Can you explain in brief how the Buy Now Pay Later facility offered by Sezzle works?
Sezzle’s Buy Now Pay Later (BNPL) option is very simple. At the time of purchase, a user has to pay only 25% of the billed amount. Two weeks later, he pays another 25%, four weeks later another 25% and at the end of sixth week the remaining 25%. This way a customer benefits from paying for any purchase in four instalments over six weeks at zero interest. Unlike some other BNPL players, we allow shoppers to split every purchase rather than follow a consolidated billing.
Credit cards also give free credit and easy payment options to customers. How is BNPL any different?
There are several differences between a credit card and BNPL. For one, we don’t charge users an annual fee whereas most credit card companies levy a yearly charge. Secondly, credit cards follow a consolidated billing system, wherein users are billed for the entire amount spent during the billing cycle. If a card’s billing cycle is from 1 to 30 November, a purchase made even on 29 November will be billed in December. In contrast, BNPL treats every purchase as unique and the option to pay in four instalments is available to every purchase, giving users the much-needed flexibility. Additionally, Sezzle enables users to budget better as users pay for each purchase rather than accumulate a lump sum and pay at once.
The general feeling is that if something is free, there must be a catch somewhere. If you are not charging any interest on the credit extended to the buyer, where exactly do BNPL companies expect to earn from?
Sezzle believes in transparency and that is the reason why our merchant and user base have grown exponentially. When we say there is no catch, we mean it. A shopper pays nothing extra if instalments are paid on time. Sezzle earns a commission from merchants every time a purchase is made using Sezzle.
How has BNPL grown in the last few quarters? Has the pandemic affected the growth?
BNPL is one of the fastest-growing and preferred payment methods. The overall industry size was about $6.9 billion in 2020. This is expected to reach $52.8 billion by 2028. That is 650% growth in less than a decade.
The pandemic did help bring BNPL into the mainstream, however, even in the current phase when we are past the peak pandemic, BNPL’s adoption is increasing. Both merchants and shoppers are loving BNPL. What shoppers like most about BNPL are the transparency and flexibility it offers. Usage of BNPL is no longer limited to high-value purchases like electronics, shoppers are using it for day-to-day needs, including personal care, nutrition and food.
How does BNPL help in financial inclusion?
Obtaining credit was traditionally viewed as a cumbersome and slow process. However, with BNPL becoming mainstream that’s changing. BNPL enables shoppers across demographic profiles and democratises credit by bringing it within everybody’s reach.
Do you think BNPL can help improve consumption in the festive season?
BNPL is empowering shoppers and will continue to do so even in the festive season. Around this time of the year, purchases rise across all segments, be it clothing, jewellery, consumer electronics and durables. The shopper-friendly model of BNPL will drive the purchases this festive season as well.
What’s the growth projection for the coming year?
From being on the periphery to becoming a mainstream payment method, BNPL has come a long way. The growth can mainly be attributed to transparency and ease of usage. Technology is another factor that is enabling both shoppers and merchants. In the remainder of this year and the next, BNPL’s growth trajectory will only be upwards. You will very soon find the BNPL payment option available at most offline stores as well, just the way UPI is now.
Your business model is built around an ecosystem of smaller businesses. Has this resulted in better sales?
For Sezzle, every merchant is important. We continue to empower businesses irrespective of their scale. Since its launch in India in 2020, Sezzle has tied up with more than 800 merchants from every category. These merchants have benefitted from increased average order value, increase in prepaid order count, and ultimately an increase in sales.
