Nigel Morris, co-founder of Capital One and an early investor in BNPL giants like Klarna and Aplazo, has raised fresh alarms about the state of the U.S. economy. Speaking at Web Summit in Lisbon, Morris said he is “deeply uncomfortable” with the rapid rise of buy-now-pay-later (BNPL) services being used to purchase basic necessities like groceries, a clear sign, he warned, that many Americans are financially strained.
BNPL usage has surged to 91.5 million people in the U.S., with 25% of users now financing groceries, according to data from Empower and LendingTree. But more worrying is that 42% of users made at least one late payment in 2025, up from 34% just two years earlier. Morris said this trend reflects a growing dependence on short-term loans for everyday living.
A major issue is the creation of “phantom debt” because most BNPL providers do not report loans to credit bureaus. This means consumers can take multiple loans across platforms without lenders knowing. “The credit system is flying blind,” Morris said, calling the lack of visibility a danger to the broader financial ecosystem.
Regulatory efforts have added to the confusion. The CFPB initially sought to classify BNPL as credit and enforce stricter protections, but recent rollbacks under the current administration removed those rules, leaving the sector largely unregulated. New, more optimistic CFPB findings, suggesting 98% repayment among first-time users with low credit, clash sharply with older data showing rising late payments and heavy usage.
State-level actions, such as New York’s new licensing requirements, attempt to fill the gap, but Morris noted that patchwork regulation is easy for large financial firms to navigate around.
Despite the growing risks, Morris stopped short of predicting a repeat of the 2008 crisis. However, he emphasized several “storm clouds,” including rising unemployment, economic uncertainty, and the end of student loan forbearance, with nearly 10 million borrowers already in default or late-stage delinquency.
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BNPL is also expanding rapidly into mainstream banking, embedded finance, and even business-to-business lending. Major banks, PayPal, Affirm, Klarna, Apple Pay, and Google Pay have integrated BNPL options deeply into retail and payment systems. Investors have begun buying BNPL debt in large volumes, echoing pre-2008 trends in debt securitization.
The biggest looming concern, experts warn, is the spillover effect: borrowers prioritize BNPL payments because they’re smaller and more frequent, while larger obligations like car loans, credit cards, and student loans fall behind, potentially accelerating defaults across the credit market.
While Morris still believes in the value of responsible lending, he emphasized the need for a moral compass in consumer finance. His “mom test”, if you wouldn’t confidently recommend a product to your own mother, you shouldn’t offer it, highlights the ethical tension in BNPL’s rapid expansion.
As BNPL spreads across consumer and business lending, the lack of transparency, rising late payments, and growing dependency among vulnerable borrowers signal a need for urgent regulatory clarity. Morris’s message is clear: this isn’t a crisis yet, but the warning signs are too loud to ignore.
