Proposed 10 percent APR cap could hit fintechs, acquirers hard

President Donald Trump's renewed call to cap credit card interest rates at 10 percent annually has reignited debate across the payments ecosystem, drawing sharp reactions from banks, fintechs, consumer advocates and merchants.

While the proposal is framed as a consumer-protection measure aimed at easing household debt burdens, industry executives warn it could trigger far-reaching consequences, particularly for fintech card programs and the merchant acquiring side of the business that depend on card usage volume.

With average U.S. credit card APRs hovering above 20 percent, supporters argue that a hard cap could deliver meaningful relief to consumers struggling with revolving debt. Critics, however, say the economics of card issuing, especially in the United States, rely heavily on interest income to offset credit risk, fraud losses, compliance costs and customer servicing expenses.

"A 10% cap on credit card APRs would represent a fundamental shift in the economics of card issuing," said Radi El Haj, CEO at RS2. "Higher APRs don't just drive profit; they help subsidise access to credit for less prime, thin-file or newly banked customers who are inherently more expensive to underwrite and manage."

El Haj warned that a cap at that level would compress margins for many issuers, particularly those serving mass-market or underserved segments, making certain customer profiles commercially unviable.

The most likely outcomes, Haj said, would be tighter underwriting standards, lower credit limits or outright exits from higher-risk segments — reducing access to credit for the very consumers such measures are often intended to protect.

Fintech programs and partner banks under pressure

The effects could be even more acute for fintech card programs, many of which rely on partner banks and operate on thinner margins than traditional issuers. These programs depend on a carefully calibrated mix of interchange, interest income and scale to sustain their business models.

"A hard APR cap would force partner banks to reassess program-level risk and returns," El Haj said. That reassessment could translate into higher capital requirements, more conservative approval criteria, delayed product launches or reduced appetite for supporting newer fintech entrants, potentially slowing innovation across the ecosystem.

Ripple effects for merchant acquiring

While much of the discussion has focused on issuers and consumers, payments executives say merchant acquirers would not be insulated from the fallout. If issuers respond to lost interest income by tightening credit or lowering limits, overall card spend volumes could decline, directly affecting acquiring revenue tied to transaction volume.

At the same time, issuers seeking to replace interest income may lean more heavily on interchange optimization, premium card structures or new fee-based models. That could increase pressure on merchants already grappling with high acceptance costs, particularly if richer rewards programs or premium card tiers gain traction as issuers rebalance revenue.

For acquirers, this dynamic could complicate merchant conversations around pricing and value, especially as regulators and lawmakers continue to scrutinise interchange levels. In a lower-APR environment, merchants could face a scenario where interest costs fall for consumers, but acceptance costs rise or become harder to justify, potentially reshaping card-versus-alternative-payment adoption decisions at the point of sale.

In addition, on Tues., Jan. 13, CNBC reported that JPMorgan Chase CFO Jeremy Barnum hinted the industry could fight President Donald Trump’s demand for credit card price controls. “If you wind up with weakly supported directives to radically change our business that aren’t justified, you have to assume that everything’s on the table,” Barnum said on a call with reporters following JPMorgan’s fourth-quarter earnings report. “We owe that to shareholders.”

Shifting costs and unintended consequences

El Haj noted that issuers are likely to explore alternative revenue strategies, including higher annual fees, subscription pricing or unbundling services that are currently free. While these approaches may preserve issuer viability, they risk shifting costs away from interest rates and directly onto consumers and merchants, reducing transparency and potentially undermining the consumer-protection goals of an APR cap.

"Any policy intervention on APRs needs to consider the full payments and credit ecosystem," El Haj said. "Without that holistic view, there's a real risk of unintended consequences — from reduced credit availability and slower fintech innovation to higher upfront costs for consumers and merchants alike."

As policymakers weigh proposals aimed at curbing borrowing costs, industry participants across issuing, fintech and acquiring agree on one point: changes to one part of the card economics ripple quickly through the rest of the payments value chain.

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