market.

Banks are right to pay attention and advocate for themselves. I just think they may be overstating how much yield alone will change consumer behavior.

That connects directly to the theme of the 2026 What’s Going On in Banking report: AI, crypto, and fraud, oh my.

Only about 29% of respondents cited crypto providers as a threat, which still feels low given how much the market has changed.

In the consumer research you mentioned, a meaningful percentage of people under 50 now directly own cryptocurrency.

So when crypto firms start offering rewards or yield on stablecoins in the 3% to 4% range while some traditional deposits still pay almost nothing, the contrast is pretty stark.

The question becomes: if something behaves like a dollar deposit, is denominated like a dollar deposit, and pays more than a dollar deposit, who gets to offer it and who regulates it?

I’ve learned several phrases today.

I had never heard “Turkey Five” before.

I thought Triple D meant Diners, Drive-Ins and Dives, although I can never remember the order.

And did you just say “couch-cushion yields”?

If you clean out your couch cushions, what do you find? Sometimes more than your bank account is paying you.

Fair enough.

The strategic point is that banks need to get serious about where they want to participate in digital assets.

Do they want to issue something? Custody it? Enable transfers? Partner with a platform? Offer tokenized deposits?

They do not need to make every decision today, but this belongs in board and executive conversations now.

The environment is moving too quickly for institutions to wait until every detail is settled.

All right, last topic.

After what felt like an incredibly long process, we finally have a successor to Goldman Sachs as the issuer behind the Apple Card.

No surprise, it is JPMorgan Chase.

Because Apple is involved, the story gets a huge amount of attention.

If this were almost any other co-branded card, most people wouldn’t care nearly as much.

From a product perspective, I don’t think the change itself is enormously important to the banking industry.

But I think it highlights two things.

First, Goldman Sachs entered consumer credit without fully appreciating what it takes to manage a retail credit-card portfolio.

Second, Apple also misjudged what it needed in a partner.

Apple is brilliant at many things. Choosing Goldman as the original issuer was not one of them.

They may have liked the economics and the brand alignment, but they underestimated the operational and credit-risk complexity.

Moving to JPMorgan Chase essentially resets the partnership with a company that has deep card expertise.

I don’t expect the product to change overnight, but it will be interesting to see how much profitability Chase can generate from the portfolio.

The way I look at it, Apple basically told Goldman, “You were fun, but this relationship got expensive,” and then called the biggest guy in the yard and asked JPMorgan whether it was busy.

Six years of Goldman trying to become a cool consumer bank ended with a retreat back toward the businesses it knows best.

So if Apple made a mistake in partner selection, what should financial institutions learn from it as they build partnerships with fintechs, technology companies, and other providers?

I’m going to put the question back to you: which financial institutions really need to learn this lesson?

Most large banks and established card issuers already understood the complexity Goldman was taking on.

The real question is why Goldman and Apple did not understand it well enough at the start.

I’m sure both sides thought the economics looked great and that Apple would capture much of the upside without assuming the credit risk.

So I don’t think this is some huge strategic lesson for the entire banking industry.

To me, it is more a reminder that even companies with extraordinary reputations can make bad partnership decisions.

Apple does plenty of brilliant things. This one was not brilliant.

I think that is a good place to leave it.

Thanks everybody for joining us.

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