The buy now, pay later (BNPL) space is rapidly becoming crowded with new entrants offering consumers a way to defer their payments, interest-free, over a few installments.
That, in turn, creates a new challenge for everyone in the space: How can players distinguish themselves beyond offering consumers a more predictable, certain way to pay for what they would like to buy?
It’s a clever play for these early days, Sezzle CEO Charlie Youakim noted in a conversation with Karen Webster, but not one that will ultimately determine the winner in the increasingly crowded space. Exclusivity won’t be the long-term answer, in his opinion, as the power of deals will fade over time. Success will be about the value add that’s built around the provider’s BNPL core.
“The goal is to find a way to be visible at the consumer’s moment of decision so that they are more likely to click their favorite brand more often than the other BNPL offers in front of them,” Youakim explained.
The Value Of Choice
Exclusivity may give some merchants more lucrative economics and promotional terms as they focus on attracting a new, younger customer base, he said. But in the end, consumers want payment choice. If past is prologue, one need look no further than Australia, where exclusive deals with one provider gave way to merchant sites with multiple BNPL options available at checkout.
That suggests that the BNPL world will look a lot like the credit card world, with multiple brands in consumer wallets and appearing on product checkout pages, and each will have to do its own work to build its brand — and brand loyalty — with the customer. And just as different card brands — Visa, Mastercard, American Express — bring their own customer bases with them, so too can BNPL.
“I use multiple cards, like everyone does, and there are different scenarios when I want to use a certain card over another,” Youakim said. “I think consumers will do the same with [BNPL] products. So, we have to think ahead. How do we get that customer making that choice for us more often?”
Differentiating The Deal For Consumers
Answering the differentiation question for consumers — “What makes you different?” — is what Youakim said the Sezzle brand was created to do.
Sezzle isn’t only a way to pay for a product in a few monthly installments; it is the only BNPL player to do so while building a credit score for its consumers over time, he said. Sezzle often provides the only access to credit a consumer has ever had, as well as the opportunity to build a credit score while using it. Becoming the on-ramp to mainstream credit access and a channel for more traditional financial institutions (FIs) is the core of the Sezzle mission.
Youakim said that differentiation is also how BNPL adds value to a merchant, driving more sales and increasing basket size for consumers who otherwise might not have had any other way to make a purchase. Sezzle is also experimenting with exclusive offers — a newer product within the business that helps merchants drive consumer spend by highlighting specific offerings and deals available exclusively via the Sezzle platform.
The Winding Path Ahead For BNPL
The most exciting part of the BNPL market as it is developing in the U.S., Youakim said, isn’t what we see happening on the surface today, but what’s simmering below the surface — and with merchants, particularly smaller ones.
Small- to medium-sized businesses (SMBs) have been something of a “sweet spot” for Sezzle in recent months, he said, as the firm has engaged in a concerted push to get those retailers ready to go as fast as possible to motivate their consumers back into shopping.
But beyond specific tactics and offerings, Youakim said, Sezzle’s goal is earning consumer trust and building a brand that consumers consistently return to because the process works for them, elevates their shopping experience and does more than offer them a payment method that breaks up their payments over time.
“I think the more you can make a customer fall in love with the brand and how you treat them, the better you are making the long play,” Youakim said. “If you do that and you keep on doing it consistently for years, you can launch new products, new extensions, and they’ll trust you along the way. And if you can do all that right, you’re going to have a highly successful company.”
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