Buy-now-pay-later had record Cyber Monday, but that was just gravy for Minneapolis-based Sezzle

Cyber Monday drew record numbers for buy-now-pay-later services, but Minneapolis-based Sezzle was already having a record year.

On Dec. 2, consumers nationwide spent about $991 million through buy-now-pay-later (BNPL) services, the highest single day for the category, according to an Adobe Analytics report. Sezzle is one app in a sea of options, but it’s been growing more profitable as it chases market share in the BNPL space.

The company reported a $53.1 million profit through September, a significant departure from its $7 million profit in 2023 and losses in 2021 and 2022. At one point, its stock value — despite a rocky launch on U.S. exchanges — shot up more than 3,400% in the past year.

“We’re still growing rapidly, even with the space,” said CEO Charlie Youakim. “... Competitors are coming in, but some are exiting, as well. So, it’s been a wild ride, actually, for a few years here.”

Sezzle launched its first BNPL product in 2017. Pay-in-4 allows consumers to pay for large expenses in four equal installments: one at the time of purchase and then three biweekly payments. For consumers who pay on time and use a bank account, it’s generally free.

But in the past few years, Sezzle has transitioned to a subscription model to expand the services it can offer. Since 2022, Sezzle Premium charges consumers a recurring fee to extend its payment plans to “premium merchants” not integrated with the app. Sezzle Anywhere gives consumers a virtual card accepted anywhere Visa is.

Sezzle’s newest product, On Demand, allows consumers to use Sezzle’s BNPL products anywhere that accepts Visa — without a subscription — by distributing single-use virtual cards for different transactions.

As of September, Sezzle had about 529,000 subscribers, about 72% more than it had at the beginning of the year. Meanwhile, its nearly 2.7 million active consumers have remained about the same.

Here is what Youakim said, edited for length and clarity, about the company’s approach to growth and the holiday shopping season.

It was a good holiday season. Fourth quarter is always our biggest quarter, in terms of volume.

[But] this is a dynamic that people don’t understand about our business: If a customer fails to make a payment to us, we don’t allow them to make another purchase, and that’s completely opposite of a credit card, in my mind.

There’s a totally different approach to the holiday season between Sezzle, buy-now-pay-later and credit cards. We want to stop people from overspending. We want, of course, to help you in your holiday season, but we’re also actively trying to stop you from overspending. We might pull back limits in some cases. If a customer overspends too much and then fails to pay us, there’s always a percentage chance that some of those customers don’t want to pay us back at all ever. And we lose a customer.

Some of it’s a little bit inherent in the product. Because the product itself, even though it’s short term and smaller dollar, it’s high frequency, and if the consumer fails to make a payment, they can’t make another purchase. So we tend to be top of their repayment stack because they don’t want to lose the utility of the product. We do a little bit of pullback [of credit limits] in the holidays, which plays into that, as well.

Those new products — Premium, Anywhere, On Demand — those are all fast-rising products that are built to capture more demand. We already know Premium and Anywhere are there. On Demand, we’re learning about — is it the next killer product for us? And the more of these products where you kind of hit the nail on the head for customer demand, the more likely you gain market share.

Allowing the customer to use it where they want to use it is huge. The Anywhere product meets you where you want to be. It’s not necessarily that we’re trying to incentivize customers to spend more because we don’t like if we have this irresponsible spending. I think it just makes it more available.

Every year, we’ve launched something that’s worked out really well. We’ve had a really good hit rate — Premium in 2022, Anywhere in 2023 and On Demand in 2024. I think the next product launch is going to be our shopping features. Our plan is to create a couple browser extensions for your phone, and then in our app, you can see price comparison, you can see coupons that are automatically applied.

Our young customer is, in many cases, paycheck to paycheck. And they like our financial product because it helps them budget across their paychecks, but they really would fall in love if you save them $15.

We’re really proud of a product we got called Sezzle Up. We’re the only company in the whole space that reports on credit bureau activity, which I think is a big feather in the cap of the company: that we help customers. A customer can join optionally for free, and we start reporting to help them build their credit score up.

I always think: make the product do what you would want it to do if your own kid used it. I have a 4-year-old, so not even close to paying yet, but if he was 14 years older, I’d be looking to get his credit score up.

Caleb Fravel is a University of Minnesota student reporter on assignment for the Minnesota Star Tribune.