Trash Cans, Rewards Gaps, and Gray-Zone Lending: This Week in Banking

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

Stacey, how are you doing?

You know how I’m doing. I called you out on LinkedIn.

We are definitely going to talk about that. But first, how are you actually doing?

Fantastic. We are officially in Q3, the July heat is brutal, and I am still riding the Knicks high.

Hold on. That has to be topic number one.

Stacey and I do not live in the same city, so we do not see each other in person very often. We happened to see each other last night, even though it was not for the best of reasons. It was still good seeing you, and I’m glad you eventually made it home despite all the delays.

Now, before we get into banking, thank you, and I mean this as sarcastically as possible, for calling me out publicly on LinkedIn yesterday.

You basically posted, “I told you,” with a dead-serious face.

That was about the Knicks, obviously.

Congratulations. Your Knicks won. But it has been a couple of weeks. I think it may be time to re-enter ordinary life.

Absolutely not.

Let’s set the scene for the listeners.

On June 18, after 53 years, the New York Knicks, the city of New York, the longtime fans who never let hope die, and the bandwagon fans who jumped on because they were winning all celebrated the championship parade after the Knicks beat the San Antonio Spurs.

They got the key to the city. Alicia Keys performed “Empire State of Mind.” More than 700 sanitation workers cleaned up the confetti and ticker tape afterward.

The city was covered in blue and orange. The energy was electric.

And that brings us to the sanitation story.

Apparently, New York had painted a number of trash cans blue and orange for the celebration.

One of the big stories after the parade involved a woman who was caught on video taking one of those painted trash cans, dumping the trash onto the street in front of the person filming her, and walking off with the can.

She was later filmed taking it home on the subway.

The banking connection is that she worked at JPMorgan Chase and was subsequently fired.

So here is the real question for this podcast: was that warranted?

People absolutely get fired for violating the values of the company they work for, even when the behavior happens outside working hours.

I can understand why JPMorgan made the decision, although I am not entirely convinced termination was the only appropriate response.

There is a German word, schadenfreude, for taking pleasure in someone else’s misery, and I do not want to do that here.

I’m also going to remind you that Knicks fans had waited 53 years.

Grown adults were climbing on sanitation trucks. Strangers were hugging on the 4 train. New Yorkers do not even normally say good morning to each other, and now they were hugging.

I understand the excitement, but 53 years is not an excuse for breaking the law or dumping trash onto the street.

The real question is still how the bank should have handled it.

Would a warning have been enough? Should they have given her a second chance?

Fine. You got me to put on the HR hat.

I think she should have received a very serious warning rather than being fired.

But I also understand the bank’s side.

We talk constantly with community-bank, credit-union, and fintech executives about building and protecting a brand. Trust is part of the product.

JPMorgan has every reason to hold employees to behavioral standards, whether they are on the clock or not, because conduct can become associated with the company very quickly.

So I understand why they acted. I just think a stern warning could have been enough.

That is pretty close to where I land too.

I think we have beaten that one enough. Let’s move on.

You have another Substack piece you wanted to discuss.

Yes. And everybody listening should subscribe to Ron’s Substack. It is free, which still seems crazy to me.

The piece was titled “A Gym Membership Problem Just Ate Your Debit and Credit Card Rewards Program.”

We are officially halfway through 2026, and this article felt like a product-design warning for financial institutions trying to differentiate.

The gym-membership analogy is pretty intuitive.

People sign up, pay every month, and then often fail to use the value they are paying for.

The same thing happens with credit-card rewards and benefits.

Alexander Navell at Wallet Savvy highlighted the example of the American Express Platinum card. It may advertise more than $1,500 in potential benefits against a substantial annual fee, but a large portion of cardholders never capture enough value to offset what they are paying.

Same product. Same annual fee. Completely different outcome depending on how the customer uses it.

That gap between what a product promises and what a customer actually captures has quietly been part of the business model for years.

The same logic can apply to relationship-checking products with activity requirements, CD renewals people forget about, and other financial products that benefit when customers do not fully optimize their behavior.

So here is my question.

In all your years covering banking and fintech, can you think of a financial institution that genuinely built a business around helping customers use less of a product, move out of the wrong product, or switch to something better for them?

Or has the industry generally depended on that usage gap remaining open?

There is a lot there.

First, I should clarify that the gym-membership concept was not mine. There is academic research going back roughly 20 years showing how gym economics benefit when many people pay for memberships they do not use very much.

Navell also cited research around similar behavioral gaps in financial products.

The broader issue is product design.

How do you design something that produces reasonable profitability for the provider while also maximizing real value to the consumer?

I would be hard-pressed to name a financial institution that has built a meaningful business around closing the gap, mostly because its existing economics usually reward widening the gap.

Until recently, it also would have been very difficult for one institution to solve this comprehensively.

To tell a consumer they are using the wrong credit card, debit card, subscription, or other account, you need visibility into a much broader portion of their financial life.

That is where consumer-permissioned data access matters.

You also need analytics or AI that can recognize whether the customer is actually capturing the expected value.

Those capabilities are much more available now than they were a decade ago.

That does not mean the final version of Section 1033 is settled. It is being rewritten, and the eventual framework may look very different from the original rule.

But even outside regulation, consumers can already authorize many forms of data access.

That creates the possibility for a community bank or credit union to offer an advocacy service that looks across products, including products held somewhere else, and tells the customer where they are leaving money on the table.

I think there is a business in that.

But it needs to be separate enough from the bank’s product-sales incentives that people can trust the recommendation.

If the system always recommends your own credit card, you have recreated the conflict.

The existing recommendation industry has the same problem.

If a website earns more money by steering you to the $695 card than to the free card, its incentives are not necessarily aligned with yours.

Mint had versions of this problem years ago. It promised to help consumers find better financial products, but paid relationships could influence what got recommended.

So there is an opportunity for an institution that is willing to build a genuinely customer-aligned recommendation business.

You may even be able to charge consumers directly for honest recommendations.

That would be better than pretending the service is free while monetizing the recommendation behind the scenes.

I would call that an advocacy-based value model.

The institution helps you use what you already have more effectively, even if some of those products sit somewhere else.

That can create retention and stickiness because the customer sees the bank as an advocate rather than simply a seller.

The alternative is acquisition-based value, where the institution mostly cares about getting the sign-up.

As fintechs such as SoFi and Chime keep expanding, I think that distinction becomes more important.

I agree, although we should be careful with the word advocacy because bankers often use it the other way around.

They say they want customers to become advocates for the bank and refer their friends and family.

We are talking about the bank advocating for the customer.

I have been writing about that distinction for more than 20 years and taking grief from institutions that say, “What is in it for us? We have products to sell.”

The answer is trust.

If you tell somebody, “Our card is not the best choice for this situation. Use something else,” then when your product is the right choice later, your recommendation carries much more credibility.

That is the opportunity.

Ready for a third topic?

Let’s do it.

SoFi recently announced that it is moving into small-business lending.

The new loans range from a few thousand dollars up to roughly $250,000, with no application or origination fees and no prepayment penalties.

The company also says funding can happen quickly after approval.

Anthony Noto framed the move by saying that for many SoFi members, their financial lives do not stop at personal goals. They also include the businesses they are building.

That line is important.

We have talked a lot about how SoFi has been winning consumer checking, payment, investment, and lending relationships.

Now it is moving into the business side.

I do not see this as a direct threat to large commercial real-estate lending or large enterprise C&I banking.

The more interesting opportunity sits in the gray area between a consumer and a formal small business.

Gig workers, creators, side hustlers, influencers, freelancers, and other people can have substantial business income without operating like a traditional company.

I like to call them “bizumers,” half business and half consumer.

I do not expect that term to take off, but I’m not giving up yet.

SoFi already sees much of these customers’ personal financial lives. It may see checking activity, payments, investments, existing loans, and cash flow.

That gives it an important advantage when the same customer eventually needs financing for a side business.

And I think community banks and credit unions need to take that seriously.

I am going to push back a little.

There are already strong small-business lenders and marketplaces such as Lendio that help businesses connect with multiple lending options.

The bigger strategic point for community financial institutions is not trying to out-breadth SoFi.

They probably cannot.

The opportunity is relationship depth.

Community institutions can still bring human underwriting judgment, local-market knowledge, and an understanding of a borrower’s story that a purely digital platform may not have.

I recently worked with a roughly $9 billion bank in Pennsylvania that thinks about householding very intentionally.

They map the full relationship. Here is the customer. Here is the spouse. Here are the children or beneficiaries. Are there businesses in the household? What products do they use? Where are there opportunities to deepen the relationship?

That is where community institutions can compete.

Noto’s statement is about breadth: one platform serving more of the customer’s needs.

A local institution can still win on depth.

It can know the bakery owner’s business, not only the credit file.

It can show up at local events, understand the surrounding ecosystem, and use that context in decisions.

So the strategic bet should not be becoming everything to everyone.

It should be becoming unmistakably better at the things only you can do, while also fixing the friction points that make customers feel like they have traveled backward in time.

I am not sure you proved me wrong yet.

A couple of reactions.

First, Lendio is more of a marketplace and intermediary than a direct lender in the same sense as SoFi, so I would not make that the cleanest comparison.

Second, SoFi’s advantage is exactly the data you mentioned earlier.

We have a Cornerstone research report sitting with a client right now called How Credit Unions Can Steal SoFi’s Playbook.

We surveyed SoFi members and found that many already have deep relationships with the company.

Historically, student lending was often the entry point.

More recently, checking, payments, and investing have become common entry products.

Once SoFi sees the cash flow, it may understand more about the customer’s emerging business than a local bank that knows the bakery is popular but has to ask the owner for weeks of paperwork before it can see the underlying finances.

That is why I consider this a real threat.

And again, the sweet spot is the gray area between the fully formed business and the individual side hustle.

Vantage West Credit Union in Arizona has built a product around this idea called Hustl.

It is not simply a loan. It is a bundle of services intended to help people manage their side business or gig more effectively.

That is the kind of product innovation community institutions should be thinking about.

I agree with the data point.

There are also examples of institutions using partner data more intelligently today.

Baxter Credit Union has used SavvyMoney data to see external credit relationships at a high level.

If the institution can see that a member has significant outside credit-card balances, an unsecured loan, or an auto loan, it can create a more relevant consolidation or refinance offer.

That is one way community institutions can compete without spending like SoFi or JPMorgan.

They still need better data, better partnerships, and better product thinking.

If the organization cannot interpret the data it already has and use it creatively, it is going to fall behind.

Data is king.

I think that is a good note to end on.

And no, I am not giving you another Knicks victory lap.

Too late.

For everybody listening, remember that Ron and I are also looking for the best banking posts each month. Tag us on LinkedIn or Substack if you see or create something that deserves a What’s Going On in Banking tumbler.

It is always a pleasure talking this out with you, Ron.

Thanks, Stacey.

And thanks to everybody for joining us. We hope you’ll listen to another episode of What’s Going On in Banking.

If you enjoyed today’s episode, follow us on Spotify, Apple Podcasts, YouTube, or wherever you listen.

Stay tuned.