Sezzle Inc. (‘Sezzle’) operates as a digital payments company.
The company has built a digital payments platform that provides consumers a flexible alternative to traditional credit. Through the company’s products, it aims to enable consumers to take control of their spending, be more responsible, and gain financial freedom.
The company launched Sezzle amid a backdrop during which digital shopping began to claim a larger share of the retail sector and younger generations (i.e., Gen Z and Mille...
Sezzle Inc. (‘Sezzle’) operates as a digital payments company.
The company has built a digital payments platform that provides consumers a flexible alternative to traditional credit. Through the company’s products, it aims to enable consumers to take control of their spending, be more responsible, and gain financial freedom.
The company launched Sezzle amid a backdrop during which digital shopping began to claim a larger share of the retail sector and younger generations (i.e., Gen Z and Millennials) started demonstrating a need for credit. Gen Z and Millennial consumers, who are defined as individuals between ages 18–28 and 29–47, respectively, use credit cards less frequently than other generations and, in many cases, lack access to traditional credit. These same consumers are tech-savvy and gravitate towards modern, streamlined commerce solutions, whether online or in-person. The company’s platform addresses the shortcomings in legacy payment offerings consumers face by providing a flexible, secure, omnichannel alternative with the structural benefit of ‘creditizing’ traditional debit products. The technology solutions it has designed align with its mission of financially empowering the next generation.
Additionally, on March 22, 2021, the company became a Certified B Corporation by B Lab, an independent non-profit organization, joining a movement of innovative, socially-conscious brands. In order to be designated as a Certified B Corporation, the company was required to undertake a comprehensive and objective assessment of its environmental, social, and governance standards for transparency, accountability, and commitment to improved performance. To maintain the company’s status as a Certified B Corporation, it must satisfy re-certification requirements every three years.
The company operates in the United States and Canada, and is winding down and exiting operations in India and certain countries in Europe.
Products
Sezzle Platform
The Sezzle Platform offers a payments solution for consumers that instantly extends credit at the point-of-sale, allowing consumers to purchase and receive the ordered merchandise at the time of sale while paying in installments over time.
The Sezzle Platform can be integrated into merchants’ websites via pre-built widgets for select e-commerce platforms or the company’s direct Application Programming Interface. Consumers can access the Sezzle Platform through the Sezzle mobile application or Sezzle online dashboard. The company is able to rapidly onboard and integrate merchants through an increasingly automated merchant underwriting process and, once integrated, consumers can choose the Sezzle Platform as a payment method at the merchant’s point-of-sale. The Sezzle Platform is presented alongside other payment options on the merchant’s checkout page. Consumers then select Sezzle as their payment option and, if they are first-time users, create an account with Sezzle in a quick and streamlined process integrated into the selected merchant’s checkout. If a particular merchant is not directly integrated with the company, consumers are still able to checkout with the Sezzle Platform using a virtual card if they are subscribed to Sezzle Premium (for select merchants) or Sezzle Anywhere (subject to certain merchant, product, goods, and service restrictions), or if they elect to use Sezzle On-Demand.
The Sezzle Platform reviews the transaction and consumer profile in real-time and, if approved, quickly confirms the transaction for both the consumer and the merchant. Once an initial transaction is approved, consumers are granted a spending limit. The company’s underwriting platform analyzes above-limit purchase attempts and may provide alternative terms to prevent a consumer from being denied outright. After a transaction is approved and merchant checkout is completed, the merchant ships the order and receives payment, just as if the consumer had paid in cash or used a traditional credit or debit card.
In 2024, the company launched Payment Streaks, a new feature designed to reward consumers for consistent and timely payments. The company’s free Payment Streaks program enables consumers to ascend through loyalty tiers by consistently making on-time payments, with each tier providing additional benefits to consumers.
In addition, the company periodically offers promotions and incentives for consumers to earn Sezzle Spend. Sezzle Spend are credits issued to consumers and can be applied to future orders made on the Sezzle Platform.
Pay-in-Four
The Sezzle Platform flagship product, ‘pay-in-four,’ allows consumers to pay a fourth of the purchase price up front, and then another fourth of the purchase price every two weeks thereafter over a total of six weeks. The company’s ‘pay-in-four’ product is generally free to consumers who pay on time and use a bank account or non-electronic payment method to make their installment payments, excluding their first payment, unless they choose to pay for one of its two subscription products or use Sezzle On-Demand. Consumers receive a notification via email, text message, and the Sezzle mobile application two days prior to the date the installment payment is automatically debited by the Sezzle Platform from the consumer’s payment method provided under the consumer’s account. The consumer is able to review and manage their Sezzle account via the Sezzle Platform’s online dashboard or mobile application. Consumers are also able to reschedule a payment without charge one time, and may subsequently reschedule a payment up to two additional times for a fee, subject to applicable state laws. Consumers who fail to pay for their purchases on time (or reschedule their payments as permitted above) may incur a late payment fee, which requires the settlement of an outstanding balance (including the late payment fee) before they may use the company’s platform again in the future. Additionally, when a payment method fails, consumers may incur a failed payment fee. Sezzle utilizes third-party collection agencies for past due balances, which may report such delinquent balances to credit bureaus.
Pay-in-Full
The company began offering a ‘pay-in-full’ option to consumers in 2022. This option allows consumers to pay for the full value of their order up-front through the Sezzle Platform without the extension of credit. This allows new consumers who are denied credit to complete their order through its platform without the need to re-enter any payment information.
Pay-in-Two and Other Alternative Installment Options
The company also began offering a ‘pay-in-two’ option to certain consumers who are not qualified for its ‘pay-in-four’ product in 2023. In ‘pay-in-two,’ a consumer pays half of the value of their order up-front and the second half in two weeks.
In addition, the company may offer customized installment terms that differ from its traditional four payment, six week terms with select enterprise merchants. An example of these alternative terms is a four payment, three month product. The company offers these unique products to consumers through selected merchants at its discretion in situations where alternative terms would provide additional value to both the consumer and merchant, while also better aligning with the typical purchase frequency at these select merchants.
Sezzle Virtual Card
The Sezzle Virtual Card, issued by Sutton Bank, Member FDIC, pursuant to a license from Visa U.S.A Inc., allows consumers to use the Sezzle Platform with merchants in-store and online, including merchants that are not directly-integrated with Sezzle. The Sezzle Virtual Card bolsters the company’s omnichannel offering and provides a rapid-installation, point-of-sale option for brick-and-mortar retailers through its compatibility with Apple Pay and Google Pay. With the Sezzle Virtual Card solution, consumers can enjoy in-store shopping with the convenience of immediately tapping into the Sezzle Platform with the ‘tap’ of their Sezzle Virtual Card at the point-of-sale.
Sezzle Premium
In 2022, the company launched Sezzle Premium—a paid subscription service that allows its consumers to access large, non-integrated ‘premium merchants’ for a recurring fee. In addition to being able to use Sezzle online or in-store at these premium merchants, consumers enrolled in Sezzle Premium also gain access to other benefits, including exclusive deals and discounts, the ability to earn Sezzle Spend back on purchases, and one additional free reschedule per order.
Sezzle Anywhere
The company launched Sezzle Anywhere in 2023—a paid subscription service that allows consumers to use their Sezzle Virtual Card at any merchant online or in-store, subject to certain merchant, product, goods, and service restrictions, for a recurring fee. Consumers enrolled in Sezzle Anywhere also gain access to all the benefits of Sezzle Premium, as well as earning cash back in Sezzle Spend on pay-in-full transactions.
Sezzle On-Demand
In 2024, the company launched Sezzle On-Demand, a service that allows consumers who are not subscribed to Sezzle Anywhere to use the Sezzle Platform at any merchant online or in-store (subject to certain merchant, product, goods, and service restrictions). Consumers using Sezzle On-Demand pay a finance charge that is added to the consumer’s initial down payment.
Sezzle Up
Sezzle Up is an opt-in feature of the Sezzle Platform. Consumers elect to participate in Sezzle Up, which allows the company to report the consumer’s transactions made on the Sezzle Platform to establish a record of payments. Building a record of timely payments on financial obligations generally has a positive impact on a consumer’s credit record. As these consumers pay their financial obligations to the company when due, their spending limits on the Sezzle Platform and overall credit score may increase over time.
To qualify for Sezzle Up, consumers must pay off at least one order on time and in full, link a checking account, and set it as their default payment method (consumers’ initial down payments are still completed over a card network), and verify their account with a social security number for consumers located in the United States. In Canada, a social insurance number or similar identifying information is used to verify the account.
Long-Term Lending — Access to Third-Party Lenders
Through collaboration with third-party lenders, the company enables its consumers at participating merchants access to interest-bearing monthly fixed-rate installment-loan products for larger-ticket items (up to $15,000), which extend up to 60 months. The company earns a fee from its lending collaborators for marketing and referring the potential consumers to them and processing applications using its proprietary underwriting analysis; however, it does not make final credit decisions or originate or hold the loans in its portfolio, which limits its capital needs and credit risk.
Consumers
The company focuses on a young consumer base that is tech-savvy, socially-minded, and expects brands to possess ethical and sustainable principles. As of December 31, 2024, approximately 78% of the company’s Active Consumers consisted of members of the Gen Z and Millennial generations (ages 18-47), which are generally early in their credit journey.
Gen Z and Millennial consumers use credit cards less frequently relative to other generations and, in many cases, lack access to traditional credit. As a result, they tend to have fewer viable options for budgeting, achieving financial flexibility, and building credit history. Consumers in these generations also tend to transact frequently across e-commerce and brick-and-mortar retail, but spend less on average per transaction than older generations. In doing so, these consumers are increasingly seeking financial products that offer transparency and affordability. They prefer to avoid loans with hidden terms or payment structures that strain their budgets. The company’s core product, ‘pay-in-four,’ provides these younger generations, who are newer to credit, with a unique solution to these challenges before they move up the FICO score spectrum and have more repayment history. In addition, as the company’s platform grows and it establishes more products, features, and ways to pay, its consumers enjoy a wider variety of financial tools and shopping features that provide viable alternatives to traditional credit cards.
Merchants
The company offers a unique and user-friendly platform to its directly-integrated merchants. The company’s easy integration and seamless onboarding allow most merchants to go live on its platform within one day of activation to quickly realize the benefits of partnering with Sezzle. The company’s merchants benefit from its platform’s network effects through increased access to a deep pool of consumers equipped with its flexible payment product.
The company provides a toolkit to its merchants to help grow their businesses, which is unmatched among digital payments platforms. All of the company’s merchants are provided complimentary placement in its marketplace presented across both the Sezzle website and mobile app. Additionally, the company’s merchants are offered paid placements on the Sezzle Platform to assist with user acquisition efforts. The company provides select merchants with incentives to grow their sales and introduce Sezzle into new merchant categories through initiatives such as Sezzle Spend and co-branded marketing. To eligible merchants, the company also facilitates access to working capital loans up to $150,000 issued by a third-party lender (‘Sezzle Capital’). Loans facilitated by the company through Sezzle Capital are unsecured and repayments are based on a percentage of daily sales. To be eligible for a Sezzle Capital loan, the third-party lender requires, at a minimum, merchants to have at least $1,000 in average monthly sales, have been in business for at least four months, and be incorporated in a country acceptable to the third-party lender.
The ongoing expansion of the company’s platform should continue to enhance the benefits for its merchants. The company’s integration into scaled e-commerce platforms is expected to give more merchants the opportunity to seamlessly offer Sezzle as a payment option at checkout. Other products on the Sezzle Platform, such as long-term lending and alternative installment options, further enhance its platform’s value for merchants. This all occurs without any credit risk being transferred to the merchant.
The company’s directly-integrated merchant segments are small-to-medium-sized businesses (‘SMB’) and enterprise merchants, each spanning numerous verticals.
SMB
SMB, which the company defines as merchants with total annual gross sales of less than $500 million, have historically constituted the largest segment of its merchant base. The company’s fast, easy application process makes onboarding simple, and its user-friendly merchant interface streamlines the integration process. Through Sezzle, these merchants are able to offer their consumers an optimized, effortless checkout process that enables them to complete sales. Included in SMB are a diverse, growing array of ‘direct-to-consumer’ brands that are online-first and seek to connect with consumers without the use of secondary retailers, which naturally fits within its core offering.
Enterprise Merchants
An ongoing major initiative is greater engagement with enterprise merchants, which the company defines as merchants with over $500 million in total annual gross sales. The Sezzle pay-in-four product helps these merchants to facilitate a sale by providing access to credit for a consumer who has limited-to-no credit history. Without the Sezzle Platform, the consumer without credit history may otherwise not have completed the purchase, or be rejected after applying for the store’s private label or co-branded credit card. The company collaborates with these retailers to drive sales and over time serve as a lead generator to consumers who are ready to ‘graduate’ to the retailer’s card program.
Merchant and Partner Concentration
The concentration of a significant portion of the company’s business and transaction volume with a limited number of scaled e-commerce platforms exposes it disproportionately to any of those partners choosing to no longer partner with it or choosing to partner with a competitor, and to any events, circumstances, or risks affecting such partners. In addition, a material modification in the financial operations of any significant scaled e-commerce partner could affect the results of its operations, financial condition, and future prospects.
Business Model
The Sezzle Platform is generally free to consumers who pay on time and use a bank account or non-electronic payment method to make their installment payments, excluding the first payment, unless they choose to pay for one of its two subscription products, elect to use Sezzle On-Demand, or enter into an interest-bearing loan with its third-party partner. The company’s primary sources of revenue are from merchants, partners, and subscription revenue from consumers.
The company’s primary source of revenue from merchants is from merchant processing fees, which are based on a percentage of GMV plus a fixed fee per transaction. For the company’s direct integration solution, the purchase price, less merchant processing fees, is paid to merchants by it in advance of collecting installment payments from the consumer. For the company’s virtual card solution, the full purchase price is paid to merchants at the time of sale, and it separately collects merchant processing fees due to it from the merchant to the extent applicable. The company also earns revenue from partners, including interchange fees through its virtual card solution and third-party promotional incentives.
Another significant portion of the company’s revenue is derived from subscription revenue. The company offers its consumers the ability to subscribe to two paid services: Sezzle Premium and Sezzle Anywhere. Sezzle Premium allows consumers to shop at select large, non-integrated premium merchants, along with other benefits, for a recurring fee. Sezzle Anywhere allows consumers to use their Sezzle Virtual Card at any merchant online or in-store, subject to certain merchant, product, goods, and service restrictions, for a recurring fee.
A smaller portion of the company’s revenue is derived from consumer fees. Any consumer fees that the company earns are either from late payment fees charged to a consumer for failing to make a principal payment by its due date, failed payment fees charged to a consumer following a failed principal payment, when a consumer uses a debit or credit card for their installment payments (excluding the first payment), or when consumers elect to reschedule a payment (all of which are pursuant to state law). Consumers are not allowed to make any new purchases with the company until all past-due principal and fees are paid. Additionally, consumers are able to reschedule a payment without charge one time, and can subsequently reschedule a payment up to two additional times for a small fee, subject to applicable state laws. The company allows qualifying consumers to have fees waived under its hardship and fee forgiveness program.
Seasonality
The company experiences seasonality as a result of the spending patterns of its consumers. Total revenue and GMV in the fourth quarter have historically been strongest for it, in line with consumer spending habits during the holiday shopping season. These higher volumes have typically been accompanied by increased charge-offs when compared to the prior three quarters (year ended December 31, 2024).
Competition
The company considers its main competitors to be other BNPL service providers. In the U.S. market, this includes Affirm, Afterpay (a subsidiary of Block, Inc.), Klarna, PayPal’s ‘Pay Later,’ and Zip. In the Canadian market, this includes Klarna, Affirm, and Afterpay.
Regulatory Environment
The company is directly subject to the regulatory, supervisory, and enforcement authority of the Consumer Financial Protection Bureau (‘CFPB’). Under the Dodd-Frank Act, the CFPB has the supervisory authority to conduct on-site examinations of the company and its originating bank partner’s businesses on a periodic basis and/or subject it or its originating bank partner to a formal or informal inquiry or investigation, and the enforcement authority to pursue administrative proceedings or litigation for violations of federal consumer laws.
In the United States, the Truth-in-Lending Act (‘TILA’) and Regulation Z thereunder, administered by the CFPB, require the company to provide relevant and informative disclosure of the terms and conditions of the company’s products to all consumers with whom it conducts business and to comply with certain lending practice requirements and restrictions. The company is required to comply with Section 5 of the Federal Trade Commission Act (‘FTC Act’), which prohibits unfair and deceptive acts or practices (‘UDAP’) in or affecting commerce, and analogous provisions in each state; the Consumer Financial Protection Act, which prohibits unfair, deceptive, or abusive acts or practices (‘UDAAP’) in connection with consumer financial products and services; the Equal Credit Opportunity Act (‘ECOA’) and Regulation B promulgated thereunder, which prohibit creditors from discriminating against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, the fact that all or part of the applicant’s income derives from any public assistance program, or the fact that the applicant has in good faith exercised any right under the Federal Consumer Credit Protection Act or applicable state law; the Fair Credit Reporting Act (‘FCRA’), which promotes the accuracy, fairness, and privacy of information in the files of consumer reporting agencies; the Fair Debt Collection Practices Act (the ‘FDCPA’), which provides guidelines and limitations concerning the conduct of third-party debt collectors in connection with the collection of consumer debts; the Telephone Consumer Protection Act (the ‘TCPA’), which regulates the use of telephone and texting technology to contact customers; and the Controlling the Assault of Non-Solicited Pornography and Marketing Act (‘CAN-SPAM Act’), which protects consumers from misleading or unwanted email messages.
The company is subject to the Electronic Fund Transfer Act and Regulation E thereunder, which provide disclosure requirements, guidelines, and restrictions on the electronic transfer of funds from consumers’ bank accounts, and the detailed timing, notification rules, and guidelines administered by the National Automated Clearing House Association (‘NACHA’). Transfers of funds for the repayment of loans offered by the company or its originating bank partner may be performed by electronic fund transfers, such as ACH transfers. EFTA requires the company to make available loan payment methods other than automatic preauthorized electronic fund transfers and prohibits it or the company’s originating bank partner from conditioning the approval of a loan transaction on the consumer’s agreement to repay the loan through ACH transfers.
The company is also subject to the Holder in Due Course Rule of the Federal Trade Commission (‘FTC’), and equivalent state laws, which require any holder of a consumer credit contract to include a required notice and become subject to all claims and defenses that a borrower could assert against the seller of goods or services; the Electronic Signatures in Global and National Commerce Act and similar state laws, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures; the Military Lending Act and similar state laws, which provide obligations and prohibitions relating to loans made to servicemembers and their dependents; and the Servicemembers Civil Relief Act, which allows active duty military members to suspend or postpone certain civil obligations.
A substantial majority of the loans facilitated through the Sezzle Platform within the United States are originated by the company’s originating bank partner, WebBank, a Federal Deposit Insurance Company (‘FDIC’)-insured Utah state-charted industrial bank (‘WebBank’). WebBank originates loans through the Sezzle Platform based on federal law pursuant to Section 27 of the Federal Deposit Insurance Act (‘Section 27’). Section 27 allows an FDIC-insured bank, such as its originating bank partner, to charge interest to consumers on a nationwide basis based on the rate allowed by the state where the bank is located. The company relies on its originating banking partner’s authority under federal law to establish interest rates and charge interest on the loans its originating bank partner originates through the Sezzle Platform.
In Canada, the company is required to comply with the Canada Anti-Spam Law, which regulates the transmittal of commercial email messages, the Canadian Personal Information Protection and Electronic Documents Act, and equivalent provincial privacy laws in the provinces of Alberta, British Columbia, and Quebec, each of which includes requirements surrounding the use, disclosure, and other processing of certain personal information about Canadian residents.
The company is also subject to the Payment Card Industry Data Security Standard (‘PCI DSS’) with respect to the acceptance of payment cards, which provides for security standards relating to the processing of cardholder data and the systems that process such data. The failure of the company’s products to comply with PCI DSS requirements may result in the loss of its status as a PCI DSS certified Service Provider and adversely impact its relationship with its merchant partners and their ability to comply with PCI DSS.
In Canada, the company is required to comply with the Payments Canada Rule H1- Pre-Authorized Debit Rules in respect of the acceptance of payments from Canadian bank accounts and the Quebec Charter of French Language laws, which regulates the language of communication in commerce and business and applies to entities carrying on business in Quebec.
In the United States, the company is subject to the Gramm-Leach-Bliley Act (the ‘GLBA’) and implementing regulations and guidance thereunder, in addition to applicable privacy and data protection laws in the other jurisdictions in which it carries on business activities or processes personal information.
In addition, in Canada, the company is subject to the Personal Information Protection and Electronic Documents Act (‘PIPEDA’), which governs how companies may collect, use, and disclose personal information of consumers, and other privacy or data security laws of Canada’s provinces with respect to its operations in Canada.
The company is subject to regulations relating to its corporate conduct and the conduct of its business, including securities laws, trade regulations, anti-money laundering (‘AML’) laws, Know-Your-Customer (‘KYC’) laws, as well as anti-corruption legislation. The company is required to comply with the U.S. Foreign Corrupt Practices Act, the Foreign Public Officials Act (Canada), and similar anti-bribery laws in other jurisdictions, which prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business.
The company is also subject to certain economic and trade sanctions programs, including Canadian sanctions laws and the sanctions programs administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (‘OFAC’), which prohibit or restrict transactions or dealings with specified countries, individuals, and entities.
History
Sezzle Inc., a Delaware Public Benefit Corporation, was founded in 2016. The company was incorporated in 2016.
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