We’ve often been tough on buy now, pay later (BNPL) here at Localogy Insider. We’ve written about how regulators are narrowing in on the payment method that allows consumers to take possession of goods today and pay for them over time. BNPL is a kind of jujitsu on the old layaway model. And we’ve written about why regulators have taken an interest in BNPL. Namely, for its reported role in increasing debt levels among younger consumers, among whom BNPL is especially popular.
Yet BNPL carries on. It may even be gaining in popularity as it settles into its place in the payments mainstream. Another interpretation is that companies like Sezzle are finding growth by aggressively expanding the BNPL product to other industries.
We saw one bit of evidence supporting this particular take this week in the form of Sezzle’s first-quarter earnings results. According to the company’s Q1 earnings announcement, the company grew its total income in Q1 year over year by 25.5% to $35.7 million. All while its “underlying merchant sales” (UMS) have been declining. For the first quarter, Sezzle’s UMS fell 17.9% to $369.8 million.
In the U.S. UMS would probably be called Gross Merchandise Volume (GMV). Whichever acronym, this is the total value of the goods and services from which BNPL platforms like Sezzle derive their income, usually by charging merchants a fee per transaction. Sezzle, for instance, charges merchants a $0.30 flat fee plus 6% of each transaction. The company reports having 47,000 merchants active on its platform. Other income sources can include interest (not all do change interest. Sezzle claims it does not, though it does assess late fees.
Left at the Altar
By way of background, Minnesota-based Sezzle, which was founded in 2016, has been among the more troubled of the many BNPL platforms that have launched over the past decade or so to capitalize on what is undoubtedly one of the more seductive offers to consumers in recent memory. Buy the stuff you want now, take immediate possession, and pay for it later without interest.
On the Heels of Klarna’s Big Haircut, ZipCo. Cancels Sezzle Merger
In July, Australian BNPL player ZipCo., which had been on a mission to roll up smaller rivals, canceled its planned acquisition of Sezzle, “in light of current macroeconomic conditions.” The deal was originally announced in February. In the end, ZipCo preferred eating an $11 million cancellation fee over going through with the wedding. This cancellation may have said as much about the broader state of fintech in the middle of last year as it did about these two companies. Around the same time, for example, Sezzle’s much larger BNPL rival Klarna was raising money at a much-reduced valuation.
Selzzle had been trying to get in shape before the wedding. in March of last year, for example, announced a 20% headcount reduction last March.
The company has recently been on a mission to stoke growth and achieve sustainable profitability. Sezzle reports that Q123 represents its third consecutive profitable quarter.
New Product Focus
Since being left at the altar, Sezzle has been focused on expanding demand for BNPL through an array of new products and partnerships. For example, Sezzle launched a “Pay in 2” payment product. Most BNPL platforms offer a standard pay in four installments product. And usually, at zero interest if payments are made on time. Sezzle has also over the past year expanded BNPL into new areas like college textbooks and vacation rentals.
Sezzzle, currently listed on the Australian Stock Exchange (ASX), has also announced plans to move over to the NASDAQ via a direct listing.
One final note. We have written recently about the fact that most BNPL platforms are moving away from the term “buy now, pay later”. Instead, BNPLs are now referring to themselves broadly as fintech or payments companies. Or they are using terms like “alternative payments.” Today we noted that Sezzle has jumped on this bandwagon as well. Sezzle now refers to itself as a “purpose-driven installment payment platform”.
