In the financial markets, one sector's crisis often becomes another's opportunity. That dynamic played out dramatically Monday as buy now, pay later stocks surged while traditional credit card issuers suffered their worst session in years.

Affirm Holdings jumped as much as 5% in early trading before settling around 3% higher, while SoFi Technologies gained 4%. Block, which owns Afterpay, added 2.1%. The divergence couldn't have been starker against a backdrop of 8-10% declines in pure-play credit card issuers.

The Logic Behind the Rally

Mizuho analyst Dan Dolev spelled out the investment thesis in a Monday research note: "President Trump's demand for a one-year 10% cap on credit card interest rates could have major positive ramifications for BNPL and personal loan providers."

The reasoning is straightforward. If traditional banks are forced to cap rates at 10%—well below the current average of 20% or more—they will inevitably tighten lending standards. Subprime and near-prime borrowers who currently qualify for credit cards may find themselves shut out.

Those consumers will need alternatives. Enter buy now, pay later.

Why BNPL Economics Are Different

Affirm's business model provides a natural hedge against credit card rate caps because the company generates the majority of its revenue from merchant fees rather than consumer interest charges. When a shopper uses Affirm at checkout, the retailer typically pays 5-6% of the transaction value for the privilege of offering flexible payments.

This structure means Affirm can remain economically viable in environments where capped credit cards struggle. The company does charge interest on some loans, but its blended economics are less dependent on high APRs than traditional card issuers.

"Because Affirm charges merchants rather than relying solely on high consumer APRs, it could remain economically viable where capped credit cards struggle, allowing BNPL to gain share at checkout."

— Mizuho Securities research note, January 12, 2026

The Regulatory Tailwind

Adding to the sector's appeal, the Trump administration has taken a notably lighter touch on BNPL regulation. In May 2025, the Consumer Financial Protection Bureau dropped enforcement of rules that would have subjected buy now, pay later providers to the same disclosure requirements as credit cards.

The political framing also benefits BNPL. Trump's rate cap proposal positions traditional credit card companies as villains "ripping off" American consumers with 20-30% interest rates. By contrast, buy now, pay later products are often marketed as "interest-free" alternatives—even though they generate substantial revenue through late fees and merchant charges.

Growth Runway Remains Substantial

Despite rapid adoption in recent years, buy now, pay later still represents a small fraction of consumer credit. Affirm processed roughly $20 billion in gross merchandise volume last year—significant, but tiny compared to the $1.23 trillion in credit card balances outstanding.

If even a fraction of credit-restricted consumers shift to BNPL platforms, the growth implications are enormous. Analysts estimate that a 10% rate cap could push more than 14 million American households toward alternative credit sources, according to Bank Policy Institute data.

Risks Remain

The rally in BNPL stocks isn't without risks. For one, the rate cap proposal faces enormous legal and political hurdles. Jefferies analysts called it "dead on arrival" without congressional action.

Additionally, if economic conditions deteriorate, BNPL providers could face their own credit losses. Unlike credit card issuers, which have decades of experience managing charge-offs through economic cycles, buy now, pay later is a relatively untested model in a sustained downturn.

Affirm's earnings report, expected around February 5, will provide the next major data point on the company's credit trends and outlook.

The Investment Case

For investors, the BNPL surge represents a potential structural shift rather than just a one-day trade. If the political pressure on credit card rates persists—regardless of whether the cap becomes law—buy now, pay later providers could continue gaining market share.

SoFi Technologies offers perhaps the most diversified exposure to this theme, with personal loans, student loan refinancing, and banking products alongside its BNPL offerings. Affirm remains the pure-play option for investors who want concentrated exposure to the installment-payment trend.

The irony is rich: a proposal designed to help American consumers may end up supercharging an industry that some consumer advocates consider equally problematic. But in markets, unintended consequences often create the biggest opportunities.