I didn't listen in on the call as I'm no longer a holder, and did anyone here? Any revelations?
Would be interested in knowing if they had a plan to reduce their "cost of income". It is at 3.1% of UMS/GMV, in comparison to Afterpay which is 1.2%. Hard to see them being able to sign up any larger enterprise merchants without having the ability to lower that rate. They would be losing money on each sale.
In the SMB space they can charge the merchant 5.5% and are now able to make 0.3% margin on it. Expect them to further improve the margin, perhaps getting to 1% through further reductions in losses. If that happens the best they could offer a larger client would be a rate of 4.5%, which is a lot higher than their competitors can offer.
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I also think the reason for the difference in cost of income % between Afterpay and Sezzle is something like this:
Sezzle built their system but didn't have the payment processing tech to do it, so they have outsourced that to a different company and are paying them a fee to do so. That fee includes other fees paid to companies like V/MC to use the 'payment rails'. Afterpay had a similar issue during its start, but it gave a % of the company to Touchcorp to do that work, and then merged with them later on, so that function/service is in-house and Afterpay is just paying the fees to V/MC to use the 'payment rails'. It seems to me to be a significant difference which quite a few investors may not be aware of.
While Sezzle and Afterpay look to be similar companies from the outside, underneath the hood is a different story.
SZL Price at posting:
$1.49 Sentiment: None Disclosure: Not Held
