Momentum Building

It is great to observe the momentum Sezzle is building in recent times. It is only a matter of time until this is reflected in the share price. They are continuing to enhance a differentiated product that resonates with customers and merchants. While they are small, they appear to be gaining market share from other players thanks to their strong growth rate and strategic moves that lengthen the runway for future growth.

While I thought the long-awaited deal with Target was their ‘company-maker’ announcement, I now think it the partnership with Discover is the more significant announcement. With Visa and Mastercard likely to do their own thing with BNPL (https://www.investors.com/news/technology/visa-stock-company-moves-into-buy-now-pay-later-as-others-compete-for-consumer-financing/), it is quite a coup that the number 3 player, Discover, has chosen to partner and invest in Sezzle. For those who aren’t aware, Discover is accepted at 99% of US merchants that accept credit cards. This will allow Sezzle to be used anywhere – in-store or online, on the Discover payment rails, at a viable rate.

This deal got a few questions from analysts at the recent Discover results presentation. There seems to be some optimism that Discover will be able to offer banking and credit products to Sezzle customers as the BNPL product matures. (https://illinoisnewstoday.com/discover-financial-services-dfs-q2-2021-earnings-call-transcript/317212/). No surprise really as we are seeing this in Australia with Afterpay.

We all know there is exponential growth ahead, but patience is required – just like with the Target partnership. The deal with Ally was announced long ago, but appears only in the pilot stage, only having been rolled out to a few merchants. But this move into interest-bearing loans up to $40k will significantly increase their TAM.

Likewise, the setting up of Sezzle Europe has taken time, but now they are operating in Germany, France and Spain, with Italy and UK following soon. In the past couple of weeks, they have announced their sponsorship of Valencia Football Club as well as partnered with a few larger merchants (such as Illamasqua and Glossybox).

Sezzle India is a more established pilot. They seem to have kicked a lot of goals here in the past quarter and I speculate it will move out of pilot stage soon. It has launched the Sezzle app, passed 13,000 followers on Instagram, has over 500 merchants (include some recently announced larger ones: Go Noise, Fasttrack, Wow Skin Science, Titan Watches). Curious to see how the loss rates compare to Sezzle US at the same point in time.

In the home market of the US, it seems to now have the products, partners and scale to capitalise on network effects. No doubt Target was a big shot in the arm in terms of credibility. In the last couple of weeks, they have partnered with some noticeably larger merchants (Barstool Sports, Sigma Beauty, Bellami Hair, Wolven, Milk Snob, Kicks Crew, LuvMe Hair, Cellucor, With Jean, HydroJug, Peak Designs, Spartan Race (via Ticket Socket). With Sezzle Anywhere, they have recently added AirBNB and Shein.

Sezzle claim to have the best technology, the best service and loved by both merchants and customers. I have no reason to disagree. But I think the market undervalues the fact they are a B Corp and a strong mission-driven company. That is why they have been so successful with millennials and will continue to be.

In my opinion, Sezzle’s share price suffers from no operating in Australia. But the coming US IPO will help as it will give its many customers and merchants a chance to invest in something they believe in.