Is delaying password setup after the signup a good thing?

In order to reduce the signup friction on our website, we are planning to delay the need for the users to set their password to a later step by asking them only their email address at the moment they join the website.

The workflow would then be something like this:

  1. A user signs up to the website entering his email address only
  2. We create a temporary password for him in the backend and use this password to log him in. The user can thus use the application as normal.
  3. We email the user a link that he will use to set his password later. This email serves also as a mean to confirm that the user's email address is correct.

I can't think of any drawbacks of using such a workflow but as it's not the standard we see elsewhere, am I missing something?