The Consumer Financial Protection Bureau (CFPB) has recently opened a regulatory inquiry into BNPL (Buy Now Pay Later) companies who make point-of-purchase lending frictionless for consumers.

In short, the CFPB is worried that consumers are taking on too much debt too quickly and too easily without fully understanding the impact on their ability to pay it back.

This can have broad ramifications for consumer financial wellness as well as the economy at a macro level. Millions of consumers not being able to pay their debt obligations has never been a good story for the US economy. We have only to look at the predatory lending practices observed during the housing crisis bubble for a recent, though more catastrophic, corollary.

To get a sense of how far-reaching the problem is, a recent study by C+R Research says that about 60% of US adults have used BNPL services and 80% say they planned to use it over the holidays. For context, only 70% of US adults carry a credit card.

How did we get here?

Although the skyrocketing BNPL usage may be leading to a potential consumer debt crisis, its ease of use, fast growth and popularity are a testament to Embedded Finance. It proves that customers will engage in traditional financial services products which are embedded in places where they’re already spending their time, and their money.

What’s the real issue?

Most BNPL solutions work the same way a credit card does – by checking the borrower’s credit and capacity to pay back the debt. Although, BNPL does it instantly, at the point of check out. The consumer effectively enters into a debt arrangement without understanding the impact to their credit and without being able to see their overall debt picture. I refer to this as “impulse borrowing”. A consumer’s full financial picture becomes increasingly disconnected as they engage in these impulse-loans across retail sites and across providers, like Klarna, Afterpay, and Affirm (who recently partnered with Amazon).

How do we solve the problem?

While it’s true that the ease of use that comes with Embedded Finance is causing this issue, it’s also true that Embedded Finance can likely solve it. At Envestnet, we’re creating Embedded Finance tools that are focused on financial wellness for the consumer. An example is our Embedded Savings solution. When embedded into a retailer, it presents a way for the consumer to save at the point of purchase, rather than borrow. Using our Yodlee FastLink process the consumer can seamlessly set up a way to save for this purchase goal by debiting money from their checking account on a regular basis. This money remains available to the user at any time, in case of emergencies. It’s the true digital layaway. The consumer doesn’t receive the product until they’ve saved enough to afford to buy it.

Why are we excited about this?

At Envestnet, we’re delivering an intelligent financial life. This is just one approach: we’re keeping a consumer’s spending and savings connected and focused on the goals they most want to achieve. We’re calling for all retailers to engage with their consumers in this manner, presenting a healthier way to approach their financial life, and building a better relationship with the communities they serve. For more information on how to implement Embedded Savings from Envestnet, email us at

The information, analysis and opinions expressed herein are for informational purposes only and do not necessarily reflect the views of Envestnet. These views reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. Nothing contained in this piece is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.

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