Sezzle
Sezzle Inc. (NASDAQ: SEZL) is a publicly traded financial technology company that operates a buy-now-pay-later platform, allowing consumers to split purchases into four interest-free installment payments over six weeks at participating merchants or via a virtual card.[1][2] Founded in 2016 by Charlie Youakim and Paul Paradis, the company is headquartered in Minneapolis, Minnesota, and serves customers primarily in the United States and Canada.[3][4] As a certified B Corporation, Sezzle positions itself as focused on financial empowerment for younger consumers through accessible credit alternatives to traditional cards, with no fees for on-time payments from linked bank accounts.[2] The firm has reported steady revenue growth from transaction fees and merchant services, with total income rising to $26.6 million in the first quarter of 2024 from $25.9 million the prior year, reflecting expansion in its user base and partnerships.[5] In March 2025, Sezzle executed a 6-for-1 stock split to enhance liquidity following its public listing via a special purpose acquisition company merger in 2023.[6] However, it has encountered controversies, including a December 2024 short-seller report from Hindenburg Research alleging aggressive lending practices that risk consumer overdrafts and uncollectible loans—claims disputed by the company—and an ongoing antitrust lawsuit against Shopify accusing the e-commerce platform of favoring its own BNPL offerings to stifle competition.[7][8] These events have contributed to stock volatility, underscoring challenges in the competitive BNPL sector amid regulatory scrutiny over debt accumulation among users.[9]Founding and Early History
Founding and Initial Launch
Sezzle was founded in 2016 in Minneapolis, Minnesota, by Charlie Youakim and Paul Paradis, with Killian Brackey as an additional co-founder.[10][11] Youakim, a serial entrepreneur who had previously co-founded and led Passport, a mobile parking payment app that he later sold, provided key fintech expertise and invested proceeds from that exit into the new venture.[12] The initial focus was on developing a payment solution to reduce merchants' processing costs compared to traditional credit card fees, addressing inefficiencies in e-commerce transactions.[11] The company launched its platform in 2017, initially as a payment processing service that appealed to retailers for its lower fees.[13] This evolved rapidly into a buy now, pay later (BNPL) model, enabling consumers to split purchases into four interest-free installments over six weeks, with merchants receiving full payment upfront minus a fee.[14] Sezzle's core BNPL offering targeted underserved younger consumers, such as Gen Z, by forgoing traditional credit checks and emphasizing financial empowerment without compounding interest.[9] Early operations emphasized technology architecture designed by Youakim to support seamless consumer-merchant integration, setting the stage for scalable growth in the competitive BNPL space.[3] By prioritizing short-term installment plans, Sezzle differentiated itself from credit-heavy alternatives, though it faced challenges in risk management and consumer defaults from inception.[9]Expansion and Product Development (2016–2020)
Sezzle was incorporated on January 4, 2016, in Minneapolis, Minnesota, with initial operations focused on developing a buy-now-pay-later (BNPL) platform offering interest-free installment payments.[15] Following a seed funding round of $1.9 million in October 2016, the company assembled its core team and built the foundational product, which emphasized transparent, four-payment plans over six weeks without hidden fees.[16] This early development phase addressed consumer demand for flexible financing alternatives to credit cards, prioritizing short-term underwriting models to minimize risk.[17] The platform officially launched in the United States in 2017, enabling integration with e-commerce merchants for seamless checkout experiences.[18] By mid-2018, Sezzle secured $9.1 million in venture funding, which fueled merchant onboarding and platform scalability, including enhancements to payment processing and user verification systems.[19] Expansion accelerated as the company targeted online retailers, achieving 500,000 active customers by August 2019—nearly three years after inception—through targeted marketing and partnerships that broadened accessibility for underserved demographics.[20] Product iterations during this period refined core mechanics, such as automated installment scheduling and basic fraud detection, to support higher transaction volumes without interest charges to consumers. Revenue from merchant fees, typically 5-6% per transaction, underpinned reinvestment in technology infrastructure.[21] User growth surged to over one million active customers by February 2020, reflecting a doubling in the prior six months amid rising BNPL adoption, though this relied on lenient credit assessments that later drew regulatory scrutiny.[20] In May 2019, Sezzle listed on the Australian Securities Exchange, raising capital for international merchant expansion while maintaining U.S.-centric operations.[22] These efforts positioned the company for sustained scaling, with gross merchandise value increasing exponentially as merchant integrations expanded beyond initial niches like apparel and electronics.[20]Corporate Evolution and Public Listing
Going Public and Post-IPO Growth
Sezzle Inc. conducted its initial public offering on the Nasdaq stock exchange through a direct listing on August 17, 2023, trading under the ticker symbol SEZL.[23] The reference price was set at $12.35 per share, reflecting the company's position as a provider of installment-based payment solutions for online merchants.[24] This listing followed an earlier debut on the Australian Securities Exchange in July 2019, where shares closed the first trading day up 80% at A$2.20 after pricing at A$1.22.[25] Following the Nasdaq listing, Sezzle demonstrated robust operational expansion, driven by increased adoption of its buy-now-pay-later platform. In the first quarter of 2025, gross merchandise volume (GMV) rose 64.1% year-over-year to $808.7 million, supported by higher purchase frequency and growth in monthly active users.[26] By the second quarter of 2025, GMV achieved a record $927 million, with revenue increasing 76% from the prior-year period amid elevated user engagement.[27] Monthly On-Demand and Subscribers (MODS), a key metric for recurring user activity, reached 748,000 in Q2 2025, marking a 62% year-over-year increase.[28] The company raised its full-year 2025 revenue growth guidance to 60-65% in mid-2025, up from an initial projection of 25-30%, reflecting confidence in sustained demand for its services.[29] Analyst estimates aligned with this trajectory, projecting approximately 63% annual revenue growth for 2025.[30] Sezzle's annual revenue stood at $60.3 million as of December 31, 2024, with expectations for further acceleration into 2025 based on quarterly trends.[10] Stock performance post-IPO reflected this growth, with shares surging over 200% in the first half of 2025 from early-year levels around $45 to a peak exceeding $180 in July.[31] As of October 24, 2025, the closing price was $76.96, delivering substantial returns for early investors compared to the 2023 listing price—$1,000 invested at IPO would have grown significantly by this point.[32] Despite subsequent volatility, including a more than 50% decline from the July high amid broader market concerns in the buy-now-pay-later sector, Sezzle maintained positive momentum relative to its IPO valuation.[33]Strategic Acquisitions and Partnerships
Sezzle has primarily advanced its growth through strategic partnerships with merchants, financial institutions, and technology providers, emphasizing high-value integrations to expand its buy-now-pay-later (BNPL) footprint without notable acquisitions. In Q3 2024, the company disclosed a five-year partnership with WebBank to fund consumer installment loans, enabling scalable underwriting and risk management while reducing reliance on alternative funding sources.[34] This collaboration supports Sezzle's shift toward value-oriented merchant acquisitions, prioritizing partners that drive sustainable gross merchandise volume (GMV) over sheer volume.[35] To streamline consumer onboarding and payment verification, Sezzle integrated with Plaid's data network, allowing users to securely link bank accounts for instant verification and automated payments, which enhances conversion rates and reduces friction in the lending process.[36] On the merchant side, Sezzle secured an exclusive BNPL agreement with Backcountry on November 11, 2024, extending interest-free payment options across its platforms including Steep & Cheap and evo, targeting outdoor and adventure retail segments.[37] Ahead of the 2025 holiday season, Sezzle announced expansions with key retailers such as Cato Fashions (women's apparel), SCHEELS (sporting goods), D&B Supply (rural lifestyle), and Dermstore (beauty and skincare), integrating BNPL options to capture increased seasonal spending in fashion, fitness, and consumer goods categories.[38] These partnerships align with Sezzle's broader strategy of selective merchant onboarding, which contributed to Q2 2025 GMV growth of 74.2% year-over-year to $927 million, bolstered by targeted marketing and retention efforts.[27] Earlier attempts at inorganic growth included a proposed acquisition by Zip Co. announced in 2021, aimed at combining operations to strengthen U.S. market presence, but the deal was mutually terminated in July 2022 amid regulatory hurdles and market volatility.[39] Post-termination, Sezzle redirected focus to organic partnerships, avoiding further M&A pursuits as of October 2025.[40]Business Model and Operations
Core Platform Mechanics
Sezzle operates as a buy-now-pay-later (BNPL) platform, enabling consumers to purchase goods from participating merchants by deferring full payment through interest-free installment plans, with Sezzle advancing funds to merchants upfront. The core offering, known as "Pay in 4," divides eligible purchases into four equal payments, requiring 25% down at checkout followed by three bi-weekly installments over six weeks total.[41][42] This model targets consumers, particularly younger demographics like Gen Z and millennials, who may lack traditional credit histories, by avoiding reliance on conventional credit scores for initial approvals.[41] Consumer onboarding begins with account creation, requiring users to be at least 18 years old, U.S. residents, and provide personal details including name, address, Social Security number, phone, and bank account verification via two-factor authentication.[43] A two-step underwriting process follows: initial evaluation post-signup yields an estimated spending power based on factors like financial status, payment history, and risk indicators, with final approval reviewed per transaction using proprietary algorithms.[43] Sezzle employs non-traditional data and machine learning models, such as the Prophet Score, for real-time credit risk assessment, enabling access for those with limited credit files without routine credit bureau inquiries unless users opt into the Sezzle Up program for credit reporting.[41][43] During checkout at integrated merchants, approved consumers select Sezzle, which processes the order by paying the merchant the full amount (minus Sezzle's fee) immediately, while the consumer's obligation shifts to repaying Sezzle via automated bank debits.[41] For non-partner sites, the Sezzle Virtual Card generates a one-time or reusable card number for similar installment treatment.[43] Minimum order values apply, typically $20, with no interest accrued on timely payments, though late fees (up to certain limits) or account restrictions may apply for delinquencies.[43] Sezzle funds these advances through revolving credit facilities, recycling capital as installments are collected, and absorbs losses from defaults after pursuing collections.[41] Alternative plans include "Pay in 2" (50% at purchase, balance two weeks later) and "Pay Monthly" for larger purchases up to certain limits, often financed via partners like WebBank, with terms disclosed per loan agreement.[42][43] The platform's mechanics emphasize rapid, automated approvals to facilitate impulse buys, but approvals remain transaction-specific to manage fraud and overextension risks through ongoing behavioral data analysis.[41]Merchant Integration and Revenue Streams
Merchants integrate Sezzle's buy now, pay later (BNPL) functionality into their online checkout processes through API connections or pre-built plugins for major e-commerce platforms, allowing customers to select Sezzle as a payment option alongside traditional methods. Supported platforms include Shopify, Shopify Plus, WooCommerce, BigCommerce, Magento 2, Wix, and others, with setup typically involving enabling the payment gateway in the merchant's dashboard and configuring authorization settings such as authorize-only or authorize-and-capture to manage order fulfillment.[44][45][46] Once integrated, Sezzle assumes the credit risk and advances the full purchase amount to the merchant (net of fees) upon order approval, while the consumer repays Sezzle in installments.[47][48] Sezzle's core revenue from merchants stems from transaction-based discount fees, calculated as a percentage of underlying merchant sales (UMS) processed through the platform, which incentivizes merchants to drive higher volumes in exchange for increased consumer accessibility. For the fiscal year ended December 31, 2023, merchant and partner-related income accounted for 62% of Sezzle's total revenues, reflecting the dominance of this stream amid growing adoption.[49][50] These fees are structured to cover Sezzle's funding costs, risk underwriting, and operational expenses, with rates varying by merchant agreement but generally aligning with industry BNPL norms to balance merchant affordability and platform sustainability.[51][52] Supplementary merchant-related revenues include partner referral fees from agencies, tech platforms, or payment providers that integrate or promote Sezzle, as well as interchange income from Sezzle's virtual card products where applicable. In Q3 2024, total revenue reached $70 million, with underlying merchant sales growing 40.6% year-over-year, underscoring the scalability of these streams as merchant networks expand.[53][52][9] This model positions Sezzle to capture value from transaction volume rather than consumer interest, though it exposes revenues to fluctuations in merchant adoption and consumer repayment rates.[54]Underwriting and Risk Management
Sezzle employs a proprietary two-step underwriting process for consumer approvals. Upon account creation, initial underwriting assesses eligibility and assigns an estimated spending power based on factors including payment history and recent usage, though this is not guaranteed and varies by merchant. Subsequent order evaluations occur at checkout, treating each as a closed-end credit extension reviewed for fraud and risk characteristics, such as account balance, creditworthiness (via Sezzle or partner WebBank), and behavioral data.[43][55] The Sezzle Underwriting Engine facilitates real-time risk scoring for new consumers, integrating traditional credit data, alternative sources, retailer information, and machine learning models refined through transaction histories. This behavior-based approach enables dynamic credit limit adjustments and counteroffers for exceeded limits, aiming to expand access while minimizing defaults; consumers typically pay 25% upfront to limit exposure. Fraud detection relies on a dedicated system scoring transactions across multiple data points, with unsecured loans managed via ongoing monitoring rather than routine credit bureau reporting (except for the optional Sezzle Up program).[55][56] Risk management encompasses a board-overseen framework identifying key exposures like credit, operational, and regulatory risks, with the Audit and Risk Committee handling administration, including fraud incident reviews and compliance. Losses are provisioned on an expected-loss basis, with charge-offs after 90 days past due; collections involve internal processes and third-party agencies, supplemented by fees for rescheduling or reactivation. In Q1 2025, provisions for credit losses stood at 1.84% of gross merchandise volume (GMV), below some expectations, though Q2 2025 provisions doubled year-over-year to approximately 2.22% of GMV amid growth.[57][55][58][59] Challenges include reliance on third-party data accuracy and exposure to subprime borrowers, with approximately 45% of BNPL loans industry-wide (including Sezzle's) directed to deep-subprime profiles, prompting short-seller Hindenburg Research to allege in December 2024 that Sezzle funds risky loans via expensive capital, evidenced by 130% year-over-year provision growth despite modest loan book expansion. Sezzle counters that its models and upfront payments sustain low historical loss rates, though economic factors like consumer defaults could elevate risks.[9][60][55]Products and Services
Standard Payment Plans
Sezzle's standard payment plans, primarily the Pay in 4 option, enable consumers to finance eligible purchases through interest-free installments without requiring a hard credit check. Under Pay in 4, the total purchase amount is divided into four equal payments, with 25% due at checkout and the remaining three payments automatically deducted bi-weekly over a six-week period.[42][61] This structure yields a 0% annual percentage rate (APR), though actual costs can vary if service fees apply based on the transaction.[1][62] An alternative basic plan, Pay in 2, requires 50% of the purchase upfront, followed by the balance two weeks later, also at 0% interest and without mandatory fees for on-time payments.[61][63] Both plans are available for purchases at participating merchants or via Sezzle's virtual card for broader use, with approval determined by a soft credit inquiry and user-specific factors such as payment history and spending limits.[42][64] While no interest accrues, standard plans carry risks including late fees of up to $10 after a one-day grace period, insufficient funds fees of $10 per failed deduction, and potential account suspension or reactivation fees of $10 for non-payment.[62] Repeated delinquencies may restrict access to future financing or lead to collections, though Sezzle does not report positive payment history to credit bureaus and limits negative reporting.[62][64] Payments are processed automatically from a linked debit card, bank account, or credit card, with users able to reschedule once per order under standard terms.[42][63]Premium and Extended Options
Sezzle Premium is a subscription-based membership service offered to eligible users, providing enhanced access and benefits beyond the standard buy-now-pay-later platform. Priced at $13.99 per month, it unlocks shopping at over 350 non-integrated brands including Amazon, Walmart, Target, Nike, and Lowe's, along with features such as gift card sharing for select retailers, exclusive in-app discounts, priority customer support, an additional free payment reschedule per order, and up to 4% cash back in Sezzle Spend credits when payments are made in full.[65][66][67] Unlike the base service, which limits Pay Later options primarily to integrated merchants, Premium enables virtual card use for broader online purchases while waiving certain late fees and offering budgeting tools like deal notifications.[68][65] Extended payment options through Sezzle include long-term financing partnerships for higher-value purchases, allowing consumers to finance amounts up to $15,000 over terms ranging from 3 to 48 months. These plans, available at checkout for qualifying orders, differ from the interest-free short-term structures (such as Pay in 4 over 6 weeks) by incorporating variable interest rates of 5.99% to 34.99% APR, determined by creditworthiness and partner lenders, to accommodate larger ticket items like appliances or furniture.[69][63][70] Management of these extended payments occurs directly with financing partners, with prequalification offered without a hard credit pull, though approval is not guaranteed and depends on individual financial profiles.[71][72] This option expands flexibility for consumers needing deferred payments beyond biweekly installments but introduces borrowing costs absent in core BNPL offerings.[64]Additional Consumer Features
Sezzle offers Sezzle Up, an opt-in credit-building program launched to report eligible users' on-time payment history to major credit bureaus such as Experian, Equifax, and TransUnion.[73][74] To participate, users must complete at least one full order payment on time and link a bank account for automated payments, with reporting occurring monthly for positive activity but potentially including delinquencies if they occur.[75] This feature aims to help users establish or improve credit scores without traditional hard inquiries, though its effectiveness depends on consistent usage and varies by individual credit profiles.[76] The platform provides a virtual card option, enabling consumers to apply Sezzle's installment payments at any merchant accepting Visa, including those not directly integrated with Sezzle.[77][78] Available as single-use or multi-use virtual cards added to digital wallets, this tool supports purchases up to the user's approved limit without immediate full payment, subject to Sezzle's risk assessments and exclusions for certain transactions like recurring bills.[79] In the U.S., it operates without a credit check for initial setup, broadening accessibility for in-store or online shopping beyond partnered retailers.[80] Sezzle's rewards ecosystem includes Payment Streaks, a loyalty tier system introduced in 2024 that incentivizes on-time payments through points accumulation and tier progression, unlocking perks such as higher spending limits or fee waivers.[81][82] Complementing this, the Money IQ program, launched on January 14, 2025, integrates financial education modules where users earn redeemable Sezzle Spend credits—usable at Sezzle-accepting merchants—for completing interactive lessons on topics like budgeting and saving.[83][84] By April 2025, participants had averaged 11 modules completed, collectively earning over 5 million experience points, demonstrating engagement in responsible financial habits.[85] In March 2025, Sezzle enhanced its app with consumer savings tools, including automated coupon application, price drop alerts, and personalized deal discovery within its product marketplace.[86][87] These features scan for discounts at checkout and notify users of post-purchase price reductions for potential refunds, integrated with a price comparison function to promote cost-conscious spending.[88] Further updates in June 2025 added Sezzle Balance for tracking funds, one-tap Express Checkout, and a browser extension for seamless wallet integration across sites.[89][90] The mobile app, rated 4.6 on Google Play and 4.9 on the App Store as of late 2025, also supports payment rescheduling, budget reminders, and exclusive in-app deals to aid financial management.[91][92]Financial Performance
Key Metrics and Revenue Growth
Sezzle's revenue has exhibited robust growth, rising from $159.4 million in fiscal year 2023 to $271.1 million in fiscal year 2024, a 70.1% year-over-year increase driven by expanded gross merchandise volume (GMV) and higher subscriber engagement.[93] [26] This trajectory continued into 2025, with total revenue reaching $98.7 million in the second quarter alone, marking a 76.4% year-over-year rise and representing 10.6% of GMV for that period.[27] Key operational metrics underscore this expansion. GMV surged to $2.5 billion for fiscal year 2024, up 39.2% from 2023, reflecting broader merchant adoption and consumer utilization of installment payments.[93] In Q2 2025, GMV hit a record $927.0 million, a 74.2% increase year-over-year, supported by 748,000 Monthly On-Demand & Subscribers (MODS), an all-time high.[27] The company reported 2.9 million active consumers transacting over the last 12 months as of mid-2025, contributing to a last-twelve-months GMV of $3.3 billion.[94]| Fiscal Year | Revenue ($ millions) | YoY Growth | GMV ($ billions) | YoY Growth |
|---|---|---|---|---|
| 2023 | 159.4 | - | ~1.8 | - |
| 2024 | 271.1 | 70.1% | 2.5 | 39.2% |