Citi Identifies U.S. Fintech Stocks as Key Beneficiaries of Trump's "Affordability" Policy Agenda

Citi’s analysis centers on a fundamental shift in the regulatory environment that favors fintech challengers over traditional financial institutions. President Trump’s “affordability” agenda, implemented through executive actions and proposed legislation, targets two critical revenue streams for incumbent banks: credit card interest income and competitive advantages in housing markets [1][2].

The credit card interest rate cap proposal, announced effective January 20, 2026, calls for a one-year limit on credit card rates at 10% [2]. This policy directly challenges the economics of major card issuers who derive substantial revenue from revolving credit balances. Traditional banks, which have historically benefited from higher interest rate environments and limited competition on pricing transparency, face potential margin compression under this regulatory framework. Fintech platforms, by contrast, often monetize through subscription models, transaction fees, and merchant services rather than interest income, positioning them favorably relative to rate-cap disruptions [1].

The executive order restricting large institutional investors from competing with individual homebuyers represents another vector of policy-driven market restructuring. This measure could redirect capital flows away from institutional mortgage buyers and toward alternative lending platforms, potentially expanding opportunities for fintech lenders capable of serving individual borrowers more efficiently than traditional banking channels [1].

Citi’s research highlights an important rotation dynamic that has developed over the past year. Traditional lenders and financial institutions experienced significant rallies in 2025 based on expectations of lighter regulation under the new administration [1]. However, as the policy agenda has crystallized around consumer-facing affordability initiatives, investor attention has begun shifting toward fintech platforms that more directly align with these priorities.

The Russell 2000’s relative strength in early 2026 trading—gaining 0.58% on January 22 while major indices showed mixed performance—reflects this emerging sector rotation [0]. Smaller financial institutions and fintech firms with exposure to consumer lending and small-business services appear positioned to benefit from policy shifts that expand consumer spending power and small-business formation incentives.

Citi’s analyst teams organized their coverage into three thematic groups, each identifying stocks positioned to benefit from different policy vectors:

emphasizes platforms serving underbanked consumers and small businesses. Affirm Holdings (AFRM) stands out as a leading buy-now-pay-later provider whose transparent installment pricing contrasts favorably with opaque revolving credit products that would face regulatory headwinds under the proposed rate cap [1][2]. Block, Inc. (SQ) benefits from dual exposure through Cash App consumer adoption and Square’s small-business merchant services, positioning it to gain from policies spurring small-business formation [1]. Toast, Inc. (TOST) serves as a restaurant technology platform directly exposed to increased small-business activity and expanded tax credits that could enhance restaurant sector viability [1].

identifies firms positioned to benefit from digital asset regulatory clarity and shifts in consumer lending markets. SoFi Technologies (SOFI), which gained approximately 70% in 2025, represents a lending-focused fintech benefiting from broader market shifts and healthier U.S. consumer dynamics [2]. Coinbase Global (COIN) and Circle Internet Group (CRCL) stand to benefit from comprehensive digital-asset reform legislation including the Genius Act’s stablecoin framework and pending Clarity Act provisions [1]. Alternative lending platforms like Upstart Holdings (UPST) and Pagaya Technologies (PGY) could see tailwinds from populist regulation that expands private-credit markets and disrupts traditional financing sources [1].

focuses on platforms serving small enterprises that could benefit from policies leaving small businesses with more financial resources. Shopify Inc. (SHOP) benefits from e-commerce growth incentives and policies encouraging small-business formation [1]. Intuit Inc. (INTU) could see elevated activity from tax policy changes and the “One Big Beautiful Bill Act” driving increased refund activity and TurboTax adoption, while CreditKarma gains lending market share [1]. HubSpot Inc. (HUBS) represents small-business software exposure positioned to benefit from a healthier small-business ecosystem [1].

The policy agenda Citi identifies represents more than sector-specific tailwinds—it suggests a fundamental competitive redefinition in financial services. Traditional banks have built competitive advantages on deposit spreads, scale in credit card lending, and institutional relationships. Fintech platforms have historically competed on user experience, speed of onboarding, and product innovation. Policy shifts that constrain traditional banking revenue streams while leaving fintech models relatively untouched could accelerate market share transfers that have been gradual trends over the past decade.

The credit card rate cap specifically targets a high-margin, annuity-like revenue stream for card issuers. While traditional banks have invested heavily in credit card profitability through reward programs and balance retention strategies, fintech platforms often avoid interest-rate-based monetization entirely. Buy-now-pay-later products like those offered by Affirm and Klarna utilize installment structures that fall outside revolving credit frameworks, potentially insulating these platforms from direct regulatory impact while their traditional competitors face margin compression [1].

Current market valuations for recommended fintech stocks indicate significant investor expectations already priced in. Affirm trades at 103x trailing earnings, Shopify at 101x, and Toast at 78x [0]. These premiums leave limited margin for disappointment if policy benefits fail to materialize or materialize more slowly than anticipated. Investors considering Citi’s thesis must weigh the potential for sustained premium valuations against execution risks in converting policy tailwinds into revenue and earnings growth.

SoFi Technologies, which has already appreciated approximately 70% over 2025, demonstrates how rapidly market participants can price anticipated benefits [2]. The stock’s current 46.8x P/E ratio remains elevated but represents a more moderate multiple than several peers, potentially offering a better risk-reward profile for investors seeking fintech exposure with less aggressive valuation assumptions [0].

The success of fintech lending platforms depends significantly on underlying consumer credit quality. While Citi’s thesis emphasizes policy-driven improvements in consumer spending power, alternative lending platforms face inherent credit risks that differ from traditional banking portfolios. Buy-now-pay-later products and AI-driven lending platforms like Upstart serve consumers who may not qualify for traditional bank financing, creating potential for elevated credit losses if economic conditions deteriorate [1].

The interplay between policy initiatives and consumer credit outcomes creates uncertainty that investors must carefully evaluate. A credit card rate cap could benefit consumers carrying balances, potentially improving their financial position. However, lenders whose business models depend on interest income from revolving credit—including some fintech platforms—may face margin compression that challenges profitability assumptions.

: The credit card interest rate cap proposal requires legislative or regulatory action for implementation. The scope, duration, and enforcement mechanisms remain undefined, creating significant uncertainty about actual market impact [2]. Traditional banks may adapt their business models, develop compliance strategies, or lobby successfully against restrictive policies, potentially mitigating competitive advantages that fintech platforms might otherwise experience.

: Several recommended stocks trade at substantial premiums to historical norms and broader market multiples [0]. AFRM’s 103x P/E and SHOP’s 101x P/E reflect optimistic growth expectations. If policy benefits prove more modest than anticipated or take longer to materialize, these valuations could face significant compression.

: Traditional financial institutions possess substantial resources, regulatory relationships, and customer relationships. Incumbent responses to fintech disruption—including improved digital offerings, pricing changes, and strategic partnerships—could limit market share transfer opportunities that Citi’s thesis anticipates.

: The 2026 midterm elections introduce significant political uncertainty. Policy priorities may shift depending on election outcomes, and the durability of Trump administration initiatives beyond the election cycle remains uncertain.

: If policy implementation creates meaningful competitive advantages for fintech platforms, accelerated market share gains could compound over multiple years. Consumer and small-business customers who switch to fintech platforms during periods of policy disruption may demonstrate sticky behavior even if competitive dynamics eventually normalize.

: Policy incentives for small-business formation could drive structural growth in platforms serving this segment. TOST, SQ, SHOP, and related stocks offer direct exposure to small-business ecosystem expansion that could prove durable beyond immediate policy cycles [1].

: Progress on the Genius Act and Clarity Act could provide a structural improvement in crypto sector legitimacy, benefiting COIN and CRCL with reduced regulatory uncertainty and expanded institutional adoption potential [1].

The analysis presents a coherent thesis linking policy developments to competitive positioning in financial services. Key data points include current stock prices and valuations [0], policy proposal details [1][2], and analyst coverage organization across thematic teams [1]. Investors should note that Citi’s publication did not include specific price targets, formal buy/hold/sell ratings, quantitative impact estimates, or portfolio allocation guidance [1]. The thesis depends on policy implementation, competitive response, and consumer credit quality outcomes that involve substantial uncertainty. Valuation premiums across recommended stocks reflect elevated expectations that may limit upside if policy benefits prove more modest than anticipated.