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Business Operations Business Models

How Does Sezzle Make Money (Business and Revenue Model)

The Sezzle business model

How Does Sezzle Make Money?
Here’s what you should know:
  • What is Sezzle, and how does Sezzle work?
  • How does Sezzle make money?
  • Merchant Fees
  • Late Payment Fees (Account Reactivation Fees)
  • Rescheduling Convenience Fees
  • Sezzle’s profit and revenue
  • What is the Sezzle business and revenue model?
  • Sezzle’s funding and market cap

How does Sezzle make money if they offer interest free loans? Here is a full, in-depth, breakdown of their three (3) revenue streams and the different products and services they offer, as well as the Sezzle business model, their profit and revenue, and how Sezzle works.

What is Sezzle, and how does Sezzle work?

Sezzle is a financial company that offers “buy now, pay later” services with interest-free installment plans to customers.

Founded in 2016 by Charlie Youakim, Sezzle began trading on the Australian Securities Exchange (ASX) on July 30, 2019, under the ticker symbol “SZL”.

Now, Sezzle has over 2.8 million active customers and more than 40,200 active merchants using the “buy now, pay later” service.

How Sezzle works is: Once customers sign up for a Sezzle account, they can then shop from over 40,200 partnering retailers with the “buy now, pay later” checkout option. Once the order is complete, customers will then pay back their loan to Sezzle over 4 interest-free installment payments spanning across 6 weeks.

Some of Sezzle’s competitors include Klarna, Afterpay, Affirm, Quadpay, Splitit, and other “buy now, pay later” services.

Sezzle App in Apple App Store | Sezzle Business Model | How Does Sezzle Make Money?
Source: Apple App Store | Sezzle

How does Sezzle make money?

According to pages 7 and 8 of Sezzle’s 2021 Half Year Report, the company has more than 2.8 million active customers and over 40,200 participating merchants on the platform. As well as transacting $856+ million in underlying merchant sales (UMS) in 2020.

So how does Sezzle make money off of all those active customers, merchants, and underlying merchant sales?

Below is a breakdown of how much money Sezzle makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 3 ways of how Sezzle makes money (in 2021):

Sezzle has a revenue model that makes money in three (3) ways – merchant fees, late payment fees, and rescheduling convenience fees.

#1. Merchant Fees

Sezzle makes the majority of its money from charging Merchant Fees. In fact, $47.56 million or 80.9% of Sezzle’s total revenue came from Merchant Fees in 2020.

As noted above, Sezzle facilitated over $856 million worth of sales for more than 40,200 active merchants using their “buy now, pay later” service globally in 2020. Of which, they receive a commission on each transaction.

Sezzle Merchant Fees:

  • 6% plus $0.30 per transaction
Sezzle Merchant Fees | Sezzle Business Model | How Does Sezzle Make Money?
Source: Sezzle

Note: 80.9% of Sezzle’s total revenue came from merchant fees in 2020.

#2. Late Payment Fees (Account Reactivation Fees)

In addition to charging the merchants a fee, Sezzle also makes money by charging the customers a fee in the form of Late Payment Fees.

The way it works is: Late Payment Fees, or Account Reactivation Fees (as Sezzle calls them), are billed to a customers’ account once a customer fails to pay no more than 2 days past their scheduled or rescheduled payment date. Once past due, Sezzle will then freeze the customers’ account and charge a $10 reactivation fee.

Sezzle Late Fees:

  • up to $10 one time, for each account deactivation per order
Sezzle Payments | Sezzle Business Model | How Does Sezzle Make Money?
Source: Sezzle

Note: Sezzle charges fees to both Sezzle merchants and Sezzle customers.

#3. Rescheduling Convenience Fees

Another fee Sezzle makes money from is what Sezzle calls Rescheduling Convenience Fees.

The way Sezzle makes money from this is by offering customers an option to delay their scheduled payments (for up to 2 weeks) by charging a $5 Rescheduling Convenience Fee. This way, they don’t incur an Account Reactivation Fee as highlighted above.

Sezzle Rescheduling Convenience Fee:

  • up to $5 (limited to a total of three reschedules per order)

Sezzle’s profit and revenue

In 2020, Sezzle reported net revenues of $58.8 million.

Note: Because the Sezzle Inc. is a publicly traded company on the Australian Securities Exchange (ASX), they must file continuous financial filings with the Australian Securities and Investments Commission (ASIC). You can find all of Sezzle’s publicly released financial reports, including annual reports, through Sezzle’s investor section on their website.

What is the Sezzle business and revenue model?

Sezzle makes money through a few revenue models that they combine within their company, they are:

  • Commission based business model
  • Fee-for-service (FFS) business model
  • B2B2C (partnerships) business model
  • Mergers & acquisitions (M&A) business model

Sezzle’s funding and market cap

According to Sezzle’s Crunchbase profile, Sezzle has raised $301.6 million over 7 rounds and has a market cap of $1.19 billion as of October 2021.