How does Sezzle make money?

Sezzle is a fintech company operating in the United States and Canada. It was founded by Charlie Youakim, Paul Paradis, and Killian Brackey in 2016.

Youakim and Paradis, who met while studying their MBAs in Minnesota, created Sezzle as a payment platform that would compete with the likes of PayPal. The pair even went as far as calling the platform PayPal 2.0 for merchant processing, envisioning a service where merchants were charged 50% less and consumers could earn cashback rewards on their purchases. Unfortunately, the service failed to gain any traction. 

While Youakim’s wife was scrolling through Instagram one day, she noticed Afterpay being offered as an option for merchants in Australia. In May 2017, Sezzle pivoted to offering interest-free credit to young people who preferred to make purchases with their debit cards.

The founders then sought funding in the United States, but the buy-now-pay-later movement was still in its infancy there. As a result, Youakim and Paradis decided to hold an IPO on the Australian Stock Exchange. The company raised $30 million on the first day of trading and by the time of the IPO in July 2019, Sezzle could already boast over 5,000 merchants and 430,000 customers.

Like many businesses, Sezzle profited enormously from the coronavirus pandemic as many shoppers migrated to making purchases online. During this time, the platform entered into partnerships with Google Pay and Apple Pay to allow its payment service to be used for in-store purchases. Merchant fees for 2020 increased by 266.9% over the previous year, with Sezzle adding over 1.3 million active users over the same period.

Sezzle revenue generation

Sezzle has a relatively simple revenue generation strategy. The service is essentially free to consumers, provided they pay on time.

With that said, below is an overview of how the company makes its money.

Merchant fees

Like most buy-now-pay-late providers, Sezzle derives most of its income from merchant fees.

The merchant fee is charged at a flat rate of $0.30 plus 6% of the total transaction amount. Merchants who enjoy higher order volumes may be able to negotiate a custom rate with Sezzle. 

The merchant fee may also be negotiable for non-profits and businesses operating in certain industries.

Rescheduled payment fee

Consumers who want to reschedule the payments on a purchase for the second or third time are also charged a fee. It should be noted that the first reschedule is free, enabling the consumer to push a payment date out by up to a fortnight.

The exact rescheduling fee depends on individual state regulations and the region where the purchase was made. Generally speaking, the rescheduling fee is around $5. 

Failed payment fee

If Sezzle is unable to process a payment, a $10 failed payment fee is added to the total amount owed.

However, this fee is waived if the individual manages to make the payment within 48 hours of the due date.

Key takeaways:

  • Sezzle is a fintech company founded by Charlie Youakim, Paul Paradis, and Killian Brackey in 2016. Co-founders Youakim and Paradis created Sezzle to compete with PayPal but later pivoted after seeing the value in buy-now-pay-later.
  • Sezzle derives much of its income from merchant fees, with merchants charged $0.30 plus 6% of the total transaction amount.
  • Sezzle is essentially free to consumers provided they make payments by the due date. For late or failed payments the fee is $10. There are also fees associated with rescheduling payment dates.
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